Supermodular mechanism design
, A. ()
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, A.: Department of Economics, University of Texas, Austin
Authors registered in the RePEc Author Service: Laurent A. Mathevet
Theoretical Economics, 2010, vol. 5, issue 3
Abstract:
This paper introduces a mechanism design approach that allows dealing with the multiple equilibrium problem, using mechanisms that are robust to bounded rationality. This approach is a tool for constructing supermodular mechanisms, i.e. mechanisms that induce games with strategic complementarities. In quasilinear environments, I prove that if a social choice function can be implemented by a mechanism that generates bounded strategic substitutes - as opposed to strategic complementarities - then this mechanism can be converted into a supermodular mechanism that implements the social choice function. If the social choice function also satisfies some efficiency criterion, then it admits a supermodular mechanism that balances the budget. Building on these results, I address the multiple equilibrium problem. I provide sufficient conditions for a social choice function to be implementable with a supermodular mechanism whose equilibria are contained in the smallest interval among all supermodular mechanisms. This is followed by conditions for supermodular implementability in unique equilibrium. Finally, I provide a revelation principle for supermodular implementation in environments with general preferences.
Keywords: Implementation; mechanisms; learning; strategic complementarities; supermodular games (search for similar items in EconPapers)
JEL-codes: C72 D78 D83 (search for similar items in EconPapers)
Date: 2010-09-22
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Citations: View citations in EconPapers (27)
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Persistent link: https://EconPapers.repec.org/RePEc:the:publsh:604
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