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Abstract

Privacy and trust aect our strategic thinking, yet they have not been precisely modeled in mechanism design. In settings of incomplete information, traditional implementations of a normal-form mechanism - by disregarding the players' privacy, or assuming trust in a mediator - may fail to reach the mechanism's objectives. We thus investigate implementations of a new type. We put forward the notion of a perfect implementation of a normal-form mechanism M: in essence, a concrete extensive-form mechanism exactly preserving all strategic properties of M, without relying on a trusted mediator or violating the privacy of the players. We prove that any normal-form mechanism can be perfectly implemented by a verifiable mediator using envelopes and an envelope-randomizing device (i.e., the same tools used for running fair lotteries or tallying secret votes). Differently from a trusted mediator, a veri able one only performs prescribed public actions, so that everyone can verify that he is acting properly, and that he never learns any information that should remain private

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File URL: http://www.cefir.ru/papers/WP140.pdf
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Bibliographic Info

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0140.

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Length: 26 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:cfr:cefirw:w0140

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This paper has been announced in the following NEP Reports:

• NEP-ALL-2010-04-17 (All new papers)
• NEP-CTA-2010-04-17 (Contract Theory & Applications)
• NEP-GTH-2010-04-17 (Game Theory)

References

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1. Robert J. Aumann & Sergiu Hart, 2003. "Long Cheap Talk," Econometrica, Econometric Society, vol. 71(6), pages 1619-1660, November.
   
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7. Gerardi, Dino, 2004. "Unmediated communication in games with complete and incomplete information," Journal of Economic Theory, Elsevier, vol. 114(1), pages 104-131, January.
   
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8. Forges, F., 1987. "Universal mechanisms," CORE Discussion Papers 1987004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
   
   • Forges, Francoise, 1990. "Universal Mechanisms," Econometrica, Econometric Society, vol. 58(6), pages 1341-64, November.
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11. Eric Maskin & Tomas Sjostrom, 2001. "Implementation Theory," Economics Working Papers 0006, Institute for Advanced Study, School of Social Science.
    
    • Maskin, Eric & Sjostrom, Tomas, 2002. "Implementation theory," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 5, pages 237-288 Elsevier.
    • Maskin, Eric & Sjostrom, Tomas, 2001. "Implementation Theory," Working Papers 5-01-1, Pennsylvania State University, Department of Economics.
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Cited by:

1. Péter Vida & Francoise Forges, 2011. "Implementation of Communication Equilibria by Correlated Cheap Talk: The Two-Player Case," CESifo Working Paper Series 3360, CESifo Group Munich.
   
   • Forges, Françoise & Vida, Péter, 2013. "Implementation of communication equilibria by correlated cheap talk: The two-player case," Theoretical Economics, Econometric Society, vol. 8(1), January.

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