Mechanism Design with Limited Commitment

Download or read book Mechanism Design with Limited Commitment written by Laura Doval and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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 outcomes 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 problem: To the usual truthtelling and participation constraints, one must add the designer's sequential rationality constraint.