American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
On the Foundations of Ex Post Incentive-Compatible Mechanisms
American Economic Journal: Microeconomics
(pp. 494–514)
Abstract
This paper considers an interdependent-value robust mechanism design problem, where the principal has little knowledge about the agent's belief. Although ex post incentive-compatible (EPIC) mechanisms can implement allocations without any knowledge about the agent's belief, we show that, under a certain condition (order-reversing interdependence), there exists a non-EPIC mechanism that achieves a strictly higher expected revenue than any EPIC mechanism given whatever (admissible) belief structure the agent may enjoy. Conversely, with sufficiently small interdependence, such a non-EPIC mechanism does not exist: for some (admissible) belief structure, an EPIC mechanism achieves the highest expected revenue.Citation
Yamashita, Takuro, and Shuguang Zhu. 2022. "On the Foundations of Ex Post Incentive-Compatible Mechanisms." American Economic Journal: Microeconomics 14 (4): 494–514. DOI: 10.1257/mic.20200174Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness