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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. 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 relation between dominant strategy implementation and Bayesian implementation.

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Paper provided by www.najecon.org in its series NajEcon Working Paper Reviews with number 666156000000000593.

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Date of creation: 10 Mar 2005
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Handle: RePEc:cla:najeco:666156000000000593
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  1. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
  2. Dirk Bergemann & Stephen Morris, 2005. "Robust Implementation: The Role of Large Type Spaces," Cowles Foundation Discussion Papers 1519, Cowles Foundation for Research in Economics, Yale University.
  3. Eliaz, Kfir, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 589-610, July.
  4. Kim-Sau Chung & Jeffrey C. Ely, 2001. "Implementation with Near-Complete Information," Discussion Papers 1332, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Holmstrom, Bengt & Myerson, Roger B, 1983. "Efficient and Durable Decision Rules with Incomplete Information," Econometrica, Econometric Society, vol. 51(6), pages 1799-819, November.
  6. Aviad Heifetz & Dov Samet, 1996. "Topology-Free Typology of Beliefs," Game Theory and Information 9609002, EconWPA, revised 17 Sep 1996.
  7. Zvika Neeman, 1998. "The Relevance of Private Information in Mechanism Design," Papers 0093, Boston University - Industry Studies Programme.
  8. Harsanyi, John C., 1994. "Games with Incomplete Information," Nobel Prize in Economics documents 1994-1, Nobel Prize Committee.
  9. Mookherjee, Dilip & Reichelstein, Stefan, 1992. "Dominant strategy implementation of Bayesian incentive compatible allocation rules," Journal of Economic Theory, Elsevier, vol. 56(2), pages 378-399, April.
  10. Philippe Jehiel & Moritz Meyer-ter-Vehn & Benny Moldovanu & William R. Zame, 2005. "The Limits of Ex-Post Implementation," UCLA Economics Working Papers 839, UCLA Department of Economics.
  11. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
  12. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 341-388, May.
  13. Battigalli Pierpaolo & Siniscalchi Marciano, 2003. "Rationalization and Incomplete Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-46, June.
  14. Lopomo, Giuseppe, 1998. "The English Auction Is Optimal Among Simple Sequential Auctions," Journal of Economic Theory, Elsevier, vol. 82(1), pages 144-166, September.
  15. Dirk Bergemann & Stephen Morris, 2003. "Robust Mechanism Design," Cowles Foundation Discussion Papers 1421R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2004.
  16. Walker, Mark, 1980. "On the Nonexistence of a Dominant Strategy Mechanism for Making Optimal Public Decisions," Econometrica, Econometric Society, vol. 48(6), pages 1521-40, September.
  17. d'Aspremont, Claude & Crémer, Jacques & Gérard-Varet, Louis-André, 2003. "Balanced Bayesian Mechanisms," IDEI Working Papers 196, Institut d'Économie Industrielle (IDEI), Toulouse.
  18. Anderson Robert M. & Zame William R., 2001. "Genericity with Infinitely Many Parameters," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 1(1), pages 1-64, February.
  19. Feinberg, Yossi, 2000. "Characterizing Common Priors in the Form of Posteriors," Journal of Economic Theory, Elsevier, vol. 91(2), pages 127-179, April.
  20. Postlewaite, Andrew & Schmeidler, David, 1986. "Implementation in differential information economies," Journal of Economic Theory, Elsevier, vol. 39(1), pages 14-33, June.
  21. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
  22. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 185-216, April.
  23. Ledyard, John O., 1978. "Incentive compatibility and incomplete information," Journal of Economic Theory, Elsevier, vol. 18(1), pages 171-189, June.
  24. Ehud Kalai, 2002. "Large Robust Games," Discussion Papers 1350, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  25. Claude d'Aspremont & Jacques Crémer & Louis-André Gérard-Varet, 2003. "Correlation, independence, and Bayesian incentives," Social Choice and Welfare, Springer, vol. 21(2), pages 281-310, October.
  26. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  27. Dirk Bergemann & Juuso Vaimaki, 2000. "Information Acquisition and Efficient Mechanism Design," Cowles Foundation Discussion Papers 1248, Cowles Foundation for Research in Economics, Yale University.
  28. Brandenburger Adam & Dekel Eddie, 1993. "Hierarchies of Beliefs and Common Knowledge," Journal of Economic Theory, Elsevier, vol. 59(1), pages 189-198, February.
  29. Aviad Heifetz & Zvika Neeman, 2006. "On the Generic (Im)Possibility of Full Surplus Extraction in Mechanism Design," Econometrica, Econometric Society, vol. 74(1), pages 213-233, 01.
  30. Hagerty, Kathleen M. & Rogerson, William P., 1987. "Robust trading mechanisms," Journal of Economic Theory, Elsevier, vol. 42(1), pages 94-107, June.
  31. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  32. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
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