The Revelation Principle in Multistage Games

The communication revelation principle of mechanism design states that any outcome that can be implemented using any communication system can also be implemented by an incentive-compatible direct mechanism. In multistage games, we show that in general the communication revelation principle fails for the solution concept of sequential equilibrium. However, it holds in important classes of games, including single-agent games, games with pure adverse selection, games with pure moral hazard, and a class of social learning games. For general multistage games, we establish that an outcome is implementable in sequential equilibrium if and only if it is implementable in a canonical Nash equilibrium in which players never take codominated actions. We also prove that the communication revelation principle holds for the more permissive solution concept of conditional probability perfect Bayesian equilibrium.

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