Mechanism Design under Unawareness -- Extended Abstract

TL;DR

This paper explores mechanism design under asymmetric awareness, proposing dynamic Vickrey mechanisms that achieve ex post efficiency and budget balance despite unawareness and private information.

Contribution

It introduces novel dynamic Vickrey mechanisms that implement ex post efficient social choice functions under unawareness without full ex ante awareness.

Findings

Mechanisms can be designed to be ex post efficient under asymmetric awareness.

Dynamic elaboration of types allows for implementation without full ex ante awareness.

Proposed auction achieves efficiency, budget balance, and participation constraints.

Abstract

We study the design of mechanisms under asymmetric awareness and information. While the mechanism designer cannot necessarily commit to a particular social choice function in the face of unawareness, she can at least commit to properties of social choice functions such as efficiency given ex post awareness. Assuming quasi-linear utilities and private values, we show that we can implement in conditional dominant strategies a social choice function that is utilitarian ex post efficient under pooled awareness without the need of the social planner being fully aware ex ante. To this end, we develop novel dynamic versions of Vickrey-Clarke-Groves mechanisms in which true types are revealed and subsequently elaborated at endogenous higher awareness levels. We explore how asymmetric awareness affects budget balance and participation constraints. We show that ex ante unforeseen contingencies are no excuse for deficits. Finally, we propose a dynamic elaboration reverse second price auction for efficient procurement of complex incompletely specified projects with budget balance and participation constraints.