A Characterization for Dominant Strategy Implementation
Economics, Finance, & Quantitative Analysis
We introduce a perfect price discriminating mechanism for allocation problems with private information. A perfect price discriminating mechanism treats a seller, for example, as a perfect price discriminating monopolist who faces a price schedule that does not depend on her report. In any perfect price discriminating mechanism, every player has a dominant strategy to truthfully report her private information. We establish a characterization for dominant strategy implementation: Any outcome that can be dominant strategy implemented can also be dominant strategy implemented using a perfect price discriminating mechanism. We apply this characterization to derive the optimal, budget-balanced, dominant strategy mechanisms for public good provision and bilateral bargaining.
Jesse Schwartz and Quan Wen, “A Characterization for Dominant Strategy Implementation,” Frontiers of Economics in China, 8:1, 1-18, 2013.