Imperfect commitment and the revelation principle: the multi-agent case

We consider mechanism design problems with n agents when the mechanism desi gner cannot fully commit to an allocation function. With a single agent (n = 1) optimal mechanisms can always be represented by direct mechanisms, und er which each agent's message set is the set of his possible types [Bester, H., Strausz, R., 2000. Contracting with imperfect commitment and the revel ation principle: the single agent case. Free University of Berlin, mimeo]. We show that this result does not hold if n greater than or equal to 2. Tha t is, in mechanism design problems with multiple agents the use of direct m echanisms may be suboptimal. (C) 2000 Elsevier Science S.A. All rights rese rved.