# Questions tagged [mechanism-design]

Mechanism design is a field in economics and game theory that takes an engineering approach to designing economic mechanisms or incentives, toward desired objectives, in strategic settings, where players act rationally.

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### Auction theory reference request

I am interested in finding the literature or at least some references (books, journal papers etc.) for the following problem: Suppose there is an auction with one seller and one buyer. The seller ...
53 views

### Allocating chores using auctions

I live in a student dorm with 16 people and we share a kitchen. Every week someone has to clean the kitchen. Right now we just take turns in a way determined by the numbers of our respective rooms. ...
16 views

### Incentive compatibilty conditions for multi-item auctions

In this paper by Myerson on optimal single item auctions, the incentive compatibility condition is shown to be equivalent to the following simpler conditions on the auction - (i) the allocation ...
17 views

### Market mechanism design and decision rule based on a graph

I am doing a micro course right now. I came upon this question while studying and I was hoping for help/hints on how to solve it or what resources to consult to better understand the topic. the ...
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### Is a resource allocation problem in mechanism design a direct or indirect mechanism?

From L. Hurwicz's work and book "Designing Economic Mechanisms," I cannot figure out whether a resource allocation problem in mechanism design is a direct or indirect mechanism. I think the answer is ...
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### Renewal of multiple notions of value in contemporary (green, public good) economy and are there general game theories?

https://en.wikipedia.org/wiki/Exchange_value mentions 4 notions of value: economic value, exchange value, use value, price. But this article also mentions that these are Marxian concepts and the ...
50 views

### Cardinal Voting, Incentive Compatibility and Secrecy

Is there any available/feasible/practical way to make a Cardinal Voting both Incentive Compatible and Secret? A method to make a cardinal voting incentive compatible would be to force them to put ...
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### Questions regarding 'Efficient Trade with Interdependent Values' by Marek Pycia and Peng Wang,2015

This question is with reference to the paper 'Efficient Trade with Interdependent Values' by Marek Pycia and Peng Wang,2015(See here). At page no. 4 of the paper, the authors describe $v_i$ as the ...
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### How to determine the first bid for a Double-Bounded Dichotomous-Choice Contingent Valuation model?

I'm very new to the survey format of double-bounded dichotomous-choice for contingent valuation, so I apologize for my naive question. Could you please let me know how a researcher decides the initial ...
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### Designing the payment function in Mechanism Design problems

Suppose we have a network in which agents request access to its resources. Thus we have a resource allocation problem. Ideally, we want to incentivize agents to send social-welfare supporting ...
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### Going from DRMs to Indirect Mechanisms

I have recently started studying mechanism design (after having taken a basic graduate micro course) through Borgers' 'Introduction to the theory of mechanism design'. I was wondering if people are ...
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### Price of Anarchy when the cost is to society and not to the selfish agents

Let's say there is some scarce resource and several agents compete to access this resource. Each agent is able to convert the resources into products that are beneficial to society, but each agent has ...
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### Is a proft tax not distorting unless we know the opportunity cost?

A Profit tax where we actually know the Entire Cost Function Including the Opportunity cost(Time, Incommodation, best alternative for the easily monetized resources etc) is not distorting. But the ...
71 views

### Direct revelation mechanism's sets of strategies and types

Mas-Colell, Whinston and Green in Microeconomic Theory describe the direct revelation mechanism as it follows: The employed notation is the following: $θ_i$: Player i's type $Θ_i$: Set of types for ...
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### Difference between social choice function and mechanism outcome function

Mas-Colell, Whinston and Green's Microeconomic Theory (3rd edition) defines the social choice function as the following: Later, the mechanism outcome function is also defined: The relationship ...
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### Bayesian incentive compatibility for a general distribution

Suppose there are $n$ bidders and a seller. Bidder $i$ observes a private signal $v_i$ from $[a,b]$. Let $\mathcal{X} = \times_{i=1}^n[a,b]$ Each bidder is represented by a random variable, that has a ...
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### Non-Bayesian Mechanism Design

Suppose we have a mechanism where a finite number of agents possess private information that is not drawn from a probability distribution. The agents' types are given and fixed but agents only know ...
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### Is a combination of Political economics and Game theory possible and beneficial?

By Political economics I do not mean the "economical" advice given by some people(see the Wealth of Nations by Adam Smith) but rather the heavily mathematized subfield of Economics studying and trying ...
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### AGV mechanism and Individual rationality

I have the following question. I consider AGV mechanism which is as follows: $u_i(x,\theta_i) = v_i(k,\theta_i) + t_i$ is an utility function where $x = (k,t_1,...,t_n)$ vector of alternatives. There ...
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### Monotonicity of second price auctions with bidder-specific reserve prices

I am having difficulty understanding the problem below: Given CDFs $F_1, ..., F_n$, prove that the allocation rule of a second-price auction with bidder-specific reserve prices is monotone. The item ...
53 views

### Are there any studies, academic papers or articles that defy “common” knowledge", i.e that patents give an incentive for R&D to private business?

In Economic Growth and particularly dynamic optimization. My professor taught us that an intertemporal allocation is a dynamic optimum(Pareto Optimum) only if(necessary condition) at any given ...
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### Are direct mechanisms always truthful?

I am very new to mechanism design so I am a bit lost among the concepts, even the most basic ones. One thing that is not clear to me is the concept of direct mechanism and its relationship with the ...
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### Synonyms for One-to-One Matching Mechanisms

I am trying to find a more elegant usage of wording for one-to-one matching and I am need of some thoughts from others. Bilateral matching? Any help would be respected.
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### What is virtual valuation?

