Econometrica: Mar 2019, Volume 87, Issue 2

Mechanisms with Evidence: Commitment and Robustness

https://doi.org/10.3982/ECTA14991
p. 529-566

Elchanan Ben‐Porath, Eddie Dekel, Barton L. Lipman

We show that in a class of I‐agent mechanism design problems with evidence, commitment is unnecessary, randomization has no value, and robust incentive compatibility has no cost. In particular, for each agent i, we construct a simple disclosure game between the principal and agent i where the equilibrium strategies of the agents in these disclosure games give their equilibrium strategies in the game corresponding to the mechanism but where the principal is not committed to his response. In this equilibrium, the principal obtains the same payoff as in the optimal mechanism with commitment. As an application, we show that certain costly verification models can be characterized using equilibrium analysis of an associated model of evidence.



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