Optimal mechanism design with approximate incentive compatibility and many players

Abstract

We consider a setting in which a mechanism designer must choose the appropriate social alternative depending on the state of nature. We study the problem of optimal design and demonstrate that a mechanism which allocates resources so as to achieve the social optimum and assigns payments equal to the posterior expected utility of the agent at the social optimum, is an epsilon-optimal mechanism for environments with many players.

Keywords

• mechanism design
• incentive compatibility
• statistical decision theory