Renegotiation-Proof Mechanism Design

A mechanism is said to be renegotiation-proof if it is robust against renegotiation both before and after it is played. We ask (1) what kind of environments admit the renegotiation-proof implementation of some social choice rules? (2) for a given environment, what kind of social choice rule are implementable in a way that is renegotiationproof? and (3) for a given renegotiation-proof implementable social choice rule, how can the rule be implemented in a way that is indeed renegotiation-proof? We obtain, for environments with private values, a tight characterization of renegotiation-proof mechanisms: for complete information environments, this characterization is in terms of ex-post efficient decision rules; for incomplete information environments with independent private values, this characterization is in terms of Vickrey-Clarke-Groves (VCG) mechanisms. Importantly, we show that some common mechanism design problems do not admit the existence of any renegotiation-proof mechanism. J C : D02, D70, D82. K : ex-post renegotiation, interim renegotiation, oracle renegotiation proofness. ∗ Acknowledgements to be added. † Department of Economics, Boston University, 270 Bay State Road, Boston, MA 02215, and the Eitan Berglas School of Economics, Tel-Aviv University, Tel-Aviv, Israel 69978; Email [email protected], http://people.bu.edu/zvika. ‡ Department of Economics, Boston University, 270 Bay State Road, Boston, MA 02215; Email [email protected], http://people.bu.edu/gpavlov.