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Level-K Mechanism Design

Author

Listed:
  • Geoffroy de Clippel
  • Rene Saran
  • Roberto Serrano

Abstract

Models of choice where agents see others as less sophisticated than themselves have significantly different, sometimes more accurate, pre- dictions in games than does Nash equilibrium. When it comes to mech- anism design, however, they turn out to have surprisingly similar impli- cations. This paper provides tight necessary and sufficient conditions for implementation with bounded depth of reasoning, discussing the role and implications of different behavioral anchors. The central con- dition slightly strenghthens standard incentive constraints, and we term it strict-if-responsive Bayesian incentive compatibility (SIRBIC).

Suggested Citation

  • Geoffroy de Clippel & Rene Saran & Roberto Serrano, 2016. "Level-K Mechanism Design," Working Papers 2016-6, Brown University, Department of Economics.
    • Handle: RePEc:bro:econwp:2016-6
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    Citations

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    Cited by:

    1. T. Hayashi & R. Jain & V. Korpela & M. Lombardi, 2023. "Behavioral strong implementation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(4), pages 1257-1287, November.
    2. Li, Fei & Song, Yangbo & Zhao, Mofei, 2023. "Global manipulation by local obfuscation," Journal of Economic Theory, Elsevier, vol. 207(C).
    3. Itzhak Rasooly, 2021. "Going... going... wrong: a test of the level-k (and cognitive hierarchy) models of bidding behaviour," Papers 2111.05686, arXiv.org.
    4. Ritesh Jain & Michele Lombardi, 2019. "Virtual implementation by bounded mechanisms: Complete information," IEAS Working Paper : academic research 19-A001, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    5. Yi-Chun Chen & Richard Holden & Takashi Kunimoto & Yifei Sun & Tom Wilkening, 2023. "Getting Dynamic Implementation to Work," Journal of Political Economy, University of Chicago Press, vol. 131(2), pages 285-387.
    6. Giacomo Rubbini, 2023. "Mechanism Design without Rational Expectations," Papers 2305.07472, arXiv.org, revised Nov 2023.
    7. Crawford, Vincent P., 2021. "Efficient mechanisms for level-k bilateral trading," Games and Economic Behavior, Elsevier, vol. 127(C), pages 80-101.
    8. Kneeland, Terri, 2022. "Mechanism design with level-k types: Theory and an application to bilateral trade," Journal of Economic Theory, Elsevier, vol. 201(C).
    9. Caballero, William N. & Lunday, Brian J. & Uber, Richard P., 2021. "Identifying behaviorally robust strategies for normal form games under varying forms of uncertainty," European Journal of Operational Research, Elsevier, vol. 288(3), pages 971-982.
    10. Itzhak Rasooly, 2022. "Going...going...wrong: a test of the level-k (and cognitive hierarchy) models of bidding behaviour," Economics Series Working Papers 959, University of Oxford, Department of Economics.
    11. Kneeland, Terri, 2017. "Mechanism design with level-k types: Theory and an application to bilateral trade," Discussion Papers, Research Unit: Economics of Change SP II 2017-303, WZB Berlin Social Science Center.
    12. Sylvain Chassang & Lucia Del Carpio & Samuel Kapon, 2020. "Making the Most of Limited Government Capacity: Theory and Experiment," Working Papers 2020-7, Princeton University. Economics Department..
    13. de Clippel, Geoffroy & Saran, Rene & Serrano, Roberto, 2023. "Continuous level-k mechanism design," Games and Economic Behavior, Elsevier, vol. 140(C), pages 481-501.

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