Principled Mechanism Design with Evidence

Sebastian Schweighofer-Kodritsch and Roland Strausz

No 11794, CESifo Working Paper Series from CESifo

Abstract: Casting mechanism design with evidence in the framework of Myerson (1982) implies that his generalized revelation principle directly applies, and we thus obtain standard notions of incentive compatible direct mechanisms. Their specific nature depends, however, on whether the presentation of evidence is controllable contractually. For deterministic implementation, we show that, in general, such control has value. We identify two independent conditions under which this value vanishes, one on evidence (WET) and another on preferences (TIWO). Allowing for fully stochastic mechanisms, we also characterize the (limited) extent to which the common assumption of evidentiary normality (NOR) negates any value of randomization. When NOR holds together with WET or TIWO, neither control nor randomization has any value. Many mechanism design settings satisfy these conditions naturally, implying that they are highly tractable.

Keywords: mechanism design; revelation principle; evidence; verifiable iInformation; value of control; value of randomization. (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Date: 2025
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