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Direct implementation with evidence

Author

Listed:
  • Banerjee, Soumen

    (CCBEF, Southwestern University of Finance and Economics)

  • Chen, Yi-Chun

    (Department of Economics and Risk Management Institute, National University of Singapore)

  • Sun, Yifei

    (Department of Economics, University of International Business and Economics)

Abstract

We study full implementation with evidence in an environment with bounded utilities. We show that a social choice function is Nash implementable in a direct revelation mechanism if and only if it satisfies the measurability condition proposed by Ben-Porath and Lipman (2012). Building on a novel classification of lies according to their refutability with evidence, the mechanism requires only two agents, accounts for mixed-strategy equilibria and accommodates evidentiary costs. While monetary transfers are used, they are off the equilibrium and can be balanced with three or more agents. In a richer model of evidence due to Kartik and Tercieux (2012a), we establish pure-strategy implementation with two or more agents in a direct revelation mechanism. We also obtain a necessary and sufficient condition on the evidence structure for renegotiation-proof bilateral contracts, based on the classification of lies.

Suggested Citation

  • Banerjee, Soumen & Chen, Yi-Chun & Sun, Yifei, 2024. "Direct implementation with evidence," Theoretical Economics, Econometric Society, vol. 19(2), May.
    • Handle: RePEc:the:publsh:5015
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    References listed on IDEAS

    as
    1. Dutta, Bhaskar & Sen, Arunava, 2012. "Nash implementation with partially honest individuals," Games and Economic Behavior, Elsevier, vol. 74(1), pages 154-169.
    2. Elchanan Ben‐Porath & Eddie Dekel & Barton L. Lipman, 2019. "Mechanisms With Evidence: Commitment and Robustness," Econometrica, Econometric Society, vol. 87(2), pages 529-566, March.
    3. Chen, Yi-Chun & Kunimoto, Takashi & Sun, Yifei & Xiong, Siyang, 2021. "Rationalizable implementation in finite mechanisms," Games and Economic Behavior, Elsevier, vol. 129(C), pages 181-197.
    4. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 23-38.
    5. Kartik, Navin & Tercieux, Olivier & Holden, Richard, 2014. "Simple mechanisms and preferences for honesty," Games and Economic Behavior, Elsevier, vol. 83(C), pages 284-290.
    6. Matthew O. Jackson, 1992. "Implementation in Undominated Strategies: A Look at Bounded Mechanisms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 757-775.
    7. Eric Maskin & John Moore, 1999. "Implementation and Renegotiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 39-56.
    8. Bull, Jesse & Watson, Joel, 2007. "Hard evidence and mechanism design," Games and Economic Behavior, Elsevier, vol. 58(1), pages 75-93, January.
    9. Philippe Aghion & Drew Fudenberg & Richard Holden & Takashi Kunimoto & Olivier Tercieux, 2012. "Subgame-Perfect Implementation Under Information Perturbations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(4), pages 1843-1881.
    10. repec:hal:pseose:halshs-00943301 is not listed on IDEAS
    11. Ben-Porath, Elchanan & Lipman, Barton L., 2012. "Implementation with partial provability," Journal of Economic Theory, Elsevier, vol. 147(5), pages 1689-1724.
    12. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September.
    13. Jerry R. Green & Jean-Jacques Laffont, 1986. "Partially Verifiable Information and Mechanism Design," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(3), pages 447-456.
    14. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 83-114.
    15. repec:hal:pseose:hal-00812781 is not listed on IDEAS
    16. Soumen Banerjee & Yi-Chun Chen, 2022. "Implementation with Uncertain Evidence," Papers 2209.10741, arXiv.org.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Mechanism design; costly signaling; verifiable information; Nash implementation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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