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Approximation in Mechanism Design

  • Jason D. Hartline
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    This paper considers three challenge areas for mechanism design and describes the role approximation plays in resolving them. Challenge 1: optimal mechanisms are finely tuned to precise details of the distribution on agent preferences. Challenge 2: in environments with multi-dimensional agent preferences economic analysis has failed to provide general characterizations optimal mechanisms. Challenge 3: optimal mechanisms are parameterized by unrealistic knowledge of the distribution of agents' private preferences. This paper surveys positive resolutions to these challenges with emphasis on basic techniques and their relevance to theory and practice.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.330
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    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 102 (2012)
    Issue (Month): 3 (May)
    Pages: 330-36

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    Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:330-36
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    1. Thanassoulis, John, 2004. "Haggling over substitutes," Journal of Economic Theory, Elsevier, vol. 117(2), pages 217-245, August.
    2. Manelli, Alejandro M. & Vincent, Daniel R., 2007. "Multidimensional mechanism design: Revenue maximization and the multiple-good monopoly," Journal of Economic Theory, Elsevier, vol. 137(1), pages 153-185, November.
    3. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
    4. Ilya Segal, 2003. "Optimal Pricing Mechanisms with Unknown Demand," American Economic Review, American Economic Association, vol. 93(3), pages 509-529, June.
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