Implementation and Mind Control

Hitoshi Matsushima

No CARF-F-174, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper incorporates social psychology into implementation theory, where an uninformed principal manipulates a dynamic decision-making process without employing any tailored contractual device. We demonstrate the principal's mind-control method through which he can effectively utilize social psychology tactics to incentivize informed agents to announce their information in keeping with his wishes. We show that with incentive compatibility, the principal can implement any alternative that he wishes as the unique Nash equilibrium outcome, even if the psychological cost of each agent from disobeying the principal's wishes is small as compared to his total material benefits.

Pages: 23 pages
Date: 2009-09
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Working Paper: Implementation and Mind Control (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf174

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