Implementation with Interdependent Valuations
42 Pages Posted: 10 Mar 2006
Date Written: March 2006
Abstract
It is well-known that the ability of the Vickrey-Clarke-Groves (VCG) mechanism to implement efficient outcomes for private value choice problems does not extend to interdependent value problems. When an agent's type affects other agents' utilities, it may not be incentive compatible for him to truthfully reveal his type when faced with CGV payments. We show that when agents are informationally small, there exist small modifications to CGV that restore incentive compatibility. We further show that truthful revelation is an approximate ex post equilibrium. Lastly, we show that in replicated settings aggregate payments sufficient to induce truthful revelation go to zero.
Keywords: Auctions, Incentive Compatibility, Mechanism Design, Interdependent Values, Ex Post Incentive Compatibility
JEL Classification: C70, D44, D60, D82
Suggested Citation: Suggested Citation
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