6 research outputs found
Probabilistic Verification in Mechanism Design
We introduce a model of probabilistic verification in a mechanism design
setting. The principal verifies the agent's claims with statistical tests. The
agent's probability of passing each test depends on his type. In our framework,
the revelation principle holds. We characterize whether each type has an
associated test that best screens out all the other types. In that case, the
testing technology can be represented in a tractable reduced form. In a
quasilinear environment, we solve for the revenue-maximizing mechanism by
introducing a new expression for the virtual value that encodes the effect of
testing
Linking Mechanisms: Limits and Robustness
Quota mechanisms are commonly used to elicit private information when agents
face multiple decisions and monetary transfers are infeasible. As the number of
decisions grows large, quotas asymptotically implement the same set of social
choice functions as do separate mechanisms with transfers. We analyze the
robustness of quota mechanisms. To set the correct quota, the designer must
have precise knowledge of the environment. We show that, without transfers,
only trivial social choice rules can be implemented in a prior-independent way.
We obtain a tight bound on the decision error that results when the quota does
not match the true type distribution. Finally, we show that in a multi-agent
setting, quotas are robust to agents' beliefs about each other. Crucially,
quotas make the distribution of reports common knowledge
Comment on Jackson and Sonnenschein (2007) "Overcoming Incentive Constraints by Linking Decisions"
We correct a bound in the definition of approximate truthfulness used in the
body of the paper of Jackson and Sonnenschein (2007). The proof of their main
theorem uses a different permutation-based definition, implicitly claiming that
the permutation-version implies the bound-based version. We show that this
claim holds only if the bound is loosened. The new bound is still strong enough
to guarantee that the fraction of lies vanishes as the number of problems
grows, so the theorem is correct as stated once the bound is loosened
Mechanisms without transfers for fully biased agents
A principal must decide between two options. Which one she prefers depends on
the private information of two agents. One agent always prefers the first
option; the other always prefers the second. Transfers are infeasible. One
application of this setting is the efficient division of a fixed budget between
two competing departments. We first characterize all implementable mechanisms
under arbitrary correlation. Second, we study when there exists a mechanism
that yields the principal a higher payoff than she could receive by choosing
the ex-ante optimal decision without consulting the agents. In the budget
example, such a profitable mechanism exists if and only if the information of
one department is also relevant for the expected returns of the other
department. We generalize this insight to derive necessary and sufficient
conditions for the existence of a profitable mechanism in the n-agent
allocation problem with independent types