The communication burden of payment determination

Games and Economic Behavior (GEB) | , Vol 77(1): pp. 153

In the presence of self-interested parties, mechanism designers typically aim to implement some social-choice function in an equilibrium. This paper studies the cost of such equilibrium requirements in terms of communication. While a certain amount of information x needs to be communicated just for computing the outcome of a certain social-choice function, an additional amount of communication may be required for computing the equilibrium-supporting payments (if exist).

Our main result shows that the total amount of information required for this task can be greater than x by a factor linear in the number of players n, i.e., nx">

(under a common normalization assumption). This is the first known lower bound for this problem. In fact, we show that this result holds even in single-parameter domains. On the positive side, we show that certain classic economic domains, namely, single-item auctions and public-good mechanisms, only entail a small overhead.