Indirect Mechanisms and the Revelation Principle

Behavioral Differences between Direct and Indirect Mechanisms: Evidence from First Price Auctions∗

The Revelation Principle depends on a seemingly innocuous assumption that theoretically outcome-equivalent (TOE) direct and indirect mechanisms are behaviorally equivalent as well. However, this strong assertion has not yet been tested in previous experimental studies. In this paper, we aim to fill this gap. We use the first-price sealed-bid auction as our indirect mechanism and construct corre...

The revelation principle and regularity conditions

The revelation principle asserts that every outcome brought by a mechanism is realized by a truthful direct mechanism. The present paper investigates the regularity conditions of these two mechanisms in the continuous space of the agent’s type. It questions what regularity condition a general mechanism confers upon a direct mechanism through the revelation principle. By so doing, we elucidate t...

A costly Bayesian implementable social choice function may not be truthfully implementable

The revelation principle is a fundamental theorem in many economics fields. In this paper, we construct a simple labor model to show that a social choice function which can be implemented costly in Bayesian Nash equilibrium may not be truthfully implementable. The key point is the strategy cost condition given in Section 4: In the direct mechanism, each agent only reports a type and will not pa...

An End-to-end Argument in Mechanism Design (Prior-independent Auctions for Budgeted Agents)

This paper considers prior-independent mechanism design, namely identifying a single mechanism that has near optimal performance on every prior distribution. We show that mechanisms with truthtelling equilibria, a.k.a., revelation mechanisms, do not always give optimal priorindependent mechanisms and we define the revelation gap to quantify the non-optimality of revelation mechanisms. This stud...

Better with Byzantine: Manipulation-Optimal Mechanisms

A mechanism is manipulable if it is in some agents’ best interest to misrepresent their private information. The revelation principle establishes that, roughly, anything that can be accomplished by a manipulable mechanism can also be accomplished with a truthful mechanism. Yet agents often fail to play their optimal manipulations due to computational limitations or various flavors of incompeten...

A Note on Competing Mechanisms and the Revelation Principle