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Mechanism Design with Limited Commitment

Doval, Laura and Skreta, Vasiliki (2018) Mechanism Design with Limited Commitment. Social Science Working Paper, 1443. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20191018-161056919

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Abstract

We develop a tool akin to the revelation principle for mechanism design with limited commitment. We identify a canonical class of mechanisms rich enough to replicate the payoffs 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. We show how this insight can be used to transform the designer's problem into a constrained optimization one: To the usual truthtelling and participation constraints, one must add the designer's sequential rationality constraint.


Item Type:Report or Paper (Working Paper)
Additional Information:Vasiliki Skreta acknowledges funding by the European Research Council (ERC) consolidator grant "Frontiers In Design." Other acknowledgements to be added. First version: April 8, 2018. This version: November 8, 2018.
Group:Social Science Working Papers
Funders:
Funding AgencyGrant Number
European Research Council (ERC)UNSPECIFIED
Subject Keywords:mechanism design, limited commitment, revelation principle, information design
Series Name:Social Science Working Paper
Issue or Number:1443
Record Number:CaltechAUTHORS:20191018-161056919
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20191018-161056919
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:99376
Collection:CaltechAUTHORS
Deposited By: Katherine Johnson
Deposited On:18 Oct 2019 23:15
Last Modified:18 Oct 2019 23:15

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