A Bayesian implementable social choice function cannot be implemented by a direct mechanism

Wu, Haoyang (2016): A Bayesian implementable social choice function cannot be implemented by a direct mechanism.

Abstract

The revelation principle is a fundamental theorem in many economics fields such as game theory, mechanism design and auction theory etc. In this paper, I construct an example to show that a social choice function which can be implemented in Bayesian Nash equilibrium by an indirect mechanism cannot be implemented by a direct mechanism. The key point is that agents pay cost in the indirect mechanism, but pay nothing in the direct mechanism. As a result, the revelation principle does not hold when agent's cost cannot be neglected 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; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design

References

A. Mas-Colell, M.D. Whinston and J.R. Green, Microeconomic Theory, Oxford University Press, 1995.