<p>In direct mechanism agents directly report their preferences (preferences are observable).</p>

<p>In indirect mechanism agents don’t report their preferences directly. Preferences can be observed only indirectly through signals or behavior.</p>

<p>By Revelation Principle if some outcomes can be implemented in indirect mechanism they must be also implementable in the direct mechanism where everything is observable - that’s what the quote is trying to say.</p>

CC BY-SA 4.0
2019-11-30T07:53:40.837Z
Thank you for your answer. So the "indirect mechanism" is the (arbitrarily complicated) mechanism which they defined at the beginning?
Aqqqq
CC BY-SA 4.0
2019-11-29T22:50:30.120Z
2019-11-29T23:00:27.550Z
2019-11-29T23:00:27.550Z
1muflon1
<p>On <a href="https://www.et.econ.uni-muenchen.de/studium_lehre/lehrveranst/lehre_files/contract_theory/lecture/contract4.pdf" rel="nofollow noreferrer">this slide deck</a>, page 12, it says "then this direct mechanism implements exactly the same allocation as the indirect mechanism we started". What is indirect mechanism in this context and in particular, what is the "indirect mechanism we started" on this page?</p>

<game-theory><principal-agent><adverse-selection>
What is "indirect mechanism" in the context of adverse selectoin?
Aqqqq
# What is "indirect mechanism" in the context of adverse selectoin?

(Asked by: username_0 on 2019-11-29)

On [this slide deck](https://www.et.econ.uni-muenchen.de/studium_lehre/lehrveranst/lehre_files/contract_theory/lecture/contract4.pdf), page 12, it says "then this direct mechanism implements exactly the same allocation as the indirect mechanism we started". What is indirect mechanism in this context and in particular, what is the "indirect mechanism we started" on this page?

**Tags:** game-theory, principal-agent, adverse-selection

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## 1 answers

### Answer by username_1 on 2019-11-29. Score: 2 | Accepted answer

In direct mechanism agents directly report their preferences (preferences are observable).

In indirect mechanism agents don’t report their preferences directly. Preferences can be observed only indirectly through signals or behavior.

By Revelation Principle if some outcomes can be implemented in indirect mechanism they must be also implementable in the direct mechanism where everything is observable - that’s what the quote is trying to say.

> **Comments:**
> **username_0**: Thank you for your answer. So the "indirect mechanism" is the (arbitrarily complicated) mechanism which they defined at the beginning?  

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