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Process Manipulation in Unique Implementation

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  • Hitoshi Matsushima

    (The University of Tokyo)

Abstract

We incorporate social influence into implementation theory, and highlight the manner in which an informed agent feels guilty with regard to disobeying an uninformed principal’s wishes. The degree of this feeling depends on the agent’s expectation of others’ behavioral modes. We demonstrate a method of process manipulation, through which the principal employs psychological tactics for incentivizing agents to announce information in keeping with his/her wishes. We indicate that with a version of incentive compatibility, the principal can implement any alternative that he/she wishes as the unique Nash equilibrium without employing any contractual devices. Each agent’s psychological cost would be negligible.

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File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/313.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-301.

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Length: 19 pages
Date of creation: Dec 2008
Date of revision: Jul 2012
Handle: RePEc:cfi:fseres:cf301

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  1. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
  2. Lombardi Michele & Yoshihara Naoki, 2012. "Natural implementation with partially hones agents," Research Memorandum 005, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  3. Eliaz, K., 1999. "Fault Tolerant Implementation," Papers 21-99, Tel Aviv.
  4. Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics.
  5. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  6. Matsushima, Hitoshi, 2008. "Role of honesty in full implementation," Journal of Economic Theory, Elsevier, vol. 139(1), pages 353-359, March.
  7. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
  8. Kfir Eliaz, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 589-610.
  9. Matsushima, Hitoshi, 2008. "Behavioral aspects of implementation theory," Economics Letters, Elsevier, vol. 100(1), pages 161-164, July.
  10. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
  11. Maskin, Eric, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 23-38, January.
  12. Kartik, Navin & Tercieux, Olivier, 2012. "Implementation with evidence," Theoretical Economics, Econometric Society, vol. 7(2), May.
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