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Robust Mechanism Design

  • Dirk Bergemann
  • Stephen Morris

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 playersÌ belief types, so the incentive constraints reduce to conditions distinguishing types with the same beliefs about othersÌ types but different payoff types.

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 666156000000000035.

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Date of creation: 06 Jun 2003
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Handle: RePEc:cla:levrem:666156000000000035
Contact details of provider: Web page: http://www.dklevine.com/

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