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Foundations of Dominant-Strategy Mechanisms

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  • KIM-SAU CHUNG
  • J.C. ELY

Abstract

Robert Wilson criticizes applied game theory's reliance on common-knowledge assumptions. In reaction to Wilson's critique, the recent literature of mechanism design has adopted the goal of finding "detail-free "mechanisms in order to eliminate this reliance. In practice this has meant restricting attention to simple mechanisms such as dominant-strategy mechanisms. However, there has been little theoretical foundation for this approach. In particular it is not clear the search for an optimal mechanism that does not rely on common-knowledge assumption would lead to simpler mechanisms rather than more complicated ones. This paper tries to fill the void. In the context of an expected revenue maximizing auctioneer, we investigate some foundations for using simple, dominant-strategy auctions. Copyright 2007 The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 74 (2007)
Issue (Month): 2 (04)
Pages: 447-476

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Handle: RePEc:bla:restud:v:74:y:2007:i:2:p:447-476

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  1. Neeman, Z., 1998. "The Relevance of Private Infromation in Mechanism Design," Papers 93, Boston University - Department of Economics.
  2. Morris, Stephen, 1995. "The Common Prior Assumption in Economic Theory," Economics and Philosophy, Cambridge University Press, vol. 11(02), pages 227-253, October.
  3. Dirk Bergemann & Stephen Morris, 2003. "Robust Mechanism Design," Levine's Bibliography 666156000000000035, UCLA Department of Economics.
  4. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  6. Ilya Segal, 2003. "Optimal Pricing Mechanisms with Unknown Demand," American Economic Review, American Economic Association, vol. 93(3), pages 509-529, June.
  7. Barton L. Lipman, 1997. "Finite Order Implications of Common Priors," Game Theory and Information 9703005, EconWPA.
  8. repec:wop:humbsf:2000-72 is not listed on IDEAS
  9. Motty Perry & Philip J. Reny, 2002. "An Efficient Auction," Econometrica, Econometric Society, vol. 70(3), pages 1199-1212, May.
  10. Partha Dasgupta & Eric Maskin, 2000. "Efficient Auctions," The Quarterly Journal of Economics, MIT Press, vol. 115(2), pages 341-388, May.
  11. Faruk Gul, 1998. "A Comment on Aumann's Bayesian View," Econometrica, Econometric Society, vol. 66(4), pages 923-928, July.
  12. Neeman, Zvika, 2003. "The effectiveness of English auctions," Games and Economic Behavior, Elsevier, vol. 43(2), pages 214-238, May.
  13. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  14. Brandenburger Adam & Dekel Eddie, 1993. "Hierarchies of Beliefs and Common Knowledge," Journal of Economic Theory, Elsevier, vol. 59(1), pages 189-198, February.
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