A characterization of equilibria in the Groves-Ledyard mechanism
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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- Groves, Theodore & Ledyard, John O, 1977.
"Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem,"
Econometric Society, vol. 45(4), pages 783-809, May.
- 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.
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- 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.
- Thomas Muench & Mark Walker, 1983. "Are Groves-Ledyard Equilibria Attainable?," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 393-396.
- Matthew O. Jackson, 1992. "Implementation in Undominated Strategies: A Look at Bounded Mechanisms," Review of Economic Studies, Oxford University Press, vol. 59(4), pages 757-775.
- 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.
- 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.
- 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.
- 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.
- 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. Full references (including those not matched with items on IDEAS)
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