Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150142
Authors: 
Mathevet, Laurent A.
Year of Publication: 
2010
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 5 [Year:] 2010 [Issue:] 3 [Pages:] 403-443
Abstract: 
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.
Subjects: 
Implementation
mechanisms
learning
strategic complementarities
supermodular games
JEL: 
C72
D78
D83
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article

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