The effect of false-name declarations in mechanism design: towards collective decision making on the Internet

Abstract

The purpose of this paper is to analyze a collective decision making problem in an open, dynamic environment, such as the Internet. More specifically, we study a class of mechanism design problems where the designer of a mechanism cannot completely identify the participants (agents) of the mechanism. A typical example of such a situation is Internet auctions. The main contributions of this paper are as follows. We develop a formal model of a mechanism design problem in which false-name declarations are possible, and prove that the revelation principle still holds in this model. When false-name declarations and hiding are possible, we show that there exists no auction protocol that achieves Pareto efficient allocations in a dominant strategy equilibrium for all cases. We show a sufficient condition where the Clarke mechanism is robust against false-name declarations (the concavity of the maximal total utility of agents).