Abstract
We introduce several notions of potentials for mechanism design problems with interdependent values, and relate them to implementation in ex-post equilibrium. Whereas ex-post implementation is closely linked to the ordinal concept of best-alternative potentials, the celebrated Vickrey–Clarke–Groves mechanism corresponds to the stronger notion of a cardinal potential: agents agree not only on the best alternative, but also on the quantitative differences between all alternatives. We characterize all valuations that allow for cardinal potentials, and use this characterization for: (1) Identifying valuations for which ex-post implementation is possible; (2) Identifying classes of valuations for which all ex-post implementable choice rules correspond to cardinal potentials. The latter allows us to extend to interdependent valuations a result for dominant strategy implementation in private values settings, due to Roberts (The Characterization of Implementable Choice Rules, North-Holland, Amsterdam, 1979).
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A previous version of this paper was titled “Potentials and Implementation”.
We wish to thank an associate editor, two anonymous referees, Paul Milgrom and Burkhard Schipper for helpful comments and stimulating remarks.
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Jehiel, P., Meyer-ter-Vehn, M. & Moldovanu, B. Ex-post implementation and preference aggregation via potentials. Econ Theory 37, 469–490 (2008). https://doi.org/10.1007/s00199-007-0300-1
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DOI: https://doi.org/10.1007/s00199-007-0300-1