Correlated Types and Bayesian Incentive Compatible Mechanisms with Budget Balance

This note presents a condition which guarantees the existence of a Bayesian incentive compatible mechanism with budget balance when agents have quasi-linear utility functions. This condition requires correlation among agents' private signals (“types”), and is (1) simple and easy to verify, (2) good for any decision rule whether efficient or not, (3) valid even if agents' types are mutually payoff-relevant, and (4) true for almost every probability distribution of agents' types.Journal of Economic LiteratureClassification Numbers: C72, D82.