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Implementation, Elimination of Weakly Dominated Strategies and Evolutionary Dynamics

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Author Info
Antonio Cabrales (Universitat Pompeu Fabra and ELSE)
Giovanni Ponti (Universidad de Alicante and ELSE)

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Abstract

This paper studies convergence and stability properties of Sjostrom's (1994) mechanism, under the assumption that boundedly rational players find their way to equilibrium using monotonic evolutionary dynamics and best-reply dynamics. This mechanism implements most social choice functions in economic environments using as a solution concept one round of deletion of weakly dominated strategies and one round of deletion of strictly dominated strategies. However, there are other sets of Nash equilibrium, whose payoffs may be very different from those desired by the social choice function. With monotonic dynamics, all these sets of equilibrium contain limit points of the evolutionary dynamics. Furthermore, even if the dynamics converge to the "right" set of equilibria (i.e., the one which contains the solution of the mechanism), it may converge to an equilibrium which is worse in welfare terms. In contrast with this result, any interior solution of the best-reply dynamics converges to the equilibrium whose outcome the planner desires. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1006/redy.1999.0082
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 3 (2000)
Issue (Month): 2 (April)
Pages: 247-282
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Handle: RePEc:red:issued:v:3:y:2000:i:2:p:247-282

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Healy, Paul J., 2003. "Learning Dynamics in Mechanism Design: An Experimental Comparison of Public Goods Mechanisms," Working Papers 1182, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  2. David K. Levine & Aldo Rustichini, 2000. "Introduction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(2), pages 213-215, April. [Downloadable!] (restricted)
  3. David K Levine & Aldo Rustichini, 2000. "Introduction: The Dynamic Games Special Issue," Levine's Working Paper Archive 2127, UCLA Department of Economics. [Downloadable!]
  4. Antonio Cabrales & Roberto Serrano, 2007. "Implementation in adaptive better-response dynamics," Working Papers 2007-16, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales. [Downloadable!]
    Other versions:
  5. Timothy N. Cason & Tatsuyoshi Saijo & Tomas Sjostrom & Takehiko Yamato, 2005. "Secure Implementation Experiments: Do Strategy-proof Mechanisms Really Work?," Economics Working Papers 0055, Institute for Advanced Study, School of Social Science. [Downloadable!]
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  6. Mathevet, Laurent, 2007. "Supermodular Bayesian implementation: Learning and incentive design," Working Papers 1265, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  7. repec:att:wimass:19199938 is not listed on IDEAS
  8. Dunia López-Pintado & Giovanni Ponti, 2003. "Solomon'S Dilemma: An Experimental Study On Dynamic Implementation," Working Papers. Serie AD 2003-11, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  9. repec:att:wimass:1920115 is not listed on IDEAS
  10. Marco Galbiati, 2006. "Fair Divisions as Attracting Nash Equilibria of Simple Games," Economics Working Papers ECO2006/24, European University Institute. [Downloadable!]
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