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Robust Mechanism Design

In: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs

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  • Dirk Bergemann
  • Stephen Morris

Abstract

The mechanism design literature assumes too much common knowledge of the environment among the players and planner. We relax this assumption by studying mechanism design on richer type spaces.We ask when ex post implementation is equivalent to interim (or Bayesian) implementation for all possible type spaces. The equivalence holds in the case of separable environments; examples of separable environments arise (1) when the planner is implementing a social choice function (not correspondence) and (2) in a quasilinear environment with no restrictions on transfers. The equivalence fails in general, including in some quasilinear environments with budget balance.In private value environments, ex post implementation is equivalent to dominant strategies implementation. The private value versions of our results offer new insights into the relationship between dominant strategy implementation and Bayesian implementation.

Suggested Citation

  • Dirk Bergemann & Stephen Morris, 2012. "Robust Mechanism Design," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 2, pages 49-96, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789814374590_0002
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    More about this item

    Keywords

    Mechanism Design; Game Theory; Auction Theory; Implementation; Private Information; First and Higher-Order Belief; BayesNash Equilibrium; Ex Post Equilibrium; Rationalizability; Vickrey-Clarke-Groves Mechanisms; Private Value; Interdependent Value; Common Value; Belief-Free Mechanisms;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D0 - Microeconomics - - General

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