Theoretical Economics 19 (2024), 975–999

We explore mechanism design with outcome-based social preferences. Agents' social preferences and private payoffs are all subject to asymmetric information. We assume quasi-linear utility and independent types. We show how the asymmetry of information about agents' social preferences can be operationalized to satisfy agents' participation constraints. Our main result is a possibility result for groups of \textit{at least three} agents: Any such group can resolve any given allocation problem with an ex-post budget-balanced mechanism that is Bayesian incentive-compatible, interim individually rational, and ex-post Pareto-efficient.

Keywords: Mechanism design, social preferences, Bayesian implementation, participation constraints, participation stimulation, money pump

JEL classification: C72, C78, D62, D82