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Robust Mechanism Design

Author

Listed:
  • Stephen Morris

    (Yale University, Cowles Foundation)

  • Dirk Bergemann

    (Yale University, Faculty of Arts & Sciences, Department of Economics (Box 8268))

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 players' belief types, so the incentive constraints reduce to conditions distinguishing types with the same beliefs about others' types but different payoff types.

Suggested Citation

  • Stephen Morris & Dirk Bergemann, 2004. "Robust Mechanism Design," Yale School of Management Working Papers ysm380, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm380
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Mechanism Design; Common Knowledge; Universal Type Space; Interim Equilibrium; Ex-post Equilibrium; Dominant Strategies;
    All these keywords.

    JEL classification:

    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other

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