Mechanism Design with Information Leakage

Samuel H\"afner, Marek Pycia and Haoyuan Zeng

Papers from arXiv.org

Abstract: We study the design of mechanisms -- e.g., auctions -- when the designer does not control information flows between mechanism participants. A mechanism equilibrium is leakage-proof if no player conditions their actions on leaked information; a property distinct from ex-post incentive compatibility. Only leakage-proof mechanisms can implement social choice functions in environments with leakage. Efficient auctions need to be leakage-proof, while revenue-maximizing ones not necessarily so. Second-price and ascending auctions are leakage-proof; first-price auctions are not; while whether descending auctions are leakage-proof depends on tie-breaking.

Date: 2025-11
New Economics Papers: this item is included in nep-des and nep-mic
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