Conservative-Bayesian Mechanism Design

Unknown author (2010-12-20)

Classical Bayesian mechanism design is "centralized," that is, the designer is assumed to know the distribution D from which the players' type profile has been drawn. We instead investigate a very "decentralized" Bayesian model, where the designer has no knowledge at all, and each player only has some probabilistic information about D. For this decentralized model and many contexts of interest, where the goal is to maximize revenue, we show that, for arbitrary type distributions D (in particular, correlated ones), it is possible to design mechanisms matching to a significant extent the performance of the optimal centralized mechanisms. Our results are "existential" for a broad class of contexts (including combinatorial auctions) and "constructive" for auctions of a single good.