Ball, Ian;
Kattwinkel, Deniz;
(2025)
Probabilistic Verification in Mechanism Design.
Theoretical Economics
, 20
(4)
pp. 1247-1284.
10.3982/TE6266.
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Abstract
We introduce a model of probabilistic verification in mechanism design. The principal elicits a message from the agent and then selects a test to give the agent. The agent's true type determines the probability with which he can pass each test. We characterize whether each type has an associated test that best screens out all other types. If this condition holds, then the testing technology can be represented in a tractable reduced form. We use this reduced form to solve for profit-maximizing mechanisms with verification. As the verification technology varies, the solution continuously interpolates between the no-verification solution and full surplus extraction.
| Type: | Article |
|---|---|
| Title: | Probabilistic Verification in Mechanism Design |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.3982/TE6266 |
| Publisher version: | https://doi.org/10.3982/TE6266 |
| Language: | English |
| Additional information: | Copyright © 2025 The Authors. Licensed under the Creative Commons Attribution-Non Commercial License 4.0 (https://creativecommons.org/licenses/by-nc/4.0). |
| Keywords: | Probabilistic verification, ordering tests, evidence |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10207645 |
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