Equilibrium Rejection of a Mechanism

Gorkem Celik and Michael Peters ()

Microeconomics.ca working papers from Vancouver School of Economics

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)
Pages: 0 pages
Date: 2008-08-06, Revised 2008-08-06
New Economics Papers: this item is included in nep-cdm, nep-cta and nep-gth
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Citations: View citations in EconPapers (9)

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Journal Article: Equilibrium rejection of a mechanism (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:pmicro:gorkem_celik-2008-10

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