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Credible Implementation

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Author Info
Luis Corchón () (Universidad de Alicante)
Bhaskar Chakravorti (Harvard Business School)
Simon Wilkie (California Institute of Technology)

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Abstract

The theory of mechanism design and implementation abounds with clever mechanisms whose equilibrium outcomes are optimal according to some social choice rule. However, the cleverness of these mechanisms relies on intricate systems of rewards and punishments off-the-equilibrium path. Generally, it is not in the designer's best interest to go through with the reward/punishment in the "subgame" arising from some disequilibrium play. This would make the mechanism's outcome function non-credible. In the context of exchange economies, we define an appropiate notion of "credible" implementation and show that (a) the non-dictatorial Pareto correspondence can be crediblyimplemented (b) there exists no credibly implementable Pareto-efficient and individually rational social choice rule and (c) there exists no credibly implementable fair social choice rules. We derive necessary and sufficient conditions for credible implementability of choice rules. The main implication is paradoxical: it is suboptimal for the designer to be endowed with "too much" information about the economy. Finally, we show that the negative results persist even under weaker credibility requirements .

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1993-02.pdf
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 1993-02.

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Length: 40 pages
Date of creation: May 1993
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:1993-02

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Begoña Subiza & Carmen Herrero Blanco, 1991. "A Characterization Of Acyclic Preferences On Countable Sets," Working Papers. Serie AD 1991-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  2. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June. [Downloadable!] (restricted)
  3. Chakravorti, Bhaskar, 1992. "Efficiency and Mechanisms with No Regret," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 45-59, February. [Downloadable!] (restricted)
  4. Palfrey, Thomas R & Srivastava, Sanjay, 1991. "Nash Implementation Using Undominated Strategies," Econometrica, Econometric Society, vol. 59(2), pages 479-501, March. [Downloadable!] (restricted)
  5. Antonio Villar Notario, 1991. "Market Equilibrium With Nonconvex Technologies," Working Papers. Serie AD 1991-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  6. Gonzalo Olcina Vauteren & Amparo Urbano Salvador, 1993. "INTROSPECTION AND EQUILIBRIUM SELECTION IN 2x2 MATRIX GAMES," Working Papers. Serie AD 1993-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  7. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September. [Downloadable!] (restricted)
  8. Antonio Villar Notario & Carmen Herrero Blanco, 1990. "Vector Mappings With Diagonal Images," Working Papers. Serie AD 1990-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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  9. Fernando Vega Redondo, 1991. "Competition And Culture In The Evolution Of Economic Behavior: A Simple Example," Working Papers. Serie AD 1991-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  10. Herrero, Carmen & Marco, Maria Carmen, 1993. "Rational equal-loss solutions for bargaining problems," Mathematical Social Sciences, Elsevier, vol. 26(3), pages 273-286, November. [Downloadable!] (restricted)
  11. Carmen Herrero Blanco & José Manuel Gutiérrez Díez, 1990. "Lagrangean Conditions For General Optimization Problems With Applications To Consumer Theory," Working Papers. Serie AD 1990-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  12. Thomson, William, 1984. "The Manipulability of Resource Allocation Mechanisms," Review of Economic Studies, Blackwell Publishing, vol. 51(3), pages 447-60, July. [Downloadable!] (restricted)
  13. Luis Corchón, 1990. "Monopolistic Competition: Equilibrium And Optimality," Working Papers. Serie AD 1990-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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  14. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May. [Downloadable!] (restricted)
  15. Javier M. López Cuñat & José Angel Silva, 1991. "First-Best, Second-Best And Principal-Agent Problems," Working Papers. Serie AD 1991-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  16. Luis Corchón & Ignacio Ortuño Ortín, 1991. "Robust Implementation Under Alternative Information Structures," Working Papers. Serie AD 1991-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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  17. Fernando Vega Redondo, 1991. "Technological Change And Market Structure: An Evolutionary Approach," Working Papers. Serie AD 1991-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  18. Amparo Urbano & María Dolores Alepuz Domenech, 1991. "Duopoly Experimentation: Cournot And Bertrand Competition," Working Papers. Serie AD 1991-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jackson, Matthew O. & Palfrey, Thomas R., 1999. "Voluntary Implementation," Working Papers 1077, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
    Other versions:
  2. John Conley & Simon Wilkie, 1994. "Implementing the nash extension bargaining solution for non-convex problems," Review of Economic Design, Springer, vol. 1(1), pages 205-216, December. [Downloadable!] (restricted)
  3. Pablo Amorós, 2003. "Nash Implementation and Uncertain Renegotiation," Economic Working Papers at Centro de Estudios Andaluces E2003/27, Centro de Estudios Andaluces. [Downloadable!]
    Other versions:
  4. Luis C. Corchon, 2007. "The theory of implementation : what did we learn?," Economics Working Papers we081207, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  5. Miguel González-Maestre, 1993. "Divisionalization In Markets With Hetergeneous Goods," Working Papers. Serie AD 1993-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  6. Matthew O. Jackson & Thomas R. Palfrey, 1997. "Efficiency and Voluntary Implementation in Markets with Repeated Pairwise Bargaining," Game Theory and Information 9711003, EconWPA. [Downloadable!]
    Other versions:
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