Subgame-Perfect Implementation Under Information Perturbations

Philippe Aghion (), Drew Fudenberg, Richard Holden, Takashi Kunimoto and Olivier Tercieux ()
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Philippe Aghion: Harvard University
Olivier Tercieux: PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations. First, we show that even under arbitrarily small information perturbations the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and that in addition the mechanism has sequential equilibria with undesirable outcomes. More generally, we prove that any extensive form mechanism is fragile in the sense that if a non-Maskin monotonic social objective can be implemented with this mechanism, then there are arbitrarily small information perturbations under which an undesirable sequential equilibrium also exists. Finally, we argue that outside options can help improve efficiency in asymmetric information environments, and that these options can be thought of as reflecting ownership of an asset.

Date: 2012-10
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Citations: View citations in EconPapers (37)

Published in Quarterly Journal of Economics, 2012, 127 (4), pp.1843-1881. ⟨10.1093/qje/qjs026⟩

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Journal Article: Subgame-Perfect Implementation Under Information Perturbations (2012)
Working Paper: Subgame-Perfect Implementation Under Information Perturbations (2012)
Working Paper: Subgame-Perfect Implementation Under Information Perturbations (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:hal-00812781

DOI: 10.1093/qje/qjs026

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