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By Jackson M.O.

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See Postlewaite and Schmeidler 1986, Palfrey and Srivastava 1989a, and Jackson 199148 . The incomplete information setting also introduces a necessary incentive compatibility condition. As we know from the mechanism design literature, incentive compatibility conditions can turn out to be quite restrictive, rendering many e cient The large literature on this subject begins with Hurwicz 1972, and includes papers that provide increasingly well-behaved mechanisms worrying about auxiliary properties of the mechanism like continuity of the outcome function, individual rationality, and balance out of equilibrium.

1997, E cient Audit Mechanisms to Target the Poor," Dissertation: University of Chicago. Reichelstein S. and S. Reiter 1988, Game Forms with Minimal Strategy Spaces," Econometrica, Vol. 56, pp. 661 692. Repullo, R. 1987, A Simple Proof of Maskin's Theorem on Nash Implementation," Social Choice and Welfare, Vol. 4, pp. 39 42. Rubinstein, A. and A. Wolinsky 1992, Renegotiation-Proof Implementation and Time Preferences," American Economic Review, Vol. , pp. Saglam, I. 1997, A Note on Jackson's Theorems in Bayesian Implementation," mimeo: Bilkent University.

The outcome is then F m2 J . 42 II Some i announces mi = Ri; Ri+1  and all other j 6= i announce mj = a; b such that aRiw and bRi w with all j 6= i announcing the same a; b. Then gm = aN ,i if aRi b and gm = bN ,i otherwise. The de nition of separable environments is from Jackson, Palfrey, and Srivastava 1994. Although Sjostrom's 1994 setting is slightly di erent, the intuition behind his mechanism is identical. 42So this is the outcome where individuals in J get F evaluated at the R corresponding to that in the second entry of each agent's message what they announced about their neighbor, and individuals outside of J get an outcome equivalent to the bad outcome w.

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