Publication Type
Journal Article
Version
submittedVersion
Publication Date
4-2023
Abstract
The literature on robust mechanism design assumes players' knowledge about a fixed payoff environment and investigates global robustness of optimal mechanisms to large changes in the information structure. Acknowledging global robustness as a demanding requirement, we propose continuous implementation as a notion of local robustness. Keeping the assumption of payoff knowledge, we say that an SCF is continuously implementable if there exists a mechanism which yields the outcome close to the desired one for all types close to the planner's initial model. We show that when a generic correlation condition is imposed on the class of interdependent-value environments, any (interim) incentive compatible SCF is continuously implementable with arbitrarily small transfers imposed on and off the equilibrium. This stands in stark contrast to Bergemann and Morris (2005), who show that their global robustness amounts to ex post incentive compatibility, as well as to Oury and Tercieux (2012), who show that continuous implementation without payoff knowledge generates a substantial restriction on the SCF, tightly connected to full implementation in rationalizable strategies.
Keywords
Continuous implementation, Full implementation, Incentive compatibility, Robustness, Transfers
Discipline
Economic Theory
Research Areas
Economic Theory
Publication
Journal of Economic Theory
Volume
209
First Page
1
Last Page
41
ISSN
0022-0531
Identifier
10.1016/j.jet.2023.105624
Publisher
Elsevier
Embargo Period
3-21-2023
Citation
CHEN, Yi-Chun; KUNIMOTO, Takashi; and SUN, Yifei.
Continuous implementation with payoff knowledge. (2023). Journal of Economic Theory. 209, 1-41.
Available at: https://ink.library.smu.edu.sg/soe_research/2672
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jet.2023.105624