Research and Publications

The theory of mechanism design and implementation abounds with clever mechanisms whose equilibrium
outcomes are optimal according to some social choice rule. However, the cleverness of these
mechanisms relies on intricate systems of rewards and punishments off-the-equilibrium path.
Generally, it is not in the designer's best interest to go through with the reward/punishment in
the "subgame" arising from some disequilibrium play. This would make the mechanism's outcome
function non-credible. In the context of exchange economies, we define an appropiate notion of
"credible" implementation and show that (a) the non-dictatorial Pareto correspondence can be
crediblyimplemented (b) there exists no credibly implementable Pareto-efficient and individually
rational social choice rule and (c) there exists no credibly implementable fair social choice
rules. We derive necessary and sufficient conditions for credible implementability of choice
rules. The main implication is paradoxical: it is suboptimal for the designer to be endowed with
"too much" information about the economy. Finally, we show that the negative results persist even
under weaker credibility requirements .