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Implementation and Mind Control

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  • Hitoshi Matsushima

    (Faculty of Economics, University of Tokyo)

Abstract

This paper incorporates social psychology into implementation theory, where an uninformed principal manipulates a dynamic decision-making process without employing any tailored contractual device. We demonstrate the principal's mind-control method through which he can effectively utilize social psychology tactics to incentivize informed agents to announce their information in keeping with his wishes. We show that with incentive compatibility, the principal can implement any alternative that he wishes as the unique Nash equilibrium outcome, even if the psychological cost of each agent from disobeying the principal's wishes is small as compared to his total material benefits.

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File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/180.pdf
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Bibliographic Info

Paper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-174.

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Length: 23 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:cfi:fseres:cf174

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  1. Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics.
  2. Hitoshi Matsushima, 2007. "Role of Honesty in Full Implementation," CIRJE F-Series CIRJE-F-518, CIRJE, Faculty of Economics, University of Tokyo.
  3. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  4. Hitoshi Matsushima, 2007. "Behavioral Aspects of Implementation Theory," CIRJE F-Series CIRJE-F-523, CIRJE, Faculty of Economics, University of Tokyo.
  5. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  6. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
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