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Discrete implementation of the Groves–Ledyard mechanism

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  • J. Swarthout

    ()

  • Mark Walker

    ()

Abstract

When implementing an economic institution in the field or in the laboratory, the participants' action spaces and the institution's outcomes are typically discrete, while our theoretical analysis of the institution often assumes the sets are continuous. Predictions by the continuous model generally turn out to be good approximations to the performance of the discrete implementation. We present an example in which the continuous version has a unique and Pareto efficient equilibrium, but in which the discrete version often has vastly more equilibria, many of them far from efficient. We show that the same phenomenon appears in two experiments investigating the Groves-Ledyard mechanism, and that it may account for the experimental results.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10058-008-0066-3
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Bibliographic Info

Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 13 (2009)
Issue (Month): 1 (April)
Pages: 101-114

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Handle: RePEc:spr:reecde:v:13:y:2009:i:1:p:101-114

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Related research

Keywords: Groves–Ledyard mechanism; Public goods; Implementation in discrete strategies; Multiple equilibria; Dominant strategies; C72; C90; D61; H41;

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  1. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
  2. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  3. Yan Chen & Fang-Fang Tang, 1998. "Learning and Incentive-Compatible Mechanisms for Public Goods Provision: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 633-662, June.
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