Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 2022, Volume 90, Issue 4

Mechanism Design with Limited Commitment
p. 1463-1500

Laura Doval, Vasiliki Skreta

We develop a tool akin to the revelation principle for dynamic mechanism‐selection games in which the designer can only commit to short‐term mechanisms. We identify a canonical class of mechanisms rich enough to replicate the outcomes of any equilibrium in a mechanism‐selection game between an uninformed designer and a privately informed agent. A cornerstone of our methodology is the idea that a mechanism should encode not only the rules that determine the allocation, but also the information the designer obtains from the interaction with the agent. Therefore, how much the designer learns, which is the key tension in design with limited commitment, becomes an explicit part of the design. Our result simplifies the search for the designer‐optimal outcome by reducing the agent's behavior to a series of participation, truth telling, and Bayes' plausibility constraints the mechanisms must satisfy.

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Supplement to "Mechanism Design with Limited Commitment"

Laura Doval and Vasiliki Skreta

This online appendix contains material not found within the manuscript.