IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Mechanism Design and Intentions

  • Felix Bierbrauer
  • Nick Netzer

We introduce intention-based social preferences into a Bayesian mechanism design framework. We first show that, under common knowledge of social preferences, any tension between material efficiency, incentive compatibility, and voluntary participation can be resolved. Hence, famous impossibility results such as the one by Myerson and Satterthwaite (1983) are turned into possibility results. Second, we provide a systematic account of the welfare implications of kindness sensations. Finally, we turn to an environment without common knowledge of social preferences and introduce the notion of a psychologically robust mechanism. Such a mechanism can be implemented without information about the type or the intensity of social preferences. We show that the mechanisms which have been the focus of the conventional mechanism design literature can be modified to achieve psychological robustness.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ockenfels.uni-koeln.de/fileadmin/wiso_fak/stawi-ockenfels/pdf/wp_series_download/wp0053.pdf
Download Restriction: no

Paper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 53.

as
in new window

Length:
Date of creation: 12 Mar 2012
Date of revision: 21 Aug 2012
Handle: RePEc:kls:series:0053
Contact details of provider: Postal: Albertus Magnus Platz, 50923 Köln
Phone: 0221 / 470 5607
Fax: 0221 / 470 5179
Web page: http://www.wiso.uni-koeln.de
Email:


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.:

