A Revelation Principle for Dominant Strategy Implementation
Working Paper No. 08-W19
Jesse A. Schwartz and Quan Wen
ABSTRACT [article]
We introduce a perfect price discriminating (PPD) mechanism for allocation problems with private information. A PPD mechanism treats a seller, for example, as a perfect price discriminating monopolist who faces a price schedule that does not depend on her report. In any PPD mechanism, every player has a dominant strategy to truthfully report her private information. We establish a revelation principle for dominant strategy implementation: any outcome that can be dominant strategy implemented can also be dominant strategy implemented using a PPD mechanism. We apply this principle to derive the optimal, budget-balanced, dominant strategy mechanisms for public good provision and bilateral bargaining.
Keywords and Phrases: Dominant strategy implementation, Vickrey-Clarke-Groves mechanisms, public good provision, bilateral bargaining
JEL Classification Numbers: C72, C78, D44, D82, H41