Closure under interim utility equivalence implies two-agent Bayesian implementation

Abstract

We study the relationship between the two-agent implementation problem and the concept of interim efficiency of Holmström and Myerson (1983) in Bayesian environments with private values and independent types. We present a general property, called closure under interim utility equivalence, and show it is sufficient for the implementation of social choice functions. This condition, when combined with another property, called interim inseparability, is also sufficient for the implementation of essentially single-valued social choice sets. The characterization results are then examined in a variety of environments.