A Foundation of Deterministic Mechanisms

32 Pages Posted: 10 Dec 2015  

Yi-Chun Chen

National University of Singapore (NUS) - Department of Economics

Wei He

University of Iowa - Henry B. Tippie College of Business - Department of Economics

Jiangtao Li

National University of Singapore (NUS) - Department of Economics

Yeneng Sun

National University of Singapore (NUS)

Date Written: December 8, 2015

Abstract

We study a general social choice environment that has multiple agents, a finite set of alternatives, and independent and diffuse information. We show that for any Bayesian incentive compatible mechanism, there exists a deterministic mechanism that i) is Bayesian incentive compatible; ii) delivers the same interim expected utilities/allocation probabilities for all the agents; and iii) delivers the same ex ante expected welfare. Our result holds in settings with a rich class of utility functions, multi-dimensional types, interdependent valuations, and non-transferable utilities. More importantly, the result recovers the optimality of deterministic mechanisms (whether in terms of revenue or efficiency), which sharply contrasts with the existing results in the screening literature. To prove our result, we develop a new methodology of "mutual purification", and establish its link with the literature of mechanism design.

Suggested Citation

Chen, Yi-Chun and He, Wei and Li, Jiangtao and Sun, Yeneng, A Foundation of Deterministic Mechanisms (December 8, 2015). Available at SSRN: https://ssrn.com/abstract=2701042 or http://dx.doi.org/10.2139/ssrn.2701042

Yi-Chun Chen

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

Wei He (Contact Author)

University of Iowa - Henry B. Tippie College of Business - Department of Economics ( email )

108 Pappajohn Building
Iowa City, IA 52242
United States

Jiangtao Li

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

Yeneng Sun

National University of Singapore (NUS) ( email )

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