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T-Space at The University of Toronto Libraries >
Theoretical Economics >
Volume 5, Number 3 (September 2010) >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1807/27194

Title: Supermodular mechanism design
Authors: Laurent A. Mathevet; Department of Economics, University of Texas, Austin
Keywords: Implementation, mechanisms, learning, strategic complementarities, supermodular games
C72, D78, D83
Issue Date: 22-Sep-2010
Publisher: Theoretical Economics
Citation: Theoretical Economics; Vol 5, No 3 (2010)
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/] This paper introduces a mechanism design approach that allows dealing with the multiple equilibrium problem, using mechanisms that are robust to bounded rationality. This approach is a tool for constructing supermodular mechanisms, i.e. mechanisms that induce games with strategic complementarities. In quasilinear environments, I prove that if a social choice function can be implemented by a mechanism that generates bounded strategic substitutes - as opposed to strategic complementarities - then this mechanism can be converted into a supermodular mechanism that implements the social choice function. If the social choice function also satisfies some efficiency criterion, then it admits a supermodular mechanism that balances the budget. Building on these results, I address the multiple equilibrium problem. I provide sufficient conditions for a social choice function to be implementable with a supermodular mechanism whose equilibria are contained in the smallest interval among all supermodular mechanisms. This is followed by conditions for supermodular implementability in unique equilibrium. Finally, I provide a revelation principle for supermodular implementation in environments with general preferences.
URI: http://hdl.handle.net/1807/27194
Other Identifiers: http://econtheory.org/ojs/index.php/te/article/view/20100403
Rights: Authors who publish in <i>Theoretical Economics</i> will release their articles under the <a href="http://creativecommons.org/licenses/by-nc/2.5/">Creative Commons Attribution-NonCommercial license</a>. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given.
Appears in Collections:Volume 5, Number 3 (September 2010)

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