I’m reading through a textbook in auction design when it describes a term, virtual valuation $$\phi_i(v_i) = v_i - \frac{1 - F(v_i)}{f(v_i)}$$ where $f$ is the pdf of a bidders valuation and $F$ is ...
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### Help needed to understand proof in Myerson and Satterthwaite (1983)

The following image is an excerpt taken from Myerson and Satterthwaite's 1983 paper Efficient Mechanisms for Bilateral Trading: I know what the theorem is all about, all I need is some help with the ...
33 views

### Efficient social allocation awards item to the highest valuer in a sponsored search auction. Whom is it optimal for?

In mechanism design, for example in the case of a single item auction, we often assume that a socially efficient outcome is to allocate the good to the bidder with the highest valuation of that good. ...
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### Is Myerson's Lemma valid for piecewise linear allocation functions?

In Tim Roughgarden's fantastic course on Algorithmic Game Theory, he begins the course by introducing basic mechanism design, and Myerson's Lemma. He then proves that Myerson's Lemma is valid for ...
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### Do mechanisms always result in a series of strategic games being played out?

Mechanism design is an offshoot of game theory, and many call it "inverse game theory", since it involves the use of incentives to ensure that the end result of the game being played out is beneficial ...
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### What are some examples of indirect mechanisms that are not auctions? [duplicate]

I'd like to know if there are any examples of indirect mechanisms that are not auctions. Auctions seem like a very controlled environment. I'd like to see some examples of indirect mechanisms "out in ...
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### Is quadratic voting efficient in multiple winner elections?

Quadratic voting approximates efficiency for a large collective making a sequence of binary decisions. What if a group can take multiple actions? Say, for example, a series of decisions where 2 out of ...
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### Question on uncertainity

Please imagine that Nicole is uncertain of her future wealth. Her wealth in the bad state of the world is zero. Her wealth in the good state is $w>0$. Each state is initially equally likely. ...
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### Ex-post vs Ex-ante Budget Balance in Auctions

Have I understood this correctly? When I say my auction mechanism is ex-post budget balanced it means that in practice (I have done market simulations) and according to the results my mechanism is ...
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### Auction question

I’m studying on auction. But I couldn’t understand some questions about this topic. And I cannot solve such type questions. For example, I know that a set of symmetric and risk neutral bidders ...
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### Marginal Revenue Interpretation of Auctions

I'm reading Klemperer's survey on auction theory (pages 17-18) which discusses the relation between traditional microeconomic price theory and the revenue equivalence result. Firstly, I don't quite ...
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### How to improve the underperforming construction productivity by correcting its market failures?

Globally, labor-productivity growth in construction has averaged only 1 percent a year over the past two decades, compared with growth of 2.8 percent for the total world economy and 3.6 percent in the ...
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### Bayesian Mechanism vs Prior-free Mechanism

I have a double auction mechanism in which the valuations of the agents for the items are drawn from a known random distribution. To be precise, the valuations are the probability of each agent ...
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### Incentive compatibility: Weakly dominant strategy versus Nash equilibrium?

When it comes to proving that a mechanism e.g. auction is incentive compatible this is the approach I'm using: I break down all the cases that might happen if the agent reports an untruthful value to ...
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### What types of 'market mechanisms' are said to exist besides auctions?

The book Understanding Auctions states: The term auction covers a wide range of market mechanisms that are used to exchange products and services by determining who receives an item and how much is ...
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### A manifold of agents?

In contract theory and mechanism design, if the agents have one-dimensional characteristics, then they are usually considered as a contiuum on $\mathbb R$; if they have n-dimensional type, then they ...
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### VCG mechanism with a minimum payment threshold

Suppose that we want to find a socially-optimal allocation in the following setting: There are $n$ firms and $m$ workers. Each firm $i$ needs one worker and has value $v_i$ for having a worker (any ...
115 views

### Does the VCG algorithm work for any bundle valuation function?

Assume we have $n$ buyers of $|M|=m$ items in a combinatorial auction. So as we know, we can use the Vickrey-Clarke-Groves (VCG) algorithm to allocate bundles of items to buyers as best as possible. ...
113 views

### Incentive compatibility

I have a set of objects $A=\{a_1,a_2,a_3,\cdots,a_m\}$ and one player, who proposes a vector of valuations $t=(t_1~t_2~t_3~\cdots~t_m)$ for the $m$ objects. $T$ is the set of all such valuation types. ...
349 views

### Checking incentive compatibility of a mechanism

I was thrilled at seeing an interesting bidding system in an academic institutions. This bidding is for registration of courses. Each student is allocated some points based on her grade point(GPA). So,...
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### Allocation of an Indivisible Good

Two kids at school are arguing over who owns a cool video game cartridge, and the schoolteacher, a ruthlessly practical social planner who knows that kids can only enforce so much AND that the game is ...
2k views

### Code finding all stable matchings in one-to-one problem

Do you know of any publicly available code in python or R (or any other free high level language) that returns all the stable matchings for any one-to-one matching problem? Note: This is related but ...
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### What is the difference between contract theory and mechanism design?

Can someone explain the difference between contract theory and mechanism design?
Let $\theta_i$ be $i$'s private information about the state of the world, $\theta \in \Theta$, where $\theta = \times_i \theta_i$. Each agent reports $\hat{\theta_i}$ to a social planner, so that \$\...