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On the equivalence between Bayesian and dominant strategy implementation: the case of correlated types

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  • Alexey Kushnir

Abstract

We consider general social choice environments with private values and correlated types. Each agent's matrix of conditional probabilities satisfies the full rank condition. We show that for any Bayesian incentive compatible mechanism there exists a dominant strategy incentive compatible mechanism that delivers the same interim expected utilities to all agents and generates at least the same social surplus. In addition, if there is a social alternative that is inferior to the other alternatives for all agents the dominant strategy incentive compatible mechanism matches exactly the social surplus. These results extend to environments with interdependent values satisfying the single crossing condition.

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Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 129.

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Date of creation: Aug 2013
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Handle: RePEc:zur:econwp:129

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Keywords: Mechanism design; Bayesian implementation; dominant strategy implementation; full surplus extraction; correlation;

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  1. Peters, Michael, 2001. "Surplus Extraction and Competition," Review of Economic Studies, Wiley Blackwell, vol. 68(3), pages 613-31, July.
  2. McAfee, R Preston & McMillan, John & Reny, Philip J, 1989. "Extracting the Surplus in the Common-Value Auction," Econometrica, Econometric Society, vol. 57(6), pages 1451-59, November.
  3. Mookherjee, Dilip & Reichelstein, Stefan, 1992. "Dominant strategy implementation of Bayesian incentive compatible allocation rules," Journal of Economic Theory, Elsevier, vol. 56(2), pages 378-399, April.
  4. Jacob K. Goeree & Alexey Kushnir, 2011. "A geometric approach to mechanism design," ECON - Working Papers 056, Department of Economics - University of Zurich, revised Jun 2013.
  5. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March.
  6. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
  7. Barelli, Paulo, 2009. "On the genericity of full surplus extraction in mechanism design," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1320-1332, May.
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