We introduce a perfect price discriminating (PPD) mechanism for allocation problems with private information. A PPD 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 PPD mechanism, every player has a dominant strategy to truthfully report her private information. We establish a revelation principle for dominant strategy implementation: any outcome that can be dominant strategy implemented can also be dominant strategy implemented using a PPD mechanism. We apply this principle to derive the optimal, budget-balanced, dominant strategy mechanisms for public good provision and bilateral bargaining.
Vanderbilt University Department of Economics Working Papers
Schwartz, Jesse, and Quan Wen. "A Revelation Principle for Dominant Strategy Implementation." Vanderbilt University Department of Economics Working Paper No. 08-W19, 2008.