Mechanism Design with Information Leakage
Theoretical Economics
2025-11-04 v1
Abstract
We study the design of mechanisms -- e.g., auctions -- when the designer does not control information flows between mechanism participants. A mechanism equilibrium is leakage-proof if no player conditions their actions on leaked information; a property distinct from ex-post incentive compatibility. Only leakage-proof mechanisms can implement social choice functions in environments with leakage. Efficient auctions need to be leakage-proof, while revenue-maximizing ones not necessarily so. Second-price and ascending auctions are leakage-proof; first-price auctions are not; while whether descending auctions are leakage-proof depends on tie-breaking.
Cite
@article{arxiv.2511.00715,
title = {Mechanism Design with Information Leakage},
author = {Samuel Häfner and Marek Pycia and Haoyuan Zeng},
journal= {arXiv preprint arXiv:2511.00715},
year = {2025}
}