Abstract:

We study the design of information in games in which many sellers compete in contracts to attract buyers. We identify a new dimension, private disclosures, whereby the principals asymmetrically inform the agents of how their mechanisms operate. We show that private disclosures have two important effects on the identification of equilibrium outcomes. First, they can raise a principal’s payoff guarantee against her competitors’ threats. Second, they can support equilibrium outcomes and payoffs that cannot be supported with standard mechanisms. We then develop a novel approach to competing mechanisms games in which private disclosures are included, and identify a canonical communication protocol and a canonical class of equilibria, thereby establishing a new revelation principle for these environments.