Robust Mechanism Design
46 Pages Posted: 20 May 2004
Date Written: April 2004
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: Suggested Citation