Mechanism design with level-k types: Theory and an application to bilateral trade

Terri Kneeland

Discussion Papers, Research Unit: Economics of Change from WZB Berlin Social Science Center

Abstract: This paper studies mechanism design under the level-k solution concept. The first result gives a general necessary condition for a social choice rule to be level-k implementable. In some environments, this necessary condition is equivalent to Bayesian incentive compatibility, making level-k implementation more restrictive than Bayesian implementation. The second result shows that this is not a general implication. In the bilateral trade environment ex post efficient trade is always possible under level-k implementation. Further, ex post efficient trade is possible in a mechanism that is robust to different specifications of beliefs about the levels of reasoning of others and to any specification of beliefs about payoffs.

Date: 2017
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/157375/1/885244109.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:wzbeoc:spii2017303

Access Statistics for this paper

More papers in Discussion Papers, Research Unit: Economics of Change from WZB Berlin Social Science Center Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().