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Multiplicity of Mixed Equilibria in Mechanisms: a Unified Approach ot Exact and Approximate Implementation

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Abstract

We characterize full implementation of social choice sets in mixedstrategy Bayesian equilibrium. Our results concern both exact and virtual mixed implementation. For exact implementation, we identify a strengthening of Bayesian monotonicity, which we refer to as mixed Bayesian monotonicity. It is shown that, in economic environments with at least three agents, mixed Bayesian implementation is equivalent to mixed Bayesian monotonicity, incentive compatibility and closure. For implementing a social choice function, the case of two-agents is also covered by these conditions and mixed Bayesian monotonicity reduces to Bayesian monotonicity. Following parallel steps, mixed virtual implementation is shown to be equivalent to mixed virtual monotonicity, incentive compatibility and closure. The key condition, mixed virtual monotonicity, is argued to be very weak. In particular, it is weaker than Abreu-Matsushima’s measurability, thereby implying that: (1) virtual implementation in mixed Bayesian equilibrium is more permissive than virtual implementation in iteratively undominated strategies, and (2) non-regular mechanisms are essential for the implementation of rules in that gap.

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File URL: http://www.brown.edu/Departments/Economics/Papers/2009/2009-11_paper.pdf
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Bibliographic Info

Paper provided by Brown University, Department of Economics in its series Working Papers with number 2009-11.

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Date of creation: 2009
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Handle: RePEc:bro:econwp:2009-11

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Postal: Department of Economics, Brown University, Providence, RI 02912

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Keywords: Exact implementation; approximate implementation; incomplete information; incentive compatibility; monotonicity;

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References

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Cited by:
  1. Dirk Bergemann & Stephen Morris & Olivier Tercieux, 2010. "Rationalizable Implementation," Cowles Foundation Discussion Papers 1697R, Cowles Foundation for Research in Economics, Yale University.
  2. Tomala, Tristan & Renou, Ludovic, 2010. "Mechanism design and communication networks," Les Cahiers de Recherche 926, HEC Paris.
  3. Claudio Mezzetti & Ludovic Renou, 2009. "Implementation in Mixed Nash Equilibrium," Discussion Papers in Economics 09/10, Department of Economics, University of Leicester, revised Jan 2010.
  4. Ashraf-Ball, Hezlin & Oswald, Andrew J. & Oswald, James I., 2009. "Hydrogen Transport and the Spatial Requirements of Renewable Energy," The Warwick Economics Research Paper Series (TWERPS) 903, University of Warwick, Department of Economics.

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