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Intermediated Implementation. (arXiv:1810.11475v5 [econ.TH] UPDATED)

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We examine problems of "intermediated implementation," in which a single principal can only regulate limited aspects of the consumption bundles traded between intermediaries and agents with hidden characteristics. An example is sales, whereby retailers compete through offering consumption bundles to customers with hidden tastes, whereas a manufacturer with a potentially different goal than retailers' is limited to regulating the sold goods but not the charged prices by legal barriers. We study how the principal can implement through intermediaries any social choice rule that is incentive compatible and individually rational for agents. We demonstrate the effectiveness of per-unit fee schedule and distribution regulation, which hinges on whether intermediaries have private or interdependent values. We give further applications to healthcare regulation and income redistribution.


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