Strategic Distinguishability with an Application to Robust Virtual Implementation
In a general interdependent preference environment, we characterize when two payoff types can be distinguished by their rationalizable strategic choices without any prior knowledge of their beliefs and higher order beliefs. We show that two types are strategically distinguishable if and only if they satisfy a separability condition. The separability condition for each agent essentially requires that there is not too much interdependence in preferences across agents. A social choice function -- mapping payoff type profiles to outcomes -- can be robustly virtually implemented if there exists a mechanism such that every equilibrium on every type space achieves an outcome arbitrarily close to the social choice function: this definition is equivalent to requiring virtual implementation in iterated deletion of strategies that are strictly dominated for all beliefs. The social choice function is robustly measurable if strategically indistinguishable types receive the same allocation. We show that ex post incentive compatibility and robust measurability are necessary and sufficient for robust virtual implementation.
|Date of creation:||Jun 2007|
|Date of revision:|
|Publication status:||Published in Theoretical Economics (2009), 4: 45-88|
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- 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.
- Dirk Bergemann & Stephen Morris, 2005. "Robust Implementation: The Role of Large Type Spaces," Levine's Bibliography 784828000000000116, UCLA Department of Economics.
- Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
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