as in new window
  1. Michael Kosfeld & Ferdinand A. von Siemens, 2011. "Competition, cooperation, and corporate culture," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 23-43, 03.
  2. Georg Kirchsteiger & Martin Dufwenberg, 2004. "A theory of sequential reciprocity," ULB Institutional Repository 2013/5899, ULB -- Universite Libre de Bruxelles.
  3. Antonio Cabrales & Antoni Calvó-Armengol & Nicola Pavoni, 2004. "Social Preferences, Skill Segregation and Wage Dynamics," Working Papers 181, Barcelona Graduate School of Economics.
  4. Naoko Nishimura & Timothy N. Cason & Tatsuyoshi Saijo & Yoshikazu Ikeda, 2011. "Spite and Reciprocity in Auctions," Games, MDPI, Open Access Journal, vol. 2(3), pages 365-411, September.
  5. Hahn, Volker, 2009. "Reciprocity and voting," Games and Economic Behavior, Elsevier, vol. 67(2), pages 467-480, November.
  6. Egbert Dierker & Hans Haller, 1990. "Tax systems and direct mechanisms in large finite economies," Journal of Economics, Springer, vol. 52(2), pages 99-116, June.
  7. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  8. Ernst Fehr & Oliver Hart & Christian Zehnder, 2008. "Contracts as reference points – experimental evidence," IEW - Working Papers 393, Institute for Empirical Research in Economics - University of Zurich.
  9. von Siemens, Ferdinand A., 2009. "Bargaining under incomplete information, fairness, and the hold-up problem," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 486-494, August.
  10. Falk, Armin & Fehr, Ernst, 2002. "Psychological Foundations of Incentives," CEPR Discussion Papers 3185, C.E.P.R. Discussion Papers.
  11. Tilman Börgers & Peter Norman, 2005. "A Note on Budget Balance under Interim Participation Constraints: The Case of Independent Types," Levine's Bibliography 784828000000000171, UCLA Department of Economics.
  12. Andrew Caplin & John Leahy, 2004. "The supply of information by a concerned expert," Economic Journal, Royal Economic Society, vol. 114(497), pages 487-505, 07.
  13. Ernst Fehr & Michael Powell & Tom Wilkening, 2014. "Handing out guns at a knife fight: behavioral limitations of subgame-perfect implementation," ECON - Working Papers 171, Department of Economics - University of Zurich.
  14. Sebald, Alexander, 2010. "Attribution and reciprocity," Games and Economic Behavior, Elsevier, vol. 68(1), pages 339-352, January.
  15. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  16. Heike Hennig-Schmidt, 2008. "The Framing of Games and the Psychology of Play," Bonn Econ Discussion Papers bgse15_2008, University of Bonn, Germany.
  17. Dufwenberg, Martin & Heidhues, Paul & Kirchsteiger, Georg & Riedel, Frank & Sobel, Joel, 2008. "Other-Regarding Preferences in General Equilibrium," CEPR Discussion Papers 6815, C.E.P.R. Discussion Papers.
  18. Li, Jing, 2008. "The power of conventions: A theory of social preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 489-505, March.
  19. Andreoni,J. & Brown,P.M. & Vesterlund,L., 1999. "What makes an allocation fair? : Some experimental evidence," Working papers 4, Wisconsin Madison - Social Systems.
  20. Gary Charness & Matthew Rabin, 2003. "Understanding Social Preferences with Simple Tests," General Economics and Teaching 0303002, EconWPA.
  21. Ludovic Renou & Karl H. Schlag, 2009. "Implementation in Minimax Regret Equilibrium," Discussion Papers in Economics 09/24, Department of Economics, University of Leicester.
  22. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2001. "On the Nature of Fair Behaviour," CEPR Discussion Papers 2984, C.E.P.R. Discussion Papers.
  23. Florian Englmaier & Stephen G. Leider, 2008. "Contractual and Organizational Structurewith Reciprocal Agents," CESifo Working Paper Series 2415, CESifo Group Munich.
  24. Eliaz, K., 1999. "Fault Tolerant Implementation," Papers 21-99, Tel Aviv.
  25. Werner Güth & Martin Hellwig, 1986. "The private supply of a public good," Journal of Economics, Springer, vol. 46(1), pages 121-159, December.
  26. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  27. Hitoshi Matsushima, 2007. "Role of Honesty in Full Implementation," CIRJE F-Series CIRJE-F-518, CIRJE, Faculty of Economics, University of Tokyo.
  28. Armin Falk & Urs Fischbacher, 2001. "A Theory of Reciprocity," CESifo Working Paper Series 457, CESifo Group Munich.
  29. Antonio Cabrales & Roberto Serrano, 2007. "Implementation in adaptive better-response dynamics," Working Papers 2007-16, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  30. Hitoshi Matsushima, 2005. "On Detail-Free Mechanism Design And Rationality," The Japanese Economic Review, Japanese Economic Association, vol. 56(1), pages 41-54.
  31. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  32. Matsushima, Hitoshi, 2008. "Behavioral aspects of implementation theory," Economics Letters, Elsevier, vol. 100(1), pages 161-164, July.
  33. Oliver Hart & John Moore, 2007. "Contracts as Reference Points," ESE Discussion Papers 170, Edinburgh School of Economics, University of Edinburgh.
  34. repec:bla:restud:v:75:y:2008:i:1:p:65-98 is not listed on IDEAS
  35. Norman,P., 2000. "Efficient mechanisms for public goods with use exclusions," Working papers 15, Wisconsin Madison - Social Systems.
  36. Oren Bar-Gill & Chaim Fershtman, 2005. "Public Policy with Endogenous Preferences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 841-857, December.
  37. Roger B. Myerson & Mark A. Satterthwaite, 1981. "Efficient Mechanisms for Bilateral Trading," Discussion Papers 469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  38. Englmaier, Florian & Wambach, Achim, 2010. "Optimal incentive contracts under inequity aversion," Munich Reprints in Economics 22027, University of Munich, Department of Economics.
  39. Joseph E. Stiglitz, 1981. "Self-Selection and Pareto Efficient Taxation," NBER Working Papers 0632, National Bureau of Economic Research, Inc.
  40. Bruno Frey & Matthias Benz & Alois Stutzer, 2004. "Introducing Procedural Utility: Not Only What, but Also How Matters," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(3), pages 377-, September.
  41. Antonio Cabrales & Raffaele Miniaci & Marco Piovesan & Giovanni Ponti, 2009. "Social Preferences and Strategic Uncertainty: An Experiment on Markets and Contracts," Working Papers 2009-09, FEDEA.
  42. Martin F. Hellwig, 2003. "Public-Good Provision with Many Participants," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 589-614, 07.
  43. Mathevet, Laurent A., 2010. "Supermodular mechanism design," Theoretical Economics, Econometric Society, vol. 5(3), September.
