An Introduction to the Theory of Mechanism Design

“…Also, a buyer always ends up with a nonnegative utility when participating in a sequential posted-price mechanism. Thus, by the revelation principle (see, e.g., Börgers (2015)), a sequential posted-price mechanism can be straightforwardly converted into a dominant strategy IC and ex-post IR direct-revelation mechanism that achieves the same expected revenue.…”

Section: Definition 24mentioning

confidence: 99%

Sequential Posted-Price Mechanisms with Correlated Valuations

Adamczyk

Borodin

Ferraioli

et al. 2017

ACM Trans. Econ. Comput.

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We study the revenue performance of sequential posted-price mechanisms and some natural extensions for a setting where the valuations of the buyers are drawn from a correlated distribution. Sequential posted-price mechanisms are conceptually simple mechanisms that work by proposing a "take-it-or-leave-it" offer to each buyer. We apply sequential posted-price mechanisms to single-parameter multiunit settings in which each buyer demands only one item and the mechanism can assign the service to at most k of the buyers.For standard sequential posted-price mechanisms, we prove that with the valuation distribution having finite support, no sequential posted-price mechanism can extract a constant fraction of the optimal expected revenue, even with unlimited supply. We extend this result to the case of a continuous valuation distribution when various standard assumptions hold simultaneously (i.e., everywhere-supported, continuous, symmetric, and normalized (conditional) distributions that satisfy regularity, the MHR condition, and affiliation). In fact, it turns out that the best fraction of the optimal revenue that is extractable by a sequential posted-price mechanism is proportional to the ratio of the highest and lowest possible valuation.We prove that a simple generalization of these mechanisms achieves a better revenue performance; namely, if the sequential posted-price mechanism has for each buyer the option of either proposing an offer or asking the buyer for its valuation, then a Ω(1/ max{1, d }) fraction of the optimal revenue can be extracted, where d denotes the degree of dependence of the valuations, ranging from complete independence (d = 0) to arbitrary dependence (d = n − 1).

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“…Other contributions to the literature on robust mechanism design include Ledyard (1978), Gershkov et al (2013) and Börgers (2013).…”

Section: Related Literaturementioning

confidence: 99%

Robust mechanism design and social preferences

Bierbrauer

Ockenfels

Pollak

et al. 2017

Journal of Public Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may Robust Mechanism Design and Social Preferences AbstractWe study a classic mechanism design problem: How to organize trade between two privately informed parties. We characterize an optimal mechanism under selfish preferences and present experimental evidence that, under such a mechanism, a non-negligible fraction of individuals deviates from the intended behavior. We show that this can be explained by models of social preferences and introduce the notion of a social-preference-robust mechanism. We characterize an optimal mechanism in this class and present experimental evidence that it successfully controls behavior. We finally show that this mechanism is more profitable only if deviations from selfish behavior are sufficiently frequent.JEL-Code: C920, D030, D820.

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An Introduction to the Theory of Mechanism Design

Cited by 275 publications

References 16 publications

A Full Characterization of All Deterministic Dominant Strategy Incentive Compatible, Ex-Post Individually Rational, and Ex-Post Budget Balanced Direct Mechanisms in the Public Good Provision Problem with Independent Private Values

A Full Characterization of All Deterministic Dominant Strategy Incentive Compatible, Ex-Post Individually Rational, and Ex-Post Budget Balanced Direct Mechanisms in the Public Good Provision Problem with Independent Private Values

Sequential Posted-Price Mechanisms with Correlated Valuations

Robust mechanism design and social preferences

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