A revelation principle for competing mechanisms (Q1125569)

The problem of formal modelling of the universal set of competing mechanisms is investigated in the case of two buyers and two sellers under the following assumptions. Sellers simultaneously announce the mechanisms they plan to use. No seller can observe directly the mechanism chosen by the other one. Each buyer can observe both mechanisms and select at most one seller. This information is revealed to the sellers. After this the seller's mechanisms are played out with any participating buyers. The suggested model gives the possibility to specify a class of mechanisms with the property: any well behaved set of indirect mechanisms can be embedded within it. It is established that equilibria relating to the universal class are robust, i.e. there are no profitable deviations to more complicated mechanisms. It is also established that all robust equilibria may be presented relatively to the universal class. Some model examples, proofs and explanations are provided via the appendices.