# Probabilistic Verification in Mechanism Design

## TL;DR

This paper develops a probabilistic verification model in mechanism design, characterizing when types can be effectively screened and providing a tractable way to optimize mechanisms with verification technology.

## Contribution

It introduces a new probabilistic verification framework and characterizes conditions for effective type screening, enabling tractable mechanism design with verification.

## Key findings

- Characterization of when each type has an optimal screening test
- Development of a reduced form for verification technology
- Mechanism solutions interpolate between no verification and full surplus extraction

## Abstract

We introduce a model of probabilistic verification in mechanism design. The principal elicits a message from the agent and then selects a test to give the agent. The agent's true type determines the probability with which he can pass each test. We characterize whether each type has an associated test that best screens out all other types. If this condition holds, then the testing technology can be represented in a tractable reduced form. We use this reduced form to solve for profit-maximizing mechanisms with verification. As the verification technology varies, the solution continuously interpolates between the no-verification solution and full surplus extraction.