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Robustness in Mechanism Design and Contracting

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  • Gabriel Carroll

Abstract

This review summarizes a nascent body of theoretical research on design of incentives when the environment is not fully known to the designer and offers some general lessons from the work so far. These recent models based on uncertainty and robustness offer an additional set of tools in the toolkit, complementary to more traditional, fully Bayesian modeling approaches, and broaden the range of problems that can be studied. The kinds of insights that such models can offer, and the methodological and technical challenges that they confront, broadly parallel those of traditional approaches.

Suggested Citation

  • Gabriel Carroll, 2019. "Robustness in Mechanism Design and Contracting," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 139-166, August.
    • Handle: RePEc:anr:reveco:v:11:y:2019:p:139-166
    DOI: 10.1146/annurev-economics-080218-025616
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    Citations

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    Cited by:

    1. Evan Piermont, 2023. "Iterated Revelation: How to Incentive Experts to Complete Incomplete Contracts," Papers 2304.05142, arXiv.org, revised Mar 2024.
    2. Longjian Li, 2022. "Ambiguous Cheap Talk," Papers 2209.08494, arXiv.org.
    3. Jon X. Eguia & Dimitrios Xefteris, 2021. "Implementation by Vote-Buying Mechanisms," American Economic Review, American Economic Association, vol. 111(9), pages 2811-2828, September.
    4. Gottlieb, Daniel & Moreira, Humberto, 2022. "Simple contracts with adverse selection and moral hazard," LSE Research Online Documents on Economics 114348, London School of Economics and Political Science, LSE Library.
    5. Wanchang Zhang, 2021. "Random Double Auction: A Robust Bilateral Trading Mechanism," Papers 2105.05427, arXiv.org, revised May 2022.
    6. Castro-Pires, Henrique & Moreira, Humberto, 2021. "Limited liability and non-responsiveness in agency models," Games and Economic Behavior, Elsevier, vol. 128(C), pages 73-103.
    7. Julio Backhoff-Veraguas & Patrick Beissner & Ulrich Horst, 2022. "Robust contracting in general contract spaces," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(4), pages 917-945, June.
    8. Li, Zhaolin, 2021. "Robust Moral Hazard with Distributional Ambiguity," Working Papers BAWP-2021-01, University of Sydney Business School, Discipline of Business Analytics.
    9. Moshe Babaioff & Michal Feldman & Yannai A. Gonczarowski & Brendan Lucier & Inbal Talgam-Cohen, 2020. "Escaping Cannibalization? Correlation-Robust Pricing for a Unit-Demand Buyer," Papers 2003.05913, arXiv.org, revised Aug 2020.
    10. Li, Zhaolin, 2020. "Robust Moral Hazard with Distributional Ambiguity," Working Papers BAWP-2020-03, University of Sydney Business School, Discipline of Business Analytics.
    11. Lensman, Todd & Troshkin, Maxim, 2022. "Implications of uncertainty for optimal policies," Journal of Economic Theory, Elsevier, vol. 199(C).
    12. Han, Jun & Weber, Thomas A., 2023. "Price discrimination with robust beliefs," European Journal of Operational Research, Elsevier, vol. 306(2), pages 795-809.
    13. Sandro Ambuehl & B. Douglas Bernheim & Annamaria Lusardi, 2022. "Evaluating Deliberative Competence: A Simple Method with an Application to Financial Choice," American Economic Review, American Economic Association, vol. 112(11), pages 3584-3626, November.
    14. Amine Allouah & Omar Besbes, 2020. "Prior-Independent Optimal Auctions," Management Science, INFORMS, vol. 66(10), pages 4417-4432, October.
    15. Federico Echenique & Mat'ias N'u~nez, 2022. "Price & Choose," Papers 2212.05650, arXiv.org, revised Apr 2023.
    16. Jerry Anunrojwong & Santiago R. Balseiro & Omar Besbes, 2023. "Robust Auction Design with Support Information," Papers 2305.09065, arXiv.org, revised Aug 2023.
    17. Babichenko, Yakov & Talgam-Cohen, Inbal & Xu, Haifeng & Zabarnyi, Konstantin, 2022. "Regret-minimizing Bayesian persuasion," Games and Economic Behavior, Elsevier, vol. 136(C), pages 226-248.
    18. Satoshi Nakada & Shmuel Nitzan & Takashi Ui, 2022. "Robust Voting under Uncertainty," Working Papers on Central Bank Communication 038, University of Tokyo, Graduate School of Economics.
    19. Cosmin L. Ilut & Martin Schneider, 2022. "Modeling Uncertainty as Ambiguity: a Review," NBER Working Papers 29915, National Bureau of Economic Research, Inc.
    20. Suzdaltsev, Alex, 2022. "Distributionally robust pricing in independent private value auctions," Journal of Economic Theory, Elsevier, vol. 206(C).
    21. Zhaolin Li & Samuel N. Kirshner, 2021. "Salesforce Compensation and Two‐Sided Ambiguity: Robust Moral Hazard with Moment Information," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 2944-2961, September.
    22. Rumen Kostadinov, 2023. "Worst-case Regret in Ambiguous Dynamic Games," Department of Economics Working Papers 2022-08, McMaster University.
    23. He, Wei & Li, Jiangtao, 2022. "Correlation-robust auction design," Journal of Economic Theory, Elsevier, vol. 200(C).
    24. Erik Hovenkamp & Jorge Lemus, 2022. "Antitrust Limits on Patent Settlements: A New Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 70(2), pages 257-293, June.
    25. Jerry Anunrojwong & Santiago R. Balseiro & Omar Besbes, 2022. "On the Robustness of Second-Price Auctions in Prior-Independent Mechanism Design," Papers 2204.10478, arXiv.org, revised Jan 2024.

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