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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- 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.
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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.
- 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.
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