COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 1561R

Robust Implementation: The Case of Direct Mechanisms

Dirk Bergemann and Stephen Morris

May 2006
Revised May 2007

A social choice function is robustly implementable if there is a mechanism under which the process of iteratively eliminating strictly dominated messages leads to outcomes that agree with the social choice at every type profile. In an interdependent value environment with single crossing preferences, we identify a strict contraction property on the preferences which together with strict ex post incentive compatibility is sufficient to guarantee robust implementation in the direct mechanism. Strict EPIC and the contraction property are also necessary for robust implementation in any mechanism.

The contraction property essentially requires that the interdependence is not too large. In a linear signal model, the contraction property is equivalent to an interdependence matrix having an eigenvalue less than one.

Keywords: Mechanism Design, Implementation, Robustness, Common Knowledge, Interim Equilibrium, Iterative Deletion, Direct Mechanism

JEL Classification: C79, D82