A Characterization of Efficient

Steven R. Williams

No 1100, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: A mechanism that is both efficient and incentive compatible in the Bayesian-Nash sense is shown to be payoff-equilvalent to a Groves mechanism at the point in time when each agent has just acquired his private information. This equilvalence result simplifies the question of whether or not an efficient, Bayesian incentive compatible mechanism can satisfy other desired objectives, for the search for an appropriate mechanism can be restricted to the family of Groves mechanisms. The method is used to extend a result of Myerson and Satterthwaite on the inefficiency of bilateral bargaining to multilateral setting.

Date: 1994-09
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