  44. Dirk Engelmann & Martin Strobel, 2004. "Inequality Aversion, Efficiency, and Maximin Preferences in Simple Distribution Experiments," American Economic Review, American Economic Association, vol. 94(4), pages 857-869, September.
  45. ehiel, Philippe & Benny Moldovanu & Ennio Stacchetti, 1994. "How (not) to sell nuclear weapons," Discussion Paper Serie B 288, University of Bonn, Germany.
  46. Dirk Bergemann & Stephen Morris, 2005. "Robust Mechanism Design," Econometrica, Econometric Society, vol. 73(6), pages 1771-1813, November.
  47. Offerman, Theo, 2002. "Hurting hurts more than helping helps," European Economic Review, Elsevier, vol. 46(8), pages 1423-1437, September.
  48. Samuel Bowles & Sung-Ha Hwang, 2008. "Social Preferences and Public Economics: Mechanism Design when Social Preferences Depend on Incentives," Department of Economics University of Siena 530, Department of Economics, University of Siena.
  49. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  50. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
  51. Uzi Segal & Joel Sobel, 1999. "Tit for Tat: Foundations of Preferences for Reciprocity in Strategic Settings," UWO Department of Economics Working Papers 9905, University of Western Ontario, Department of Economics.
  52. Luca Stanca, 2008. "How to be kind? Outcomes versus Intentions as Determinants of Fairness," Working Papers 145, University of Milano-Bicocca, Department of Economics, revised Jul 2008.
  53. Kfir Eliaz, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 589-610.
  54. Falk, Armin & Fehr, Ernst & Fischbacher, Urs, 2008. "Testing theories of fairness--Intentions matter," Games and Economic Behavior, Elsevier, vol. 62(1), pages 287-303, January.
  55. Dufwenberg, Martin & Kirchsteiger, Georg, 2000. "Reciprocity and wage undercutting," European Economic Review, Elsevier, vol. 44(4-6), pages 1069-1078, May.
  56. McCabe, Kevin A. & Rigdon, Mary L. & Smith, Vernon L., 2003. "Positive reciprocity and intentions in trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 267-275, October.
  57. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP -354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  58. Glazer, Jacob & Rubinstein, Ariel, 1998. "Motives and Implementation: On the Design of Mechanisms to Elicit Opinions," Journal of Economic Theory, Elsevier, vol. 79(2), pages 157-173, April.
  59. Pierpaolo Battigalli & Martin Dufwenberg, 2005. "Dynamic Psychological Games," Working Papers 287, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  60. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  61. Cabrales, Antonio & Calvó-Armengol, Antoni, 2008. "Interdependent preferences and segregating equilibria," Journal of Economic Theory, Elsevier, vol. 139(1), pages 99-113, March.
  62. Carlos Rodríguez-Sickert & Ricardo Andrés Guzmán & Juan Camilo Cárdenas, 2006. "Institutions Influence Preferences: Evidence From A Common Pool Resource Experiment," DOCUMENTOS CEDE 002890, UNIVERSIDAD DE LOS ANDES-CEDE.
  63. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
  64. Cabrales, Antonio & Serrano, Roberto, 2011. "Implementation in adaptive better-response dynamics: Towards a general theory of bounded rationality in mechanisms," Games and Economic Behavior, Elsevier, vol. 73(2), pages 360-374.
  65. Cox, J. & Friedman, D. & Gjerstad, S., 2006. "A Trackable Model of Reciprocity and Fairness," Purdue University Economics Working Papers 1181, Purdue University, Department of Economics.
  66. Serkan Kucuksenel, 2012. "Behavioral Mechanism Design," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(5), pages 767-789, October.
  67. Ernst Fehr & Simon Gachter & Georg Kirchsteiger, 1997. "Reciprocity as a Contract Enforcement Device: Experimental Evidence," Econometrica, Econometric Society, vol. 65(4), pages 833-860, July.
  68. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, vol. 75(1), pages 121-154, 01.
  69. Zephyr, 2010. "The city," City, Taylor & Francis Journals, vol. 14(1-2), pages 154-155, February.
  70. Ingela Alger & Regis Renault, 2000. "Screening Ethics when Honest Agents Care about Fairness," Boston College Working Papers in Economics 489, Boston College Department of Economics, revised 09 Nov 2004.
  71. Oren Bar-Gill, 2004. "Law and Preferences," Journal of Law, Economics and Organization, Oxford University Press, vol. 20(2), pages 331-352, October.
  72. Martin Dufwenberg & Alec Smith & Matt Van Essen, 2013. "Hold-Up: With A Vengeance," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 896-908, 01.
  73. Netzer, Nick & Schmutzler, Armin, 2010. "Rotten Kids with Bad Intentions," CEPR Discussion Papers 7667, C.E.P.R. Discussion Papers.
  74. Frédéric Gaspart, 2003. "A general concept of procedural fairness for one-stage implementation," Social Choice and Welfare, Springer, vol. 21(2), pages 311-322, October.
  75. Heifetz, Aviad & Segev, Ella & Talley, Eric, 2007. "Market design with endogenous preferences," Games and Economic Behavior, Elsevier, vol. 58(1), pages 121-153, January.
  76. Bartling, Björn, 2011. "Relative performance or team evaluation? Optimal contracts for other-regarding agents," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 183-193, August.
  77. Ramarao Desiraju & David E. M. Sappington, 2007. "Equity and Adverse Selection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 285-318, 06.
  78. Pierpaolo Battigalli & Martin Dufwenberg, 2007. "Guilt in Games," American Economic Review, American Economic Association, vol. 97(2), pages 170-176, May.
  79. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  80. Peter Norman, 2004. "Efficient Mechanisms for Public Goods with Use Exclusions," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1163-1188.
  81. Dohmen, Thomas J. & Falk, Armin & Huffman, David & Sunde, Uwe, 2009. "Homo Reciprocans: Survey Evidence on Behavioural Outcomes," Munich Reprints in Economics 20055, University of Munich, Department of Economics.
  82. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  83. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, vol. 1(1), pages 60-79, March.
  84. Caplin, Andrew & Eliaz, Kfir, 2003. " AIDS Policy and Psychology: A Mechanism-Design Approach," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 631-46, Winter.
  85. Desiraju, Ramarao & Sappington, David E.M., 2007. "Equity and adverse selection with correlated costs," Economics Letters, Elsevier, vol. 95(3), pages 402-407, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kls:series:0053. 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: (Peter Werner)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.