Detecting profitable deviations

David M. Rahman

Journal of Mathematical Economics, 2024, vol. 111, issue C

Abstract: Rochet’s Theorem characterizes implementable allocations in a mechanism design environment in terms of cyclic monotonicity, a concept from convex analysis. In this paper, I offer an alternative approach to both the proof and interpretation of this result, based on linear duality. This duality reveals a formal relationship between incentives and detection, much like that between prices and quantities. Moreover, it allows me to extend Rochet’s Theorem and present a subdifferential characterization of implementing payments, revenue equivalence as differentiability of a value function, as well as budget-balanced implementation in terms of attributing innocence after unilateral deviations, together with other ancillary results.

Keywords: Mechanism design; Implementation; Duality (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:111:y:2024:i:c:s0304406824000089

DOI: 10.1016/j.jmateco.2024.102946

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