Strategy-proofness in the Large

Eduardo Azevedo and Eric Budish

No 23771, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a criterion of approximate incentive compatibility, strategy-proofness in the large (SP-L), and argue that it is a useful second-best to exact strategy-proofness (SP) for market design. Conceptually, SP-L requires that an agent who regards a mechanism’s “prices” as exogenous to her report – be they traditional prices as in an auction mechanism, or price-like statistics in an assignment or matching mechanism – has a dominant strategy to report truthfully. Mathematically, SP-L weakens SP in two ways: (i) truth-telling is required to be approximately optimal (within epsilon in a large enough market) rather than exactly optimal, and (ii) incentive compatibility is evaluated ex interim, with respect to all full-support i.i.d. probability distributions of play, rather than ex post with respect to all possible realizations of play. This places SP-L in between the traditional notion of approximate strategy-proofness, which evaluates incentives to manipulate ex post, and the traditional notion of approximate Bayes-Nash incentive compatibility, which evaluates incentives to manipulate ex interim with respect to the single common-knowledge probability distribution associated with Bayes-Nash equilibrium.

JEL-codes: C72 C78 D44 D47 D82 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-des, nep-gth and nep-mic
Note: IO
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Citations: View citations in EconPapers (4)

Published as Eduardo M Azevedo & Eric Budish, 2019. "Strategy-proofness in the Large," Review of Economic Studies, Oxford University Press, vol. 86(1), pages 81-116.

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