Year: 2022
Type: preprint
Abstract: We study a full implementation problem with a state unknown to the designer but known to agents, where agents have uncertain evidence privately drawn from state-dependent distributions. This setting allows ``perfect deceptions,'' where agents' reports can mimic the evidence distribution of a false state which cannot also be directly refuted by evidence, making differentiation impossible for any mechanism. This yields our main result: a necessary and sufficient condition, No Perfect Deceptions (NPD), for implementation in (mixed-strategy) Bayesian Nash equilibria. The solution uses ``competing'' scoring rules to elicit ex ante evidence distributions while canceling out in equilibrium, a reflection device that converts low-probability refutations into direct incentives for full evidence submission without penalties that scale with inverse refutation probabilities, and an endogenous ``test allocation'' using bets which separate states based on the evidence probabilities. The constructed mechanism is finite and uses off-equilibrium transfers with maximum magnitude of the order of the outcome. We also allow limited but nontrivial uncertainty in the state dimension. A generalized NPD condition characterizes exact implementation under nonexclusive information and yields exact outcomes with vanishing expected transfers under information smallness.
Authors: Banerjee, Soumen, Chen, Yi-Chun
Institutions: National University of Singapore, Risk Management Institute
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4296973797