Revelation principle: encouraging truthful strategies
Les joueurs de cartes - Paul Cézanne - 1890-1892 Source : Goeree, Jacob K. and Kushnir, Alexey I., A Geometric Approach to Mechanism Design (December 20, 2011). University of Zurich Department of Economics Working Paper No. 56. Available at SSRN: http://ssrn.com/abstract=1974922 or http://dx.doi.org/10.2139/ssrn.1974922 Mechanism design is the science of creating optimal social systems by maximizing a well-defined social welfare function taking into account resource constraints and participants' incentives and hidden information. It provides a framework to address social engineering questions like what auction format assigns goods most efficiently or yields the highest seller revenue, “when should a public project such as building a highway be undertaken?” and “which trading rules maximize the gains from trade?” The difficulty in answering these questions stems from the fact that the designer, or public authority, typically does not possess deta...