On the Foundations of Ex Post Incentive-Compatible Mechanisms

This paper considers an interdependent-value robust mechanism design problem, where the principal has little knowledge about agent’s belief. Although ex post incentive-compatible (EPIC) mechanisms can implement allocations without any belief, we show that, under a certain condition (order-reversing interdependence), there exists non-EPIC that achieves strictly higher expected revenue than EPIC given whatever (admissible) belief structure agent may enjoy. Conversely, with sufficiently small interdependence, such does not exist: for some structure, highest revenue. (JEL D82, D83)