Ex-Post Equilibrium and VCG Mechanisms

Abstract

Consider an abstract social choice setting with incomplete information, where the number of alternatives is large. Albeit natural, implementing VCG mechanisms may not be feasible due to the prohibitive communication constraints. However, if players restrict attention to a subset of the alternatives, feasibility may be recovered. This paper characterizes the class of subsets which induce an ex-post equilibrium in the original game. It turns out that a crucial condition for such subsets to exist is the existence of a type-independent optimal social alternative, for each player. We further analyze the welfare implications of these restrictions. This work follows work by Holzman, Kfir-Dahav, Monderer and Tennenholtz (2004) and Holzman and Monderer (2004) where similar analysis is done for combinatorial auctions.