Mechanism Design With Limited Commitment

DOI10.3982/ECTA16846MaRDI QIDQ6181687zbMATH OpenOpenAlexFDO

Authors Laura Doval, Vasiliki Skreta

Publication date 23 January 2024

Published in Econometrica (Search for Journal in Brave)

Copyright license Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International

Full work available at URL https://arxiv.org/abs/1811.03579

zbMATH Keywords

information designlimited commitmentmechanism designrevelation principleshort-term mechanisms

Mathematics Subject Classification ID

Systems theory; control (93-XX)

Abstract: We develop a tool akin to the revelation principle for dynamic mechanism-selection games in which the designer can only commit to short-term mechanisms. We identify a canonical class of mechanisms rich enough to replicate the outcomes of any equilibrium in a mechanism-selection game between an uninformed designer and a privately informed agent. A cornerstone of our methodology is the idea that a mechanism should encode not only the rules that determine the allocation, but also the information the designer obtains from the interaction with the agent. Therefore, how much the designer learns, which is the key tension in design with limited commitment, becomes an explicit part of the design. Our result simplifies the search for the designer-optimal outcome by reducing the agent's behavior to a series of participation, truthtelling, and Bayes' plausibility constraints the mechanisms must satisfy.

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Cited in

(4)

• Mechanism Design With Limited Commitment
• Optimal mechanism for the sale of a durable good
• Implementing randomized allocation rules with outcome-contingent transfers
• Modeling the blockchain-related insurance contracts with moral hazard and adverse selection

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