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  3. American Economic Review
  4. August 2017
  5. Full Implementation and Belief Restrictions

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Full Implementation and Belief Restrictions

  • Mariann Ollár
  • Antonio Penta
American Economic Review
vol. 107, no. 8, August 2017
(pp. 2243–77)
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Abstract

Multiplicity of equilibria and the dependence on strong common knowledge assumptions are well-known problems in mechanism design. We address them by studying full implementation via transfer schemes, under general restrictions on agents' beliefs. We show that incentive-compatible transfers ensure uniqueness—and hence full implementation—if they induce sufficiently weak strategic externalities. We then design transfers for full implementation by using information on beliefs in order to weaken the strategic externalities of the baseline canonical transfers. Our results rely on minimal restrictions on agents' beliefs, specifically on moments of the distribution of types, that arise naturally in applications.

Citation

Ollár, Mariann, and Antonio Penta. 2017. "Full Implementation and Belief Restrictions." American Economic Review, 107 (8): 2243–77. DOI: 10.1257/aer.20151462

Additional Materials

JEL Classification

  • D62 Externalities
  • D82 Asymmetric and Private Information; Mechanism Design
  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness