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Adaptive Dynamics and the Implementation Problem with Complete Information

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  • Antonio Cabrales

Abstract

This paper studies the equilibrating process of several implementation mecha-nisms using naive adaptive dynamics. We show that the dynamics converge and are stable, for the canonical mechanism of implementation in Nash equilibrium. In this way we cast some doubt on the criticism of complexity commonly used against this mechanism. For mechanisms that use more refined equilibrium concepts, the dynamics converge but are not stable. Some papers in the literature on implemen-tation with refined equilibrium concepts have claimed that the mechanisms they propose are simple and implement everything (in contrast with the canoni-cal mechanism). The fact that some of these simple mechanisms have unstable equilibria suggests that these statements should be interpreted with some caution. Key Words: Implementation; Bounded Rationality; Evolutionary dynamics; Mechanisms.

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Paper provided by ESRC Centre on Economics Learning and Social Evolution in its series ELSE working papers with number 009.

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Handle: RePEc:els:esrcls:009

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