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Supermodular mechanism design

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Author Info

  • Mathevet, Laurent A.

    ()
    (Department of Economics, University of Texas, Austin)

Abstract

This paper introduces a mechanism design approach that allows dealing with the multiple equilibrium problem, using mechanisms that are robust to bounded rationality. This approach is a tool for constructing supermodular mechanisms, i.e. mechanisms that induce games with strategic complementarities. In quasilinear environments, I prove that if a social choice function can be implemented by a mechanism that generates bounded strategic substitutes - as opposed to strategic complementarities - then this mechanism can be converted into a supermodular mechanism that implements the social choice function. If the social choice function also satisfies some efficiency criterion, then it admits a supermodular mechanism that balances the budget. Building on these results, I address the multiple equilibrium problem. I provide sufficient conditions for a social choice function to be implementable with a supermodular mechanism whose equilibria are contained in the smallest interval among all supermodular mechanisms. This is followed by conditions for supermodular implementability in unique equilibrium. Finally, I provide a revelation principle for supermodular implementation in environments with general preferences.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 5 (2010)
Issue (Month): 3 (September)
Pages:

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Handle: RePEc:the:publsh:604

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Web page: http://econtheory.org

Related research

Keywords: Implementation; mechanisms; learning; strategic complementarities; supermodular games;

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Cited by:
  1. Mathevet, Laurent & Taneva, Ina, 2013. "Finite supermodular design with interdependent valuations," Games and Economic Behavior, Elsevier, vol. 82(C), pages 327-349.
  2. Healy, Paul J. & Mathevet, Laurent, 2012. "Designing stable mechanisms for economic environments," Theoretical Economics, Econometric Society, vol. 7(3), September.
  3. Felix Bierbrauer & Nick Netzer, 2012. "Mechanism Design and Intentions," Working Paper Series in Economics 53, University of Cologne, Department of Economics, revised 21 Aug 2012.

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