Robust Mechanism Design

46 Pages Posted: 20 May 2004

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Stephen Morris

Princeton University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2004

Abstract

The mechanism design literature assumes too much common knowledge of the environment among the players and planner. We relax this assumption by studying implementation on richer type spaces.

We ask when ex post implementation is equivalent to interim (or Bayesian) implementation for all possible type spaces. The equivalence holds in the case of separable environments; examples of separable environments arise (1) when the planner is implementing a social choice function (not correspondence); and (2) in a quasilinear environment with no restrictions on transfers. The equivalence fails in general, including in some quasilinear environments with budget balance.

In private value environments, ex post implementation is equivalent to dominant strategies implementation. The private value versions of our results offer new insights into the relation between dominant strategy implementation and Bayesian implementation.

Note: A previous version of this paper can be found at: http://ssrn.com/abstract=412497

Keywords: Mechanism design, Common knowledge, Universal type space, Interim equilibrium, Ex-post equilibrium, Dominant strategies

JEL Classification: C79, C82

Suggested Citation

Bergemann, Dirk and Morris, Stephen Edward, Robust Mechanism Design (April 2004). Cowles Foundation Discussion Paper No. 1421R. Available at SSRN: https://ssrn.com/abstract=547222

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-3592 (Phone)
203-432-2128 (Fax)

HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Stephen Edward Morris

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

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