A Robust Efficient Dynamic Mechanism

TL;DR

This paper proposes a new dynamic mechanism that achieves efficiency under weaker assumptions and stronger solution concepts, addressing robustness issues in previous models with multiple agents.

Contribution

It introduces a robust, efficient dynamic mechanism that relaxes previous strong assumptions and employs an efficient Nash equilibrium with guaranteed payoffs.

Findings

Previous mechanism not robust for 3 or more agents

New mechanism maintains efficiency under weaker assumptions

Enhanced robustness with stronger equilibrium concept

Abstract

Athey and Segal introduced an efficient budget-balanced mechanism for a dynamic stochastic model with quasilinear payoffs and private values, using the solution concept of perfect Bayesian equilibrium. We show that this implementation is not robust in multiple senses, especially for at least 3 agents. For example, we will show a generic setup where all efficient strategy profiles can be eliminated by iterative elimination of weakly dominated strategies. Furthermore, this model used strong assumptions about the information of the agents, and the mechanism was not robust to the relaxation of these assumptions. In this paper, we will show a different mechanism that implements efficiency under weaker assumptions and uses the stronger solution concept of ``efficient Nash equilibrium with guaranteed expected payoffs''.