Uncertainty in Mechanism Design

This paper studies the design of mechanisms that are robust to misspecification. We introduce a novel notion robustness connects a variety disparate approaches and study its implications in wide class of mechanism problems. is quantifiable, allowing us to formalize answer comparative statics questions relating nature and degree misspecification to sharp predictions regarding features of feasible mechanisms. also has behavioral foundation which reflects perception ambiguity, thus degree emerge endogenously. In number standard settings, arbitrarily small amounts generates discontinuity set feasible uniquely selects simple, ex post incentive compatible such as second-price auctions. Robustness also sheds light on value private information prevalence of full or virtual surplus extraction.