Mechanism Design under Unawareness -- Extended Abstract
Kym Pram, Burkhard C. Schipper
TL;DR
The paper develops mechanism design theories that accommodate unawareness, introducing dynamic direct elaboration mechanisms in which a mediator pools participants' awareness and facilitates iterative elaboration of payoff types. By formalizing a lattice-based model of awareness and employing VCG/Clarke-inspired transfers, it shows how utilitarian ex-post efficiency can be achieved under pooled awareness in a finite number of stages with conditional dominance as the solution concept. It also demonstrates no-deficit properties for Clarke-style implementations and discusses applicability to complex procurement contexts, offering a principled alternative to conventional auctions for incompletely specified projects. Overall, the work extends mechanism design to settings with asymmetric awareness and provides foundational tools for efficient, budget-conscious decision making in multi-agent environments.
Abstract
We study the design of mechanisms under asymmetric awareness and information. While the mechanism designer cannot necessarily commit to a particular social choice function in the face of unawareness, she can at least commit to properties of social choice functions such as efficiency given ex post awareness. Assuming quasi-linear utilities and private values, we show that we can implement in conditional dominant strategies a social choice function that is utilitarian ex post efficient under pooled awareness without the need of the social planner being fully aware ex ante. To this end, we develop novel dynamic versions of Vickrey-Clarke-Groves mechanisms in which true types are revealed and subsequently elaborated at endogenous higher awareness levels. We explore how asymmetric awareness affects budget balance and participation constraints. We show that ex ante unforeseen contingencies are no excuse for deficits. Finally, we propose a dynamic elaboration reverse second price auction for efficient procurement of complex incompletely specified projects with budget balance and participation constraints.