Natural Implementation with Partially Honest Agents in Economic Environments

In this paper, we introduce the weak and the strong notions of partially honest agents (Dutta and Sen, 2012), and then study implementation by natural price-quantity mechanisms (Saijo et al., 1996a, 1999) in pure exchange economies. Firstly, assuming that there exists at least one partially honest agent in either the weak notion or the strong notion, the class of efficient SCCs which are Nash-implementable by such mechanisms is characterized. From the characterizations, the (unconstrained) Walrasian correspondence is shown to be implementable by such a mechanism when there is at least one partially honest agent of the strong type, which may provide a behavioral foundation for decentralized implementation of the Walrasian equilibrium. In contrast, the characterization results may indicate that the injection of partial honesty cannot be helpful to the implementation problems of fair allocations