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Process Manipulation in Unique Implementation

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  • Hitoshi Matsushima

    (The University of Tokyo)

Abstract

We incorporate social influence into implementation theory, and highlight the manner in which an informed agent feels guilty with regard to disobeying an uninformed principal’s wishes. The degree of this feeling depends on the agent’s expectation of others’ behavioral modes. We demonstrate a method of process manipulation, through which the principal employs psychological tactics for incentivizing agents to announce information in keeping with his/her wishes. We indicate that with a version of incentive compatibility, the principal can implement any alternative that he/she wishes as the unique Nash equilibrium without employing any contractual devices. Each agent’s psychological cost would be negligible.

Suggested Citation

  • Hitoshi Matsushima, 2008. "Process Manipulation in Unique Implementation," CARF F-Series CARF-F-301, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Jul 2012.
  • Handle: RePEc:cfi:fseres:cf301
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    File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/313.pdf
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    References listed on IDEAS

    as
    1. Dutta, Bhaskar & Sen, Arunava, 2012. "Nash implementation with partially honest individuals," Games and Economic Behavior, Elsevier, vol. 74(1), pages 154-169.
    2. Matsushima, Hitoshi, 2008. "Role of honesty in full implementation," Journal of Economic Theory, Elsevier, vol. 139(1), pages 353-359, March.
    3. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-319, June.
    4. Matsushima, Hitoshi, 2008. "Behavioral aspects of implementation theory," Economics Letters, Elsevier, vol. 100(1), pages 161-164, July.
    5. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
    6. Lombardi Michele & Yoshihara Naoki, 2012. "National implementation with partially honest agents," Research Memorandum 005, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    7. Lombardi, Michele & Yoshihara, Naoki, 2012. "Natural Implementation with Partially Honest Agents," Discussion Paper Series 561, Institute of Economic Research, Hitotsubashi University.
    8. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, January.
    9. Eric Maskin, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 23-38.
    10. Kfir Eliaz, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 589-610.
    11. Kartik, Navin & Tercieux, Olivier, 2012. "Implementation with evidence," Theoretical Economics, Econometric Society, vol. 7(2), May.
    12. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-877, October.
    13. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
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