Discrete Implementation of the Groves-Ledyard Mechanism
When implementing an economic institution in the field or in the laboratory, the participants' action spaces and the institution's outcomes are typically discrete, while our theoretical analysis of the institution often assumes the sets are continuous. Predictions by the continuous model generally turn out to be good approximations to the performance of the discrete implementation. We present an example in which the continuous version has a unique and Pareto efficient equilibrium, but in which the discrete version often has vastly more equilibria, many of them far from efficient. We show that the same phenomenon appears in two experiments investigating the Groves-Ledyard mechanism, and that it may account for the experimental results.
|Date of creation:||Sep 2007|
|Date of revision:|
|Contact details of provider:|| Postal: (404) 651-3990|
Phone: (404) 651-3990
Fax: (404) 651-3996
Web page: http://excen.gsu.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Theodore Groves & John Ledyard, 1976.
"Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem',"
144, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Groves, Theodore & Ledyard, John O, 1977. "Optimal Allocation of Public Goods: A Solution to the "Free Rider" Problem," Econometrica, Econometric Society, vol. 45(4), pages 783-809, May.
- Chen, Yan & Plott, Charles R., .
"The Groves-Ledyard Mechanism: An Experimental Study of Institutional Design,"
867, California Institute of Technology, Division of the Humanities and Social Sciences.
- Chen, Yan & Plott, Charles R., 1996. "The Groves-Ledyard mechanism: An experimental study of institutional design," Journal of Public Economics, Elsevier, vol. 59(3), pages 335-364, March.
- Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
- 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.
When requesting a correction, please mention this item's handle: RePEc:exc:wpaper:2007-07. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (J. Todd Swarthout)
If references are entirely missing, you can add them using this form.