The robustness of the independent private value model in Bayesian mechanism design

Steven R. Williams and Georgia Kosmopoulou
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Steven R. Williams: Department of Economics, University of Illinois at Urbana-Champaign, Champaign, IL 61820, USA

Economic Theory, 1998, vol. 12, issue 2, 393-421

Abstract: In a Bayesian model of group decision-making, dependence among the agents' types has been shown to have a beneficial effect on the design of incentive compatible mechanisms that achieve the efficient choice associated with complete information. This effect is shown here to depend as much upon the use of large monetary transfers among the agents as it does upon dependence: if the transfers are bounded in magnitude, then nonexistence in the case of independence of an efficient, incentive compatible, ex ante budget-balanced and interim individually rational mechanism is robust to the introduction of a small amount of dependence among types. This robustness result supports the use of the simplifying assumption of independence in mechanism design.

JEL-codes: C7 D7 D82 (search for similar items in EconPapers)
Date: 1998-08-19
Note: Received: October 28, 1996; revised version: May 28, 1997
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Citations: View citations in EconPapers (18)

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