POLITICALLY REALISTIC IMPLEMENTATION WITH INSPECTION: THE EQUITY‐HONESTY‐WELFARE TRADE‐OFF

Ignacio Ortuño‐ortin and John Roemer

Economics and Politics, 1993, vol. 5, issue 3, 255-270

Abstract: We study dominant strategy mechanisms where the planner knows the distribution of types and the agents are instructed to announce their types to the planner. It is assumed that the planner has access to a technology of inspection which is costly but perfect, and that he can penalize an agent who is inspected after announcements have been made if he is found to have lied about his type. It shall be shown that, in general, the welfare‐maximizing mechanism that respects minimal equity will induce some agents to lie about their types.

Date: 1993
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