A Tight Sufficient Condition for Recursive Formulation of Dynamic Implementation Problems
21 Pages Posted: 17 Jun 2016
Date Written: June 9, 2016
This note explores conditions that admit recursive representation for a class of dynamic mechanism design problems. We derive a tight sufficient condition, called the common state property (CSP), which ensures that temporary incentive constraints guarantee implementability, and so allows to characterize the principal's problem recursively. The condition imposes no restrictions on agent's preferences and only concerns the properties of the evolution of private information.
Keywords: First order approach, Dynamic mechanism design
JEL Classification: D30, D80, D82
Suggested Citation: Suggested Citation