Robust Mechanism Design

Dirk Bergemann and Stephen Morris

No 1421, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The mechanism design literature assumes too much common knowledge of the environment among the players and planner. We relax this assumption by studying implementation on richer type spaces, with more higher order uncertainty. We study the "ex post equivalence" question: when is interim implementation on all possible type spaces equivalent to requiring ex post implementation on the space of payoff types? We show that ex post equivalence holds when the social choice correspondence is a function and in simple quasi-linear environments. When ex post equivalence holds, we identify how large the type space must be to obtain the equivalence. We also show that ex post equivalence fails in general, including in quasi-linear environments with budget balance. For quasi-linear environments, we provide an exact characterization of when interim implementation is possible in rich type spaces. In this environment, the planner can fully extract playersÌ belief types, so the incentive constraints reduce to conditions distinguishing types with the same beliefs about othersÌ types but different payoff types.

Keywords: Mechanism design; Common knowledge; Universal type space; Interim equilibrium; Ex-post equilibrium; Dominant strategies (search for similar items in EconPapers)
JEL-codes: C79 C82 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2003-05
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

Published in Econometrica (2005), 73(6): 1771-1813

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Related works:
Chapter: Robust Mechanism Design (2012)
Journal Article: Robust Mechanism Design (2005)
Working Paper: Robust Mechanism Design (2005)
Working Paper: Robust Mechanism Design (2004)
Working Paper: Robust Mechanism Design (2004)
Working Paper: Robust Mechanism Design (2003)
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