Designing Economic Mechanisms

Abstract

A mechanism is a mathematical structure that models institutions through which economic activity is guided and coordinated. There are many such institutions; markets are the most familiar ones. Lawmakers, administrators, and officers of private companies create institutions in order to achieve desired goals. They seek to do so in ways that economize on the resources needed to operate the institutions and that provide incentives to induce the required behavior. This book presents systematic procedures for designing mechanisms that achieve specified performance and economize on the resources required to operate the mechanism, i.e., informationally efficient mechanisms. Our systematic design procedures can be viewed as algorithms for designing informationally efficient mechanisms. Most of the book deals with these procedures of design. Beyond this, given a mechanism that implements a goal function in Nash equilibrium, our algorithm constructs a decentralized, informationally efficient mechanism that implements that goal function in correlated equilibrium. Leonid Hurwicz is Regents' Professor of Economics Emeritus at the University of Minnesota. Internationally renowned for his pioneering research on economic theory, particularly in the areas of mechanism and institutional design and mathematical economics, he received the national Medal of Science in 1990. A member of the National Academy of Sciences and the American Academy of Arts and Sciences, Professor Hurwicz is a former President and Fellow of the Econometric Society. The recipient of six honorary doctorates, he serves on the editorial board of several journals and coedited and contributed to two collections for Cambridge University Press,

Game theory model for the development of optimal strategy towards innovative products manufacturing at the enterprise

“…In order to define the win of the enterprise for the output and sales of products according to calculated strategies, we will use the correlation (14). Substitution of the parameters values mentioned before in correlation (14) allows to find the game value for the company (income for the sales of improved product unit), which in 2013 equaled 2120.79 UAH and in 2015 decreased to 1989.3 UAH.…”

What Mechanism Design Theorists Had to Say About Laboratory Experimentation in the Mid-1980s

“…As a result, the theoreticallyoriented economists affiliated with the MEDS and the CMS-EMS at Northwestern in the 1970s through the early 1980s became "a virtual who's who of mechanism design, auctions, and applied game theory" (321), and one cannot but agree that the MEDS "was a very special place and became responsible for much of the influence of game theory on economics" (321). 8 Of course, it was Reiter-"'the intellectual godfather of the research culture at the Kellogg School'" 9 (Robert Magee in Golosinski 2008, 240) who continued his collaboration with Hurwicz (see Hurwicz and Reiter 2006)-that played a foundational role in the creation of this remarkable place.…”

Improving Software Development Process through Economic Mechanism Design

“…to satisfy the desired conditions (e.g. control and coordinate the flow of the economic activity) [30]. These rules can be used for revealing true preferences of self interested actors, optimizing usage of resources, exchanging information or coordinating economic actors [31].…”

“…Hurwicz [30] introduces the concept of economic mechanisms to model organizations where participants communicate, and exchange information with each other. Further, he coined the term incentive compatibility which ensures that self-interested individuals can be motivated to reveal their true preferences and their private information.…”