Mechanism Design with Incomplete Information: A Solution to the Implementation Problem

Abstract

The main result of this paper is that the multiple equilibrium problem in mechanism design can be avoided in private value models if agents do not use weakly dominated strategies in equilibrium. We show that in such settings, any incentive compatible allocation can be made the unique equilibrium outcome to a mechanism. We derive a general necessary condition for unique implementation which implies that the positive result for private value models applies with considerably less generality to common value settings and to situations in which an agent's information does not index the agent's preferences.