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Process Manipulation in Unique Implementation

  • Hitoshi Matsushima

    (Faculty of Economics, University of Tokyo)

We incorporate social influence into implementation theory, and highlight the manner in which an informed agent feels guilty with regard to disobeying an uninformed principal's wishes. The degree of this feeling depends on the agent's expectation of others' behavioral modes. We demonstrate a method of process manipulation, through which the principal employs psychological tactics for incentivizing agents to announce information in keeping with his/her wishes. We indicate that with a version of incentive compatibility, the principal can implement any alternative that he/she wishes as the unique Nash equilibrium without employing any contractual devices. Each agent's psychological cost would be negligible.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2012/2012cf870.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-870.

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Length: 20 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:tky:fseres:2012cf870
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  1. Matsushima, Hitoshi, 2008. "Role of honesty in full implementation," Journal of Economic Theory, Elsevier, vol. 139(1), pages 353-359, March.
  2. Uri Gneezy, 2005. "Deception: The Role of Consequences," American Economic Review, American Economic Association, vol. 95(1), pages 384-394, March.
  3. Maskin, Eric, 1999. "Nash Equilibrium and Welfare Optimality," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 23-38, January.
  4. Eliaz, Kfir, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 589-610, July.
  5. Dutta, Bhaskar & Sen, Arunava, 2012. "Nash implementation with partially honest individuals," Games and Economic Behavior, Elsevier, vol. 74(1), pages 154-169.
  6. Martin J Osborne & Ariel Rubinstein, 2009. "A Course in Game Theory," Levine's Bibliography 814577000000000225, UCLA Department of Economics.
  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. Lombardi, Michele & Yoshihara, Naoki, 2012. "Natural Implementation with Partially Honest Agents," Discussion Paper Series 561, Institute of Economic Research, Hitotsubashi University.
  9. Hitoshi Matsushima, 2007. "Behavioral Aspects of Implementation Theory," CIRJE F-Series CIRJE-F-523, CIRJE, Faculty of Economics, University of Tokyo.
  10. Kartik, Navin & Tercieux, Olivier, 2012. "Implementation with evidence," Theoretical Economics, Econometric Society, vol. 7(2), May.
  11. Kfir Eliaz, 2002. "Fault Tolerant Implementation," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 589-610.
  12. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
  13. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
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