AbstractPrivacy and trust a ect 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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Bibliographic InfoPaper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0140.
Length: 26 pages
Date of creation: Jan 2010
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- NEP-ALL-2010-04-17 (All new papers)
- NEP-CTA-2010-04-17 (Contract Theory & Applications)
- NEP-GTH-2010-04-17 (Game Theory)
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