 Approximate Bayesian implementation and exact maxmin implementation: An equivalenceYangwei Song Games and Economic Behavior, 2023, vol. 139, issue C, 56-87 Abstract: This paper provides a micro-foundation for approximate incentive compatibility using ambiguity aversion. In particular, we propose a novel notion of approximate interim incentive compatibility, approximate local incentive compatibility, and establish an equivalence between approximate local incentive compatibility in a Bayesian environment and exact interim incentive compatibility in the presence of a small degree of ambiguity. We then apply our result to the implementation of efficient allocations. In particular, we identify two economic settings—including ones in which approximately efficient allocations are implementable and ones in which agents are informationally small—in which efficient allocations are approximately locally implementable when agents are Bayesian. Applying our result to those settings, we conclude that efficient allocations are exactly implementable when agents perceive a small degree of ambiguity. Keywords: Approximate local incentive compatibility; Ambiguity aversion; Efficiency; Informational size; Modified VCG mechanism (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:139:y:2023:i:c:p:56-87 DOI: 10.1016/j.geb.2023.01.012 Access Statistics for this article Games and Economic Behavior is currently edited by E. Kalai More articles in Games and Economic Behavior from Elsevier |
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