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Information Requirements for Mechanism Design

Author

Listed:
  • Richard P. McLean

    (Rutgers University)

  • Andrew Postlewaite

    (University of Pennsylvania)

Abstract

Standard mechanism design begins with a statement of the problem, including knowledge on the designer's part about the distribution of the characteristics (preferences and information) of the participants who are to engage with the mechanism. There is a large literature on robust mechanism design, much of which aims to reduce the assumed information the designer has about the participants. In this paper we provide an auction mechanism that reduces the assumed information assumed of the seller, and, in addition, relaxes substantially the assumed information of the participants. In particular, the mechanism performs well when there are many buyers, even though there is no prior distribution over the accuracy of buyers' information on the part of the designer or the participants.

Suggested Citation

  • Richard P. McLean & Andrew Postlewaite, 2024. "Information Requirements for Mechanism Design," PIER Working Paper Archive 24-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:24-035
    as

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    File URL: https://economics.sas.upenn.edu/system/files/working-papers/24-035%20PIER%20Paper%20Submission.pdf
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    References listed on IDEAS

    as
    1. Dirk Bergemann & Benjamin Brooks & Stephen Morris, 2017. "First‐Price Auctions With General Information Structures: Implications for Bidding and Revenue," Econometrica, Econometric Society, vol. 85, pages 107-143, January.
    2. Dirk Bergemann & Stephen Morris, 2012. "Robust Mechanism Design: An Introduction," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 1, pages 1-48, World Scientific Publishing Co. Pte. Ltd..
    3. Dirk Bergemann & Stephen Morris, 2012. "Robust Mechanism Design," World Scientific Book Chapters, in: Robust Mechanism Design The Role of Private Information and Higher Order Beliefs, chapter 2, pages 49-96, World Scientific Publishing Co. Pte. Ltd..
    4. McLean, Richard P. & Postlewaite, Andrew, 2017. "A dynamic non-direct implementation mechanism for interdependent value problems," Games and Economic Behavior, Elsevier, vol. 101(C), pages 34-48.
    5. Benjamin Brooks & Songzi Du, 2021. "Optimal Auction Design With Common Values: An Informationally Robust Approach," Econometrica, Econometric Society, vol. 89(3), pages 1313-1360, May.
    6. Richard McLean & Andrew Postlewaite, 2002. "Informational Size and Incentive Compatibility," Econometrica, Econometric Society, vol. 70(6), pages 2421-2453, November.
    7. Songzi Du, 2018. "Robust Mechanisms Under Common Valuation," Econometrica, Econometric Society, vol. 86(5), pages 1569-1588, September.
    8. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
    9. Borgers, Tilman & Krahmer, Daniel & Strausz, Roland, 2015. "An Introduction to the Theory of Mechanism Design," OUP Catalogue, Oxford University Press, number 9780199734023.
    10. Wolitzky, Alexander, 2016. "Mechanism design with maxmin agents: theory and an application to bilateral trade," Theoretical Economics, Econometric Society, vol. 11(3), September.
    11. Alessandro Chiesa & Silvio Micali & Zeyuan Allen Zhu, 2015. "Knightian Analysis of the Vickrey Mechanism," Econometrica, Econometric Society, vol. 83(5), pages 1727-1754, September.
    12. Takuro Yamashita, 2015. "Implementation in Weakly Undominated Strategies: Optimality of Second-Price Auction and Posted-Price Mechanism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(3), pages 1223-1246.
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    More about this item

    Keywords

    Robustness; Optimal auctions; Incentive Compatibility; Mechanism Design; Interdependent Values; Informational Size; Common Knowledge;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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