Can Mechanism Designers Exploit Buyers’ Market Information

Competing mechanism games can have many equilibrium outcomes when mechanism designers can use mechanisms which ask agents to report deviations. Existing folk theorems assume agents have perfect information about designers’ mechanisms, that they can costlessly convey very complex messages, and that they use weakly dominated strategies. This paper addresses two questions. The first is whether the basic logic behind the folk theorems for competing mechanisms can work without these assumptions. The second is to ask how large frictions have to be before collusive equilibria break down.