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Robust mechanism design and social preferences

Felix Bierbrauer, Axel Ockenfels, Andreas Pollak and Désirée Rückert

Journal of Public Economics, 2017, vol. 149, issue C, 59-80

Abstract: We study two classic challenges in mechanism design – bilateral trade à la Myerson and Satterthwaite (1983) and redistributive income taxation à la Mirrlees (1971) and Piketty (1993) – to show that some standard mechanism design solutions systematically fail with social preferences. We therefore introduce the notion of a social-preference-robust mechanism which works not only for selfish but also for social preferences of different nature and intensity, and characterize the optimal mechanism for this class. With the help of a series of laboratory experiments we find that behavior can indeed be better controlled with social-preference-robust mechanisms.

Keywords: Robust mechanism design; Social preferences; Bilateral trade; Income taxation (search for similar items in EconPapers)
JEL-codes: C92 D02 D03 D82 H2 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Robust Mechanism Design and Social Preferences (2014) Downloads
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