Strategically Simple Mechanisms

Tilman Börgers (tborgers@umich.edu) and Jiangtao Li
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Jiangtao Li: Dept. of Economics, National University of Singapore (NUS)

No 2148, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We define and investigate a property of mechanisms that we call "strategic simplicity," and that is meant to capture the idea that, in strategically simple mechanisms, strategic choices require limited strategic sophistication. We define a mechanism to be strategically simple if choices can be based on first-order beliefs about the other agents' preferences and first-order certainty about the other agents' rationality alone, and there is no need for agents to form higher-order beliefs, because such beliefs are irrelevant to the optimal strategies. All dominant strategy mechanisms are strategically simple. But many more mechanisms are strategically simple. In particular, strategically simple mechanisms may be more flexible than dominant strategy mechanisms in the bilateral trade problem and the voting problem.

Keywords: Mechanism design; Complexity (search for similar items in EconPapers)
JEL-codes: D82 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2018-12
New Economics Papers: this item is included in nep-des, nep-gth and nep-sea
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Published in Econometrica (December 2019), 87(6): 2003-2035

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Journal Article: Strategically Simple Mechanisms (2019)
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