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Stability and Implementation via Simple Mechanisms in the Complete Information Environments

  • Hitoshi Matsushima

    (Faculty of Economics, University of Tokyo)

This paper investigates implementation of social choice functions in the complete information environments. We construct particularly simple mechanisms named local direct mechanisms, which require each agent to make a single announcement about her own and neighbors' utility indices. We assume that each agent is boundedly rational in that she may announce any best reply, including disequilibrium messages, even if the others play a Nash equilibrium. We require that the honest message profile be stable in the global sense that it is reachable from every message profile and no other message profile is reachable from it. It is shown that with a minor restriction, every social choice function is virtually implementable. We provide naive models of adaptive dynamics whose convergence characterizes the static definition of stability. We also investigate several variants of the stability notion such as BR-stability, weak stability, and weak BR-stability.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2002/2002cf147.pdf
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-147.

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Length: 49 pages
Date of creation: Feb 2002
Date of revision:
Handle: RePEc:tky:fseres:2002cf147
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  1. Eric Maskin, 1998. "Nash Equilibrium and Welfare Optimality," Harvard Institute of Economic Research Working Papers 1829, Harvard - Institute of Economic Research.
  2. Sergiu Hart & Andreu Mas-Colell, 1996. "A simple adaptive procedure leading to correlated equilibrium," Economics Working Papers 200, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1996.
  3. Matsushima, Hitoshi, 1988. "A new approach to the implementation problem," Journal of Economic Theory, Elsevier, vol. 45(1), pages 128-144, June.
  4. Antonio Cabrales, . "Adaptive Dynamics and the Implementation Problem with Complete Information," ELSE working papers 009, ESRC Centre on Economics Learning and Social Evolution.
  5. Hitoshi Matsushima, 2001. "Stable Implementation," CIRJE F-Series CIRJE-F-128, CIRJE, Faculty of Economics, University of Tokyo.
  6. Palfrey, Thomas R & Srivastava, Sanjay, 1991. "Nash Implementation Using Undominated Strategies," Econometrica, Econometric Society, vol. 59(2), pages 479-501, March.
  7. Abreu, Dilip & Matsushima, Hitoshi, 1992. "Virtual Implementation in Iteratively Undominated Strategies: Complete Information," Econometrica, Econometric Society, vol. 60(5), pages 993-1008, September.
  8. Sefton, Martin & Yavas, Abdullah, 1996. "Abreu-Matsushima Mechanisms: Experimental Evidence," Games and Economic Behavior, Elsevier, vol. 16(2), pages 280-302, October.
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