Truth-telling in fully decentralized systems: An impossibility theorem and experimental evidence

Abstract

We show that truthful reporting about the realization of a publicly observed event cannot be implemented as a unique equilibrium in a completely decentralized environment. The result holds even if some individuals are compelled to tell the truth, regardless of economic incentives. We provide experimental evidence that supports our theoretical results. Our work provides a theoretical and empirical underpinning of the need for oracles and the related “oracle problem. Joint with Gabriele Camera (Chapman) and Rod Garratt (BIS)