A costly Bayesian implementable social choice function may not be truthfully implementable

Wu, Haoyang (2016): A costly Bayesian implementable social choice function may not be truthfully implementable.

Abstract

The revelation principle is a fundamental theorem in many economics fields. In this paper, we construct a simple labor model to show that a social choice function which can be implemented costly in Bayesian Nash equilibrium may not be truthfully implementable. The key point is the strategy cost condition given in Section 4: each agent pays cost when performing strategy in the indirect mechanism, but will not pay the strategy cost in the direct mechanism. As a result, the revelation principle may not hold when agents' strategies are costly in the indirect mechanism.

• Item Type: MPRA Paper
• Language: English
• Keywords: Revelation principle; Game theory; Mechanism design; Auction theory
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D70 - General

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