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Level-K Mechanism Design


  • Geoffroy de Clippel
  • Rene Saran
  • Roberto Serrano


Models of choice where agents see others as less sophisticated than themselves have significantly different, sometimes more accurate, pre- dictions in games than does Nash equilibrium. When it comes to mech- anism design, however, they turn out to have surprisingly similar impli- cations. This paper provides tight necessary and sufficient conditions for implementation with bounded depth of reasoning, discussing the role and implications of different behavioral anchors. The central con- dition slightly strenghthens standard incentive constraints, and we term it strict-if-responsive Bayesian incentive compatibility (SIRBIC).

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  • Geoffroy de Clippel & Rene Saran & Roberto Serrano, 2016. "Level-K Mechanism Design," Working Papers 2016-6, Brown University, Department of Economics.
  • Handle: RePEc:bro:econwp:2016-6

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    Cited by:

    1. Kneeland, Terri, 2017. "Mechanism design with level-k types: Theory and an application to bilateral trade," Discussion Papers, Research Unit: Economics of Change SP II 2017-303, Social Science Research Center Berlin (WZB).

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