Data-Driven Mechanism Design: Jointly Eliciting Preferences and Information

Dirk Bergemann, Marek Bojko, Paul Duetting, Renato Paes Leme, Haifeng Xu and Song Zuo

No 20227, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study mechanism design when agents have private preferences and private information about a common payoff-relevant state. We show that standard message-driven mechanisms cannot implement socially efficient allocations when agents have multidimensional types, even under favorable conditions. To overcome this limitation, we propose data-driven mechanisms that leverage additional post-allocation information, modeled as an estimator of the payoff-relevant state. Our data-driven mechanisms extend the classic Vickrey-Clarke-Groves class. We show that hey achieve exact implementation in posterior equilibrium when the state is either fully revealed or the utility is affine in an unbiased estimator. We also show that they achieve approximate implementation with a consistent estimator, converging to exact implementation as the estimator converges, and present bounds on the convergence rate. We demonstrate applications to digital advertising auctions and large language model (LLM)-based mechanisms, where user engagement naturally reveals relevant information.

Keywords: Large; Language; Models (search for similar items in EconPapers)
JEL-codes: D47 D82 D83 (search for similar items in EconPapers)
Date: 2025-05
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