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Equilibrium Selection and Stability for the Groves Ledyard Mechanism

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  • Scott E. Page
  • Troy Tassier

Abstract

In their seminal paper Groves and Ledyard (1976) construct a balanced incentive compatible mechanism that solves the free rider problem. In subsequent research, Bergstrom, Simon, and Titus (1983) prove that there exist numerous asymmetric equilibria in addition to the symmetric equilibrium. In the present paper, we explicitly solve for the additional equilibria and use computational experiments to examine the structure and stability of the set of equilibria of the Groves Ledyard Mechanism. We find that all of the equilibria found by Berstrom, Simon, and Titus are unstable and that for a high level of the punishment parameter these equilibria do not exist. Further, we find that there exists an additional boundary equilibrium for each of the equilibria found by Bergstrom, Simon, and Titus. The boundary equilibria are all stable. Copyright 2004 Blackwell Publishing Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 6 (2004)
Issue (Month): 2 (05)
Pages: 311-335

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Handle: RePEc:bla:jpbect:v:6:y:2004:i:2:p:311-335

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Cited by:
  1. Page, Scott E. & Tassier, Troy, 2010. "A characterization of equilibria in the Groves-Ledyard mechanism," Journal of Mathematical Economics, Elsevier, vol. 46(6), pages 1229-1242, November.
  2. Healy, Paul J. & Mathevet, Laurent, 2012. "Designing stable mechanisms for economic environments," Theoretical Economics, Econometric Society, vol. 7(3), September.

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