Epistemological Implementation of Social Choice Functions

Abstract

We investigate the implementation of social choice functions (SCFs) from an epistemological perspective. We consider the possibility that in higher-order beliefs there exists an honest agent who is motivated by intrinsic preference for honesty as well as material interest. We assume weak honesty, in that, although any honest agent has a cost of lying that is positive but close to zero, she (or he) is mostly motivated by material interests and even tells white lies. This study assumes that all agents are fully informed of the physical state, but “all agents are selfish” never happens to be common knowledge in epistemology. We show the following positive results for the implementability: with three or more agents, any SCF is uniquely implementable in the Bayesian Nash equilibrium (BNE). An SCF, whether material or nonmaterial (ethical), can be implemented even if all agents are selfish and “all agents are selfish” is mutual knowledge.

Keywords: unique implementation, weak honesty, common knowledge on selfishness, ethical social choice function, quadratic scoring rule

JEL Classification: C72, D71, D78, H41