A Robust Efficient Dynamic Mechanism

Abstract: Athey and Segal introduced an efficient budget-balanced mechanism for a dynamic stochastic model with quasilinear payoffs and private values, using the solution concept of perfect Bayesian equilibrium. We show that this implementation is not robust in multiple senses, especially for at least 3 agents. For example, we will show a generic setup where all efficient strategy profiles can be eliminated by iterative elimination of weakly dominated strategies. Furthermore, this model used strong assumptions about the information of the agents, and the mechanism was not robust to the relaxation of these assumptions. In this paper, we will show a different mechanism that implements efficiency under weaker assumptions and uses the stronger solution concept of ``efficient Nash equilibrium with guaranteed expected payoffs''.