“Evidence and Commitment in Allocation Mechanisms” by Barton Lipman
Elchanan Ben Porath
We consider a class of mechanism design problems with evidence and no monetary transfers including situations where a principal must allocate a good or set of goods to one or more agents. The agents have private information which determines the payoff to the principal of various actions or allocations, but the principal knows their preferences over his choices. We show that commitment has no value to the principal and ex post incentive compatibility has no cost. That is, the payoff to the principal from the best ex post incentive compatible mechanism is the same as his payoff under the best incentive compatible mechanism and in the best equilibrium of the game where he is not committed. We characterize optimal mechanisms when the evidence technology is as in Dye  and for various more specific allocation problems. We show that such mechanisms often have a favored-agent structure analogous to Ben Porath, Dekel, and Lipman .