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A dynamic non-direct implementation mechanism for interdependent value problems

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  • McLean, Richard P.
  • Postlewaite, Andrew

Abstract

Much of the literature on mechanism design and implementation uses the revelation principle to restrict attention to direct mechanisms. We showed in McLean and Postlewaite (2014) that when agents are informationally small, there exist small modifications to VCG mechanisms in interdependent value problems that restore incentive compatibility. We show here how one can construct a two-stage non-direct mechanism that similarly restores incentive compatibility while improving upon the direct one stage mechanism in terms of privacy and the size of messages that must be sent. The first stage that elicits the part of the agents' private information that induces interdependence can be used to transform certain other interdependent value problems into private value problems.

Suggested Citation

  • McLean, Richard P. & Postlewaite, Andrew, 2017. "A dynamic non-direct implementation mechanism for interdependent value problems," Games and Economic Behavior, Elsevier, vol. 101(C), pages 34-48.
    • Handle: RePEc:eee:gamebe:v:101:y:2017:i:c:p:34-48
    DOI: 10.1016/j.geb.2015.06.007
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    References listed on IDEAS

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    1. Richard McLean & Andrew Postlewaite, 2002. "Informational Size and Incentive Compatibility," Econometrica, Econometric Society, vol. 70(6), pages 2421-2453, November.
    2. Palfrey, Thomas R & Srivastava, Sanjay, 1989. "Implementation with Incomplete Information in Exchange Economies," Econometrica, Econometric Society, vol. 57(1), pages 115-134, January.
    3. Richard McLean & Andrew Postlewaite, 2004. "Informational Size and Efficient Auctions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(3), pages 809-827.
    4. Ori Heffetz & Katrina Ligett, 2014. "Privacy and Data-Based Research," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 75-98, Spring.
    5. Ledyard, John O. & Palfrey, Thomas R., 2002. "The approximation of efficient public good mechanisms by simple voting schemes," Journal of Public Economics, Elsevier, vol. 83(2), pages 153-171, February.
    6. Mount, Kenneth & Reiter, Stanley, 1974. "The informational size of message spaces," Journal of Economic Theory, Elsevier, vol. 8(2), pages 161-192, June.
    7. Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 14-33, June.
    8. John O. Ledyard & Thomas R. Palfrey, 1994. "Voting and Lottery Drafts as Efficient Public Goods Mechanisms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(2), pages 327-355.
    9. Jackson, Matthew O, 1991. "Bayesian Implementation," Econometrica, Econometric Society, vol. 59(2), pages 461-477, March.
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    Cited by:

    1. Song, Yangwei, 2023. "Approximate Bayesian implementation and exact maxmin implementation: An equivalence," Games and Economic Behavior, Elsevier, vol. 139(C), pages 56-87.
    2. Richard McLean & Andrew Postlewaite, 2018. "A Very Robust Auction Mechanism," PIER Working Paper Archive 18-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 16 Jan 2018.
    3. Richard P. McLean & Andrew Postlewaite, 2024. "Information Requirements for Mechanism Design," PIER Working Paper Archive 24-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    4. Tatiana Daddario & Richard P. McLean & Andrew Postlewaite, 2024. "An assignment problem with interdependent valuations and externalities," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(2), pages 567-592, September.
    5. Song, Yangwei, 2022. "Approximate Bayesian Implementation and Exact Maxmin Implementation: An Equivalence," Rationality and Competition Discussion Paper Series 362, CRC TRR 190 Rationality and Competition.

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    More about this item

    Keywords

    Privacy; Auctions; Incentive compatibility; Mechanism design; Interdependent values; Ex post incentive compatibility; Informational size;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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