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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 mechanisms 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 implementation with refined equilibrium concepts have claimed that the mechanisms they propose are ``simple'' and implement ``everything'' (in contrast with the canonical mechanism). The fact that some of these ``simple'' mechanisms have unstable equilibria suggests that these statements should be interpreted with some caution.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 179.

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Date of creation: Jul 1996
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Handle: RePEc:upf:upfgen:179

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Web page: http://www.econ.upf.edu/

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Keywords: Implementation; bounded rationality; evolutionary dynamics; mechanisms;

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  1. Sjostrom Tomas, 1994. "Implementation in Undominated Nash Equilibria without Integer Games," Games and Economic Behavior, Elsevier, vol. 6(3), pages 502-511, May.
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  8. Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
  9. Matthew, Jackson O. & Palfrey, Thomas R. & Srivastava, Sanjay., 1990. "Undominated Nash Implementation in Bounded Mechanism," Working Papers 754, California Institute of Technology, Division of the Humanities and Social Sciences.
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  12. Abreu, Dilip & Matsushima, Hitoshi, 1992. "A Response [Virtual Implementation in Iteratively Undominated Strategies I: Complete Information]," Econometrica, Econometric Society, vol. 60(6), pages 1439-42, November.
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  17. de Trenqualye, Pierre, 1989. "Stable implementation of Lindahl allocations," Economics Letters, Elsevier, vol. 29(4), pages 291-294.
  18. Y. G. Kim & J. Sobel, 2010. "An Evolutionary Approach to Pre-play Communication," Levine's Working Paper Archive 374, David K. Levine.
  19. Matthew 0. Jackson, 1989. "Implementation in Undominated Strategies - A Look at Bounded Mechanisms," Discussion Papers 833, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  20. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 185-216, April.
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  22. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September.
  23. L. Samuelson & J. Zhang, 2010. "Evolutionary Stability in Asymmetric Games," Levine's Working Paper Archive 453, David K. Levine.
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  26. Sefton, Martin & Yavas, Abdullah, 1996. "Abreu-Matsushima Mechanisms: Experimental Evidence," Games and Economic Behavior, Elsevier, vol. 16(2), pages 280-302, October.
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