Strategy-proof Pareto-improvement*

We consider a general framework, where each agent has an outside option of privately known value, that encompasses object allocation, matching with contracts, provision of excludable public goods, and more. First, we show that if a strategyproof mechanism is required to (weakly) Pareto-improve an individually rational and participation-maximal benchmark mechanism, there is at most one choice. A consequence is that many known mechanisms, especially in market design applications, are on the Pareto frontier of strategy-proof mechanisms. Second, we characterize the Pareto-improvement relation over strategy-proof and individually rational mechanisms: one of these mechanisms Pareto-improves another if and only if it weakly expands the set of participants at each profile of preferences. Third, for settings with transfers, we obtain a characterization of the pivotal mechanism and a revenue equivalence theorem.