The project has developed three key methodological contributions:
1. The revelation principle under limited commitment
2. The new concept of interim optimal mechanisms that allows for the tractable characterization of credible disclosure rules in general informed information design settings.
3. The tools to study optimal mechanism design in the presence of fraud.
Within economics, removing the assumption of commitment to long-term contracts allows to revisit with more realistic models important and policy-relevant issues including the design of compensation schemes, debt and mortgage contracts, monetary policy, fiscal policy, and social insurance. The techniques introduced in "Mechanism Design with Limited Commitment" in Doval and Skreta 2022 will allow researchers in public finance and macroeconomics to revisit models of optimal policy under more realistic assumptions.
The project also has interdisciplinary impacts to computer science and political science. On the one hand, mechanism design looms large in computer science, with applications to the design of online platforms, ad auctions, and the dynamic allocation of computational and communication resources. Here, too, the assumption of commitment is often unrealistic: platforms interact with consumers repeatedly and re-optimize. On the other hand, problems of limited commitment are ubiquitous in political science and a methodology that speaks to the design self self-enforcing institutions will advance the literature on political mechanism design.
Similarly, the notion of interim optimality provides the class of credible disclosure mechanisms that can be use to analyze optimal information design problems in economics, political science, accounting, finance and beyond.
Finally, the tools of test design with falsification have direct applications in computer science theory when one seeks to design reliable algorithms in the presence of manipulations.
The project has produced three published papers and another three papers that are already revised and resubmit in journals:
Part 1: Mechanism Design by an Informed Principal
“Selling with Evidence,” (with Frederic Koessler) published in Theoretical Economics.
“Informed Information Design,” (with Frederic Koessler) revise and resubmit at Journal of Political Economy.
Part 2: Mechanism Design with Limited Commitment
“Mechanism Design with Limited Commitment” (with Laura Doval); published in Econometrica in July 2022.
“Optimal Mechanism for the sale of a durable good” (with Laura Doval); second round revise and resubmit at Theoretical Economics.
“Purchase history and product personalization” (with Laura Doval) revise and resubmit at Rand Journal of Economics.
“Constrained Information Design: Toolkit ” (with Laura Doval) was revised and resubmit at Mathematics of Operations Research.
Part 3: Mechanism Design in the presence of costly fraud.
“Information Design under Falsification” (with Eduardo Perez-Richet); published in Econometrica in May 2022.
The PI has given numerous talks at the most prestigious institutions around the globe and organised a successful conference in 2019. In 2022, the PI co-organized a week of ESSET around topics central to this grant.
Research findings of the program have been presented in prestigious schools such as the Jerusalem Institute of advanced studies (2 lectures on mechanism design by and informed principal); the Simons institute of theoretical computation at UC Berkeley (a lecture on mechanism design under limited commitment by co-author Laura Doval). Papers produced by this grant are already taught at Stanford, MIT, Columbia, Northwestern, Caltech and UCL among other universities.
