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Robust Mechanism Design

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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 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.
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  • Dirk Bergemann & Stephen Morris, 2003. "Robust Mechanism Design," Levine's Bibliography 666156000000000035, UCLA Department of Economics.
  • Handle: RePEc:cla:levrem:666156000000000035
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    References listed on IDEAS

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    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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