Roland Strausz, “Mechanism Design with Partially Verifiable Information” [19p, abstract]
In mechanism design with (partially) verifiable information, the revelation principle obtains in full generality if allocations are modelled as the product set of outcomes and verifiable information. Incentive constraints fully characterize the implementable set of these product-allocations. The revelation principle does not generally hold when an allocation is modelled as only an outcome. However, any outcome of an implementable product-allocation is also implementable under this restricted modelling, provided that the mechanism designer can expand communication by adding unverifiable messages and restrict communication by limiting the use of messages. A canonical representation of such mechanisms is presented, implying that an inalienable right of the agent to withhold evidence does not affect implementability.
Keywords: Revelation principle, Mechanism Design, Verifiable Information JEL Classification: D82