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Designing stable mechanisms for economic environments

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  • , J.

    (Department of Economics, Ohio State University)

  • ,

    (Department of Economics, University of Texas)

Abstract

We study the design of mechanisms that implement Lindahl or Walrasian allocations and whose Nash equilibria are dynamically stable for a wide class of adaptive dynamics. We argue that supermodularity is not a desirable stability criterion in this mechanism design context, focusing instead on contractive mechanisms. We provide necessary and sufficient conditions for a mechanism to Nash implement Lindahl or Walrasian allocations, show that these conditions are inconsistent with the contraction property when message spaces are one-dimensional, and then show how to use additional dimensions to achieve dynamic stability while gaining budget balance out of equilibrium.

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  • , J. & ,, 2012. "Designing stable mechanisms for economic environments," Theoretical Economics, Econometric Society, vol. 7(3), September.
  • Handle: RePEc:the:publsh:898
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    5. Van Essen, Matthew & Walker, Mark, 2017. "A simple market-like allocation mechanism for public goods," Games and Economic Behavior, Elsevier, vol. 101(C), pages 6-19.
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    7. Matt Van Essen, 2012. "A note on the stability of Chen’s Lindahl mechanism," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 38(2), pages 365-370, February.
    8. Mariann Ollár & Antonio Penta, 2019. "Implementation via transfers with identical but unknown distributions," Economics Working Papers 1676, Department of Economics and Business, Universitat Pompeu Fabra.
    9. Nasimeh Heydaribeni & Achilleas Anastasopoulos, 2019. "Distributed Mechanism Design for Network Resource Allocation Problems," Papers 1904.01222, arXiv.org.
    10. Reischmann, Andreas & Oechssler, Joerg, 2018. "The Binary Conditional Contribution Mechanism for public good provision in dynamic settings — Theory and experimental evidence," Journal of Public Economics, Elsevier, vol. 159(C), pages 104-115.
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    12. Healy, Paul J. & Jain, Ritesh, 2017. "Generalized Groves–Ledyard mechanisms," Games and Economic Behavior, Elsevier, vol. 101(C), pages 204-217.
    13. Jacek B. Krawczyk & Mabel Tidball, 2016. "Economic Problems with Constraints: How Efficiency Relates to Equilibrium," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-19, December.
    14. Reischmann, Andreas, 2016. "Conditional Contribution Mechanisms for the Provision of Public Goods in Dynamic Settings - Theory and Experimental Evidence," VfS Annual Conference 2016 (Augsburg): Demographic Change 145613, Verein für Socialpolitik / German Economic Association.
    15. Meng, Dawen & Tian, Guoqiang, 2013. "Entry-Deterring Nonlinear Pricing with Bounded Rationality," MPRA Paper 57935, University Library of Munich, Germany, revised May 2014.
    16. Arifovic, Jasmina & Ledyard, John, 2011. "A behavioral model for mechanism design: Individual evolutionary learning," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 374-395, May.
    17. Matt Essen, 2014. "A Clarke tax tâtonnement that converges to the Lindahl allocation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(2), pages 309-327, August.
    18. Sylvain Chassang & Lucia Del Carpio & Samuel Kapon, 2022. "Using Divide and Conquer to Improve Tax Collection: Theory and Laboratory Evidence," Working Papers 299, Princeton University, Department of Economics, Center for Economic Policy Studies..
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    More about this item

    Keywords

    Mechanism design; implementation; stability; learning;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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