Decision makers frequently condition their actions on economic outcomes, e.g. asset prices, that they believe convey information about an unknown state. However the decision maker’s action, or expectations thereof, may also influence the outcome. In this paper we study the general problem of choosing decision rules mapping outcomes to actions in the presence of such feedback effects. We characterize the set of joint distributions of outcomes, actions, and states that can be implemented as the unique equilibrium by decision rules which satisfy a minimal notion of robustness to manipulation. Moreover, we show that all such equilibria are robust to model misspecification. This characterization of the feasible set greatly simplifies the problem of choosing decision rules. A simple graphical technique allows us to identify qualitative features of optimal policies. We illustrate the power of this approach with an application to corporate bailouts. The results are also useful for characterizing optimal decision rules when the requirement of unique implementation is relaxed.">Market-Based Mechanisms | Francisco Poggi
Microeconomic theorist from Argentina currently finishing a PhD at Northwestern University. Prior to that, I completed a BA and MA at Universidad de San Andrés.