Mechanism Design with Narratives

Individuals use narratives as rationales or justifications to make their claims more convincing. I provide a general framework for partial verifiability based on narratives. Narratives give many reasons and arguments. The receiver derives the message’s meaning by aggregating these reasons; her private information tells her whether some potential reasons support the sender’s claims. Therefore, the receiver might detect some misreports. Narratives flexibly allow for different degrees of partial verifiability and allow using the revelation principle. Considering mechanism design as an example, I prove that narratives are sufficiently powerful to implement efficient trade in the canonical bilateral-trade setting.