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A characterization of equilibria in the Groves-Ledyard mechanism

  • Page, Scott E.
  • Tassier, Troy

In this paper, we characterize all interior and boundary equilibria of the Groves-Ledyard mechanism for a large class of economies and determine their stability properties. We show that the mechanism admits three types of equilibria: a symmetric, efficient, stable interior equilibrium, a large set of asymmetric, efficient, unstable, interior equilibria, and a large set of asymmetric, inefficient, stable boundary equilibria. We further show that asymmetric equilibria fail to exist for large values of the punishment parameter or if the message space is bounded sufficiently. The boundary equilibria previously had not been located nor had the instability of the asymmetric equilibria been known. Interestingly, the stability of the symmetric equilibrium rests on two dynamics that individually produce instability.

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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 46 (2010)
Issue (Month): 6 (November)
Pages: 1229-1242

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Handle: RePEc:eee:mateco:v:46:y:2010:i:6:p:1229-1242
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Jackson, Matthew O, 1992. "Implementation in Undominated.Strategies: A Look at Bounded Mechanisms," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 757-75, October.
  2. Bergstrom, Theodore & Simon, Carl P. & Titus, Charles J., 1983. "Counting Groves-Ledyard equilibria via degree theory," Journal of Mathematical Economics, Elsevier, vol. 12(2), pages 167-184, October.
  3. Yan Chen & Fang-Fang Tang, 1998. "Learning and Incentive-Compatible Mechanisms for Public Goods Provision: An Experimental Study," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 633-662, June.
  4. Scott E. Page & Troy Tassier, 2004. "Equilibrium Selection and Stability for the Groves Ledyard Mechanism," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(2), pages 311-335, 05.
  5. Theodore Groves & John Ledyard, 1976. "Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem'," Discussion Papers 144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Van Huyck, John B & Cook, Joseph P & Battalio, Raymond C, 1994. "Selection Dynamics, Asymptotic Stability, and Adaptive Behavior," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 975-1005, October.
  7. Russell Golman & Scott Page, 2010. "Basins of attraction and equilibrium selection under different learning rules," Journal of Evolutionary Economics, Springer, vol. 20(1), pages 73-75, January.
  8. Russell Golman & Scott Page, 2010. "Basins of attraction and equilibrium selection under different learning rules," Journal of Evolutionary Economics, Springer, vol. 20(1), pages 49-72, January.
  9. Muench, Thomas & Walker, Mark, 1983. "Are Groves-Ledyard Equilibria Attainable? [Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem]," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 393-96, April.
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