Equivalence of stochastic and deterministic mechanisms

• Main Authors: CHEN, Yi-Chun, LI, Jiangtao, SUN, Yeneng
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2019
• Subjects: Economic Theory
• Online Access: https://ink.library.smu.edu.sg/soe_research/2302; https://ink.library.smu.edu.sg/context/soe_research/article/3301/viewcontent/10.3982_ECTA14698.pdf
• Institution: Singapore Management University

We consider a general social choice environment that has multiple agents, a finite set of alternatives, independent types, and atomless type distribution. We show that for any Bayesian incentive compatible mechanism, there exists an equivalent deterministic mechanism that (1) is Bayesian incentive compatible; (2) delivers the same interim expected allocation probabilities and the same interim expected utilities for all agents; and (3) delivers the same ex ante expected social surplus. This result holds in settings with a rich class of utility functions, multidimensional types, interdependent valuations, and in settings without monetary transfers. To prove our result, we develop a novel methodology of mutual purification, and establish its link with the mechanism design literature.