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Mechanism Design with Information Leakage

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  • Samuel Hafner
  • Marek Pycia
  • Haoyuan Zeng

Abstract

We study the design of mechanisms -- e.g., auctions -- when the designer does not control information flows between mechanism participants. A mechanism equilibrium is leakage-proof if no player conditions their actions on leaked information; a property distinct from ex-post incentive compatibility. Only leakage-proof mechanisms can implement social choice functions in environments with leakage. Efficient auctions need to be leakage-proof, while revenue-maximizing ones not necessarily so. Second-price and ascending auctions are leakage-proof; first-price auctions are not; while whether descending auctions are leakage-proof depends on tie-breaking.

Suggested Citation

  • Samuel Hafner & Marek Pycia & Haoyuan Zeng, 2025. "Mechanism Design with Information Leakage," Papers 2511.00715, arXiv.org.
    • Handle: RePEc:arx:papers:2511.00715
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    References listed on IDEAS

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