Equilibrium rejection of a mechanism

Gorkem Celik and Michael Peters ()

Games and Economic Behavior, 2011, vol. 73, issue 2, 375-387

Abstract: We study a mechanism design problem in which players can take part in a mechanism to coordinate their actions in a default game. By refusing to participate in the mechanism, a player can revert to playing the default game non-cooperatively. We show with an example that some allocation rules are implementable only with mechanisms which will be rejected on the equilibrium path. In our construction, a refusal to participate conveys information about the types of the players. This information causes the default game to be played under different beliefs, and more importantly under different higher order beliefs, than the interim ones. We find a lower bound on all the implementable payoffs. We use this bound to establish a condition on the default game under which all the implementable outcomes are truthfully implementable, without the need to induce rejection of the mechanism.

Keywords: Mechanism design; Default game; Cartel agreements (search for similar items in EconPapers)
JEL-codes: C72 D43 D82 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Equilibrium Rejection of a Mechanism (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:73:y:2011:i:2:p:375-387

DOI: 10.1016/j.geb.2011.03.009

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