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The revelation principle fails when the format of each agent's strategy is an action

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  • Wu, Haoyang

Abstract

In mechanism design theory, a designer would like to implement a social choice function which specifies her favorite outcome for each possible profile of agents' private types. The revelation principle asserts that if a social choice function can be implemented by a mechanism in equilibrium, then there exists a direct mechanism that can truthfully implement it. This paper aims to propose a failure of the revelation principle. At first we point out that in any game the format of each agent's strategy is either an abstract message or a real action. For any given social choice function, if the mechanism which implements it in Bayesian Nash equilibrium has action-format strategies, then ``honest and obedient'' will not be an equilibrium strategy in the corresponding direct mechanism. Consequently, the revelation principle fails.

Suggested Citation

  • Wu, Haoyang, 2020. "The revelation principle fails when the format of each agent's strategy is an action," MPRA Paper 104171, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:104171
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    References listed on IDEAS

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    1. Bester, Helmut & Strausz, Roland, 2001. "Contracting with Imperfect Commitment and the Revelation Principle: The Single Agent Case," Econometrica, Econometric Society, vol. 69(4), pages 1077-1098, July.
    2. Epstein, Larry G. & Peters, Michael, 1999. "A Revelation Principle for Competing Mechanisms," Journal of Economic Theory, Elsevier, vol. 88(1), pages 119-160, September.
    3. Myerson, Roger B., 1982. "Optimal coordination mechanisms in generalized principal-agent problems," Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
    4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
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    More about this item

    Keywords

    Mechanism design; Revelation principle.;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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