Incentive compatible networks and the delegated networking principle

Rui Gong, Jieshuang He and Frank Page

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We construct a model of a principal-agent game of network formation (over layered networks) with asymmetric information and we consider the following two questions: (1) Is it possible for the principal to design a mechanism that links the reports of agents about their private information and the set of connections allowed and recommended by the principal via the mechanism in such a way that players truthfully reveal their private information to the principal and follow the recommendations specified by the mechanism. (2) An even more fundamental question we address is whether or not it is possible for the principal to achieve the same outcome (as that achieved via a mechanism and centralized reporting) by instead choosing a profile of sets of allowable ways to connect (here modeled as player—club specific sets - or catalogs - of networks) and then delegating connection choices to each pair of agents. We call this approach to network formation with incomplete information delegated networking and we show, under relatively mild conditions on our game-theoretic model of network formation, that strategic network formation with incomplete information, implemented via a mechanism and centralized reporting, is equivalent to implementation via delegated networking with monitoring.

Keywords: Incentive compatible multilayered networks; delegated networking principle; delegation principle; bilateral incentive compatibility; mechanism design; catalog games (search for similar items in EconPapers)
JEL-codes: C70 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2016-02-15
New Economics Papers: this item is included in nep-gth, nep-mic, nep-net and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.lse.ac.uk/66045/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:66045

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().