Subgame-Perfect Implementation Under Information Perturbations

Bibliographic Data

ID19036558
AuthorsPhilippe Aghion (0000-0002-9019-1677, Harvard University and CIFAR Harvard University, University of New South Wales Hitotsubashi University Paris School of Economics, corresponding author), Drew Fudenberg (0000-0002-6747-0125, Harvard University and CIFAR Harvard University, University of New South Wales Hitotsubashi University Paris School of Economics), Richard Holden (0000-0003-1199-340X, Harvard University and CIFAR Harvard University, University of New South Wales Hitotsubashi University Paris School of Economics), Takashi Kunimoto (0000-0002-7798-7435, Harvard University and CIFAR Harvard University, University of New South Wales Hitotsubashi University Paris School of Economics), Olivier Tercieux (Harvard University and CIFAR Harvard University, University of New South Wales Hitotsubashi University Paris School of Economics)
Year2012
Volume127
Issue4
Pages1843-1881
Publication date2012-08-31
Open AccessNo
TypeARTICLE
VenueThe Quarterly Journal of Economics (JOURNAL)
Journal identifiersISSN: 0033-5533 • E-ISSN: 1531-4650
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1093/qje/qjs026
OpenAlexW2111571153
LanguageEN
Citations received10
References cited32

We consider the robustness of extensive form mechanisms to deviations from common knowledge about the state of nature, which we refer to as information perturbations . First, we show that even under arbitrarily small information perturbations the Moore-Repullo mechanism does not yield (even approximately) truthful revelation and that in addition the mechanism has sequential equilibria with undesirable outcomes. More generally, we prove that any extensive form mechanism is fragile in the sense that if a non-Maskin monotonic social objective can be implemented with this mechanism, then there are arbitrarily small information perturbations under which an undesirable sequential equilibrium also exists. Finally, we argue that outside options can help improve efficiency in asymmetric information environments, and that these options can be thought of as reflecting ownership of an asset

Complete information · Economics · Information loss · Mathematical economics · Mechanism Design · Monotonic function · Nash equilibrium · Physics · Subgame perfect equilibrium · Auction Theory and Applications · Computer Science · Experimental Behavioral Economics Studies · Law, Economics, and Judicial Systems · Mathematics · Artificial Intelligence

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