Designing stable mechanisms for economic environments

, J. () and , ()
Additional contact information
, J.: Department of Economics, Ohio State University
,: Department of Economics, University of Texas
Authors registered in the RePEc Author Service: Laurent A. Mathevet and Paul J. Healy ()

Theoretical Economics, 2012, vol. 7, issue 3

Abstract: We study the design of mechanisms that implement Lindahl or Walrasian allocations and whose Nash equilibria are dynamically stable for a wide class of adaptive dynamics. We argue that supermodularity is not a desirable stability criterion in this mechanism design context, focusing instead on contractive mechanisms. We provide necessary and sufficient conditions for a mechanism to Nash implement Lindahl or Walrasian allocations, show that these conditions are inconsistent with the contraction property when message spaces are one-dimensional, and then show how to use additional dimensions to achieve dynamic stability while gaining budget balance out of equilibrium.

Keywords: Mechanism design; implementation; stability; learning (search for similar items in EconPapers)
JEL-codes: C62 C72 C73 D02 D03 D51 (search for similar items in EconPapers)
Date: 2012-10-01
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Citations: View citations in EconPapers (24)

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