Seminar

A necessary condition on robust implementation: theory and applications

Takuro Yamashita (Toulouse School of Economics)

November 25, 2011, 13:45–15:00

Toulouse

Room MS 003

Decision Mathematics Seminar

Abstract

We derive a necessary condition, called the chain dominance property, for social choice correspondences to be admissibly implementable, i.e., given whatever admissible actions the agents play in each state, the outcomes always lie in the correspondence. The condition requires that the correspondence has a selection that is “partially” dominant-strategy incentive compatible in a certain sense. Applying the condition in worst-case expected welfare maximization problems in bilateral trading, we show that (i) for a class of priors of the designer, no mechanism can improve over a posted-price mechanism of Hagerty and Rogerson (1987), and (ii) for another class of priors, a non-dominant-strategy mechanism, called a “two-price” mechanism, is optimal.