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Competing Mechanisms: Theory and Applications in Directed Search Markets

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  • Seungjin Han

Abstract

This paper studies competing mechanism problems in directed search markets in which multiple principals (e.g., sellers) simultaneously post trading mechanisms to compete for trading opportunities while multiple agents (e.g., buyers) select any particular principal for trading via directed search. Principals can deviate to any arbitrary mechanisms. When a principal's deviation becomes evident from agents' messages, the equilibrium mechanisms posted by non-deviating principals allow them to punish a deviating principal with dominant strategy incentive compatible (DIC) direct mechanisms only in a class of DIC direct mechanisms that are available for punishment in a game. This makes equilibrium analysis tractable and induces rich applications. The theory provides a general characterization of the set of robust equilibrium allocations that are supportable in a game given a class of DIC direct mechanisms that principals can use to punish a deviating principal. Our equilibrium concept is applied to various competing mechanism problems (e.g., competing prices, competing auctions, competing ski-lift pricing, etc.).

Suggested Citation

  • Seungjin Han, 2015. "Competing Mechanisms: Theory and Applications in Directed Search Markets," Department of Economics Working Papers 2015-07, McMaster University, revised May 2016.
    • Handle: RePEc:mcm:deptwp:2015-07
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    File URL: http://socserv.mcmaster.ca/econ/rsrch/papers/archive/2015-07.pdf
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    References listed on IDEAS

    as
    1. Han, Seungjin, 2015. "Robust competitive auctions," Economics Letters, Elsevier, vol. 136(C), pages 207-210.
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    More about this item

    Keywords

    competing mechanisms; directed search; robust equilibrium; competing auctions; competing ski-lift pricing;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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