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On the Generic (Im)possibility of Full Surplus Extraction in Mechanism Design

  • Aviad Heifetz


  • Zvika Neeman


A number of studies, most notably Cr?mer and McLean (1985, 1988), have shown that in Harsanyi type spaces of a fixed finite size, it is generically possible to design mechanisms that extract all the surplus from players, and as a consequence, implement any outcome as if the players’ private information were commonly known. In contrast, we show that within the set of common priors on the universal type space, the subset of priors that permit the extraction of the players’ full surplus is shy. Shyness is a notion of smallness for convex subsets of infinite-dimensional topological vector spaces (in our case, the set of common priors), which generalizes the usual notion of zero Lebesgue measure in finite-dimensional spaces.

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Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp350.

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Length: 26 pages
Date of creation: Feb 2004
Date of revision:
Publication status: Published in Econometrica, 2006, vol. 74, pp. 213-233.
Handle: RePEc:huj:dispap:dp350
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  1. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  2. Neeman, Zvika, 2003. "The effectiveness of English auctions," Games and Economic Behavior, Elsevier, vol. 43(2), pages 214-238, May.
  3. 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.
  4. Stephen Morris & Dirk Bergemann, 2004. "Robust Mechanism Design," Yale School of Management Working Papers ysm380, Yale School of Management.
  5. Robert, Jacques, 1991. "Continuity in auction design," Journal of Economic Theory, Elsevier, vol. 55(1), pages 169-179, October.
  6. Jeff Ely, 2003. "Foundations of Dominant Strategy Mechanisms," Theory workshop papers 658612000000000064, UCLA Department of Economics.
  7. Faruk Gul, 1998. "A Comment on Aumann's Bayesian View," Econometrica, Econometric Society, vol. 66(4), pages 923-928, July.
  8. McAfee, R Preston & Reny, Philip J, 1992. "Correlated Information and Mechanism Design," Econometrica, Econometric Society, vol. 60(2), pages 395-421, March.
  9. Adam Brandenburger & Eddie Dekel, 2014. "Hierarchies of Beliefs and Common Knowledge," World Scientific Book Chapters, in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 2, pages 31-41 World Scientific Publishing Co. Pte. Ltd..
  10. Robert J. Aumann, 1998. "Common Priors: A Reply to Gul," Econometrica, Econometric Society, vol. 66(4), pages 929-938, July.
  11. Aoyagi, Masaki, 1998. "Correlated Types and Bayesian Incentive Compatible Mechanisms with Budget Balance," Journal of Economic Theory, Elsevier, vol. 79(1), pages 142-151, March.
  12. Jonathan Weinstein & Muhamet Yildiz, 2004. "Finite-Order Implications of Any Equilibrium," Levine's Working Paper Archive 122247000000000065, David K. Levine.
  13. d'ASPREMONT , C. & GERARD VARET, L.-A., . "Bayesian incentive compatible beliefs," CORE Discussion Papers RP 481, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. McAfee, R Preston & McMillan, John & Reny, Philip J, 1989. "Extracting the Surplus in the Common-Value Auction," Econometrica, Econometric Society, vol. 57(6), pages 1451-59, November.
  15. Brusco, Sandro, 1998. "Unique Implementation of the Full Surplus Extraction Outcome in Auctions with Correlated Types," Journal of Economic Theory, Elsevier, vol. 80(2), pages 185-200, June.
  16. Johnson, Scott & Pratt, John W & Zeckhauser, Richard J, 1990. "Efficiency Despite Mutually Payoff-Relevant Private Information: The Finite Case," Econometrica, Econometric Society, vol. 58(4), pages 873-900, July.
  17. 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.
  18. Jean-Jacques Laffont & David Martimort, 2000. "Mechanism Design with Collusion and Correlation," Econometrica, Econometric Society, vol. 68(2), pages 309-342, March.
  19. Morris, Stephen, 1995. "The Common Prior Assumption in Economic Theory," Economics and Philosophy, Cambridge University Press, vol. 11(02), pages 227-253, October.
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