Strategy-proofness and Markets
If a market is considered to be a social choice function, then the domain of admissible preferences is restricted and standard social choice theorems do not apply. A substantial body of analysis, however, strongly supports the notion that attractive strategy-proof social choice functions do not exist in market settings. Yetprice theory, which implicityly assumes the strategy-proofness of markets, performs quie well in describing many real markets. This paper resolves this paradox in two steps. First, given that a market is not strategy-proof, it should be modeled as a Bayesian game of incomplete information. Second, a double auction market, which is perhaps the simplest operationalization of supply and demand as a Bayesian game, is approximately strategy-proof even when the number of traders on each side of the market is quite moderate.
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- Barbera, S. & Sonnenschein, H., 1988.
"Voting By Quota And Committee,"
UFAE and IAE Working Papers
95-88, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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"Voting by Committees,"
Cowles Foundation Discussion Papers
941, Cowles Foundation for Research in Economics, Yale University.
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Econometric Society, vol. 63(1), pages 51-87, January.
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- Gibbard, Allan, 1978. "Straightforwardness of Game Forms with Lotteries as Outcomes," Econometrica, Econometric Society, vol. 46(3), pages 595-614, May.
- Gibbard, Allan, 1973. "Manipulation of Voting Schemes: A General Result," Econometrica, Econometric Society, vol. 41(4), pages 587-601, July.
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