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We can think of mechanism design as the engineering part of economic theory. Most of the time in economics, we look at existing economic institutions and try to explain or predict the outcomes that those institutions generate. This is called the positive or predictive part of economics. Perhaps 80% to 90% of economists do positive economics.
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2. A General Mechanism Design Setting 3. Dominant Strategy Mechanism Design 3.1 Dominant Strategies 3.2 Direct Mechanisms and the Revelation Principle 3.3 The Gibbard-Satterthwaite Theorem 3.4 Single Peaked-Preferences and Other Restricted Domains ⁄This survey is written to conform to the strict textbook-like style of the EOLSS. An addendum is
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- P A
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- x. second-degree price discrimination via quality distortions
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or rejects. Rejection “ends” game. If accepts, game ensues as A dictated by contract. (b) Example: Saturday-night restrictions = airline; = passenger. P A is either tourist or business traveller ( or ). T B two kinds of tickets, restricted or unrestricted ( and ). U iv. ’s value for a ticket a function of type of traveller, ,
Both types of travellers maximize their surplus, ( )
different classes of service “pro” versions versus other versions of software luxury vs. no luxury features on cars, stereos, etc. (c) The problem more generally Two players are involved in a strategic relationship; that is, each player’s well being depends on the play of the other player. One player is better informed (or will become better inform...
(c) Interpretation: is producing units of some good desired by .
(e) A contract between and is an agreement on and a payment
from to of ; yielding utilities ( ) and ( ), respectively.
m (e) revelation principle. For any general contract ( ) and as-
sociated Bayesian equilibrium, there exists a direct-revelation mecha-nism such that the associated truthful Bayesian equilibrium generates the same equilibrium outcome as the general contract. Proof: The proof of the revelation principle is standard but infor-mative. A Bayesian equilibrium of the game ( ) is a pair of M, N, σ strategies ( ).1 Let ...
Using the definition of ˆ(), this means that σ · ( [ ( ) ] )
but this means the agent prefers to play ( ) instead of ( ) in mθ m θ the original mechanism against the principal’s equilibrium strategy . This, however, can’t be since ( ) is an equilibrium best response
on the fundamentals of linkage design: physics, synthe-sis and robust design & manufacturing.2 1. An awesome book containing many great mechanism ideas is N. Sclater and N. Chironis, Mecha-nisms and Mechanical Devices, McGraw-Hill, New York, 2001 2. If the design of machines is of real interest, you should take a course on the design of mechanisms
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The mechanism design literature of the last thirty years has been a huge success on a number of different levels. There is a beautiful theoretical literature that has shown how a wide range of institutional design questions can be formally posed as mechanism design problems with a common structure. Elegant characterizations of optimal mecha-
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Mar 9, 2016 · Mechanism design is a subfield of microeconomics and game theory. It considers how to implement good system-wide solutions to problems that involve multiple self-interested agents [ 1 ]. In 2007, the Nobel Prize in economics was awarded to Leonid Hurwicz, Eric Maskin, and Roger Myerson “for having laid the foundations of mechanism design ...
