Revelation principle

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The revelation principle of economics can be stated as, "To any equilibrium of a game of incomplete information, there corresponds an associated revelation mechanism that has an equilibrium where the players truthfully report their types."

The revelation principle is useful in game theory, social welfare and auctions. William Vickrey, winner of the 1996 Nobel Prize for Economics, devised an auction type where the highest bidder would win the sealed bid auction, but at the price offered by the second-highest bidder. Under this system, the highest bidder would be better motivated to reveal his maximum price than in traditional auctions, which would also benefit the seller.

[edit] See also

• Mechanism design
• Market for lemons
• Nash equilibrium
• Game theory
• Constrained pareto efficiency

view	Topics in game theory
Definitions	Normal form game · Extensive form game · Cooperative game · Information set · Preference
Equilibrium concepts	Nash equilibrium · Subgame perfection · Bayes-Nash · Trembling hand · Proper equilibrium · Epsilon-equilibrium · Correlated equilibrium · Sequential equilibrium · Quasi-perfect equilibrium · ESS · Risk dominance
Strategies	Dominant strategies · Mixed strategy · Tit for tat · Grim trigger
Classes of games	Symmetric game · Perfect information · Dynamic game · Repeated game · Signaling game · Cheap talk · Zero-sum game · Mechanism design
Games	Prisoner's dilemma · Coordination game · Chicken · Battle of the sexes · Stag hunt · Matching pennies · Ultimatum game · Minority game · Rock, Paper, Scissors · Pirate game · Dictator game · Public goods game · Nash bargaining game
Theorems	Minimax theorem · Purification theorems · Folk theorem · Revelation principle · Arrow's Theorem
Related topics	Mathematics · Economics · Behavioral economics · Evolutionary game theory · Population genetics · Behavioral ecology · Adaptive dynamics · List of game theorists