revelation principle

Roger B. Myerson
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Abstract

In any economic institution, individuals must be given appropriate incentives to share private information or to exert unobserved efforts. The revelation principle is a technical insight that allows us to make general statements about what allocation rules are feasible, subject to incentive constraints, in economic problems with adverse selection and moral hazard. The revelation principle tells us that, for any general coordination mechanism, any equilibrium of rational communication strategies for the economic agents can be simulated by an equivalent incentive-compatible direct-revelation mechanism, where a trustworthy mediator maximally centralizes communication and makes honesty and obedience rational equilibrium strategies for the agents.
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How to cite this article

Myerson, Roger B. "revelation principle." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 20 October 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_R000137> doi:10.1057/9780230226203.1436

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