Beyond Hurwicz: Incentive Compatibility under Informational Decentralization

TL;DR

The paper addresses incentive compatibility in informationally decentralized environments and shows Hurwicz impossibility is conditional. It introduces a narrow class of non-revelation-equivalent indirect mechanisms with parallel enforcement regimes and non-scalar messages, where enforcement costs are generated endogenously. It develops a layered taxonomy of Myerson and Non-Myerson layers, adds selective disclosure across privacy walls, and formalizes trust as an unparameterizable variable leading to Gödel-type unrepresentability; using $S$, $K(S)$, and $R(S,\tau)$, it shows the optimal $S^*(\tau)$ decreases with $\tau$ and that direct elicitation of $\tau$ is impossible. The results broaden mechanism design beyond the Revelation Principle and have practical implications for decentralized protocols and consensus systems.

Abstract

Achieving incentive compatibility under informational decentralization is impossible within the class of direct and revelation-equivalent mechanisms typically studied in economics and computer science. We show that these impossibility results are conditional by identifying a narrow class of non-revelation-equivalent mechanisms that sustain enforcement by inferring preferences indirectly through parallel, uncorrelatable games.

Figures (5)

• Figure 1: Non-Myerson Layer preceding Myerson Layer. The Myerson layer conditions on preferences expressed in the preceding layer which appear projected into it in forms indistinguishable from randomness.
• Figure 2: Myerson Layer preceding Non-Myerson Layer. The Non-Myerson layer acts on transparent inputs projected into it from the previous layer, and is able to reconstruct the intent behind the projected preferences.
• Figure 3: Direct Mechanism as a Construct of Myerson Layers. Multiple Myerson Layers chained into a circular construct form a Penrose-style mechanism which is locally coherent but globally incoherent.
• Figure 4: Indirect Mechanism as a Construct of Non-Myerson Layers. Multiple Non-Myerson Layers chained into circular constructs lose verifiability as privacy walls form between layers.
• Figure 5: Selective Disclosure as Communications Strategy. Agents pierce privacy walls and communicate preferences directly through Non-Myerson meta-games the mechanism encourages to be created in private channels where speech is not tracked or penalized, but whose output is a structured input returned to the mechanism which drives the mechanism into equilibrium. This makes it a part of the underlying game, not the "null case" of player "exit" or "opt-out" as retreats to non-enforcement environments are traditionally modelled in implementation theory.