Mechanism Design and Robust Control

Javier Rivas

No 22/14, Department of Economics Working Papers from University of Bath, Department of Economics

Abstract: In this paper we introduce robust control methods in mechanism design problems. We assume that in the presence of an incentive compatible mechanism, players behave as if their types were in a δ -neighborhood of their true types. The designer’s problem is to set up a mechanism that implements a given social choice function taking these δ -perturbations into account. In our results we characterize the social choice functions that are robust to the δ -perturbations, in the sense that the designers’ loss is at most of order δ k for a certain k . A notable finding is that in quasi-linear utilitarian environments the designer’s loss is of order of δ 2 .

Date: 2014-05-08
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Persistent link: https://EconPapers.repec.org/RePEc:eid:wpaper:39842

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