Implementation with partial verification

Abstract.

This paper examines the implementability of social choice functions when only partial verification of private information is possible. Green and Laffont (1986) used this framework to derive a necessary and sufficient condition for the revelation principle to continue to hold with partial verification. We provide economically interesting characterizations of this condition, which suggest that it may be too restrictive. This leads us to consider implementation (not necessarily truthful) in general, when there is partial verification. We consider the case where compensatory transfers are allowed, giving the mechanism designer further leeway. We show how partial verification may allow efficient implementation of bilateral trade, where it would otherwise not be possible.