Publication Type
Working Paper
Version
publishedVersion
Publication Date
2-2025
Abstract
When the normative goals for a set of agents can be summarized in a set-valued rule and agents take actions that are rationalizable, a new theory of incentives emerges in which standard Bayesian incentive compatibility (BIC) is relaxed significantly. The paper studies the interim rationalizable implementation of social choice sets with a Cartesian product structure, a leading example thereof being ex-post efficiency. Setwise incentive compatibility (setwise IC), much weaker than BIC, is shown to be necessary for implementation. Setwise IC enforces incentives flexibly within the entire correspondence, instead of the pointwise enforcement entailed by BIC. Sufficient conditions, while based on the existence of SCFs in the correspondence that make truthful revelation a dominant strategy, are shown to be permissive to allow the implementation of ex-post efficiency in many settings where equilibrium implementation fails (e.g., bilateral trading, multidimensional signals). Furthermore, this success comes at little cost: all our mechanisms are well behaved, in the sense that best responses always exist.
Keywords
Rationalizability, Implementation, correspondences, Setwise incentive, Compatibility, Setwise Dominance, Ex-post Efficiency.
Discipline
Economic Theory
Research Areas
Economic Theory
First Page
1
Last Page
55
Publisher
Singapore Management University
Citation
KUNIMOTO, Takashi; SARAN, Rene; and SERRANO, Roberto.
Rationalizable incentives: Interim rationalizable implementation of correspondences. (2025). 1-55.
Available at: https://ink.library.smu.edu.sg/soe_research/2799
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
