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22
Truthful Mechanisms for OneParameter Agents
"... In this paper, we show how to design truthful (dominant strategy) mechanisms for several combinatorial problems where each agent’s secret data is naturally expressed by a single positive real number. The goal of the mechanisms we consider is to allocate loads placed on the agents, and an agent’s sec ..."
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Cited by 192 (4 self)
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In this paper, we show how to design truthful (dominant strategy) mechanisms for several combinatorial problems where each agent’s secret data is naturally expressed by a single positive real number. The goal of the mechanisms we consider is to allocate loads placed on the agents, and an agent’s secret data is the cost she incurs per unit load. We give an exact characterization for the algorithms that can be used to design truthful mechanisms for such load balancing problems using appropriate side payments. We use our characterization to design polynomial time truthful mechanisms for several problems in combinatorial optimization to which the celebrated VCG mechanism does not apply. For scheduling related parallel machines (QjjCmax), we give a 3approximation mechanism based on randomized rounding of the optimal fractional solution. This problem is NPcomplete, and the standard approximation algorithms (greedy loadbalancing or the PTAS) cannot be used in truthful mechanisms. We show our mechanism to be frugal, in that the total payment needed is only a logarithmic factor more than the actual costs incurred by the machines, unless one machine dominates the total processing power. We also give truthful mechanisms for maximum flow, Qjj P Cj (scheduling related machines to minimize the sum of completion times), optimizing an affine function over a fixed set, and special cases of uncapacitated facility location. In addition, for Qjj P wjCj (minimizing the weighted sum of completion times), we prove a lower bound of 2 p 3 for the best approximation ratio achievable by a truthful mechanism.
Learning Dynamics In Mechanism Design: An Experimental Comparison Of Public Goods Mechanisms
, 2003
"... In a repeatedinteraction public goods economy, dynamic behavior may affect the efficiency of various mechanisms thought to be efficient in oneshot games. Inspired by results obtained in previous experiments, the current paper proposes a simple best response model in which players' beliefs are ..."
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Cited by 13 (3 self)
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In a repeatedinteraction public goods economy, dynamic behavior may affect the efficiency of various mechanisms thought to be efficient in oneshot games. Inspired by results obtained in previous experiments, the current paper proposes a simple best response model in which players' beliefs are functions of previous strategy profiles. The predictions of the model are found to be highly consistent with new experimental data from five mechanisms with various types of equilibria. Interesting properties of a 2parameter VickreyClarkeGroves mechanism help to draw out this result. The simplicity of the model makes it useful in predicting dynamic stability of other mechanisms.
2006): “Optimal StateContingent Regulation Under Limited Liability
 RAND Journal of Economics
"... We consider an optimal regulation model in which the regulated firm’s production cost is subject to random, publicly observable shocks. The distribution of these shocks is correlated with the firm’s cost type, which is private information. The regulator designs an incentivecompatible regulatory sch ..."
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Cited by 6 (0 self)
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We consider an optimal regulation model in which the regulated firm’s production cost is subject to random, publicly observable shocks. The distribution of these shocks is correlated with the firm’s cost type, which is private information. The regulator designs an incentivecompatible regulatory scheme, which adjusts itself automatically ex post given the realization of the cost shock. We derive the optimal scheme, assuming that there is an upper bound on the financial losses that the firm can sustain in any given state. We first consider a twotype, twostate case, and then extend the results to the case of a continuum of firm types and an arbitrary finite number of states. We show that the firstbest allocation can be implemented if the state of nature conveys enough information about the firm’s type and/or the maximal loss that the firm can sustain is sufficiently large. Otherwise, the solution is characterized by classical secondbest features. 1.
Supermodular Bayesian Implementation: Learning and Incentive Design
, 2007
"... This paper examines the problem of designing mechanisms with learning properties that help guide agents to play desired equilibrium strategies. I introduce the concept of supermodular implementation where the mechanisms are constructed to induce supermodular games, i.e games with strategic complemen ..."
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Cited by 5 (1 self)
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This paper examines the problem of designing mechanisms with learning properties that help guide agents to play desired equilibrium strategies. I introduce the concept of supermodular implementation where the mechanisms are constructed to induce supermodular games, i.e games with strategic complementarities. These supermodular mechanisms receive the valuable characteristics of supermodular games such as their learning properties. A social choice function (scf) is supermodular implementable if it is implementable with a supermodular mechanism. In quasilinear environments, I prove that if a scf 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 scf. If the scf also satisfies some efficiency criterion, then I show that it is supermodular implementable with budgetbalancing transfers. Then I address the multiple equilibrium problem. I provide general sufficient conditions for a scf to be implementable with a supermodular mechanism whose equilibria are contained in the smallest interval among all supermodular mechanisms. I also give conditions for supermodular implementability in unique equilibrium. Finally, the paper deals with general preferences by providing a Supermodular
The StrategyProof Provision of Public Goods under Congestion and Crowding Preferences
, 2002
"... We examine the strategyproof provision of excludable public goods when agents care not only about the level of provision of a public good, but also the number of consumers. We show that on such domains strategyproof and efficient social choice functions satisfying an outsider independence conditio ..."
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Cited by 3 (1 self)
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We examine the strategyproof provision of excludable public goods when agents care not only about the level of provision of a public good, but also the number of consumers. We show that on such domains strategyproof and efficient social choice functions satisfying an outsider independence condition must be rigid in that they must always assign a fixed number of consumers, regardless of individual desires to participate. The fixed number depends on the attitudes of agents regarding group size  being small when congestion effects dominate (individuals prefer to have fewer other consumers) and large when cost sharing effects dominate (agents prefer to have more consumers). A hierarchical rule selects which consumers participate and a variation of a generalized median rule to selects the level of the public good. Under heterogeneity in agents' views on the optimal number of consumers, strategyproof, efficient, and outsider independent social choice functions are much more limited and in an important case must be dictatorial.
JeanJacques Laffont: A Look Back
 Journal of the European Economic Association
, 2004
"... JeanJacques Laffont, economist extraordinaire and visionary founder of the Institut de l’Economie Industrielle ( IDEI) in Toulouse, died at his home in Colomiers on May 1 after a valiant battle against cancer. He was fiftyseven years old. Laffont is remarkable for having had three distinct profess ..."
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Cited by 2 (0 self)
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JeanJacques Laffont, economist extraordinaire and visionary founder of the Institut de l’Economie Industrielle ( IDEI) in Toulouse, died at his home in Colomiers on May 1 after a valiant battle against cancer. He was fiftyseven years old. Laffont is remarkable for having had three distinct professional identities and for performing at the very highest level in all of them. First, he was one of the great economists of our time. He was instrumental in transforming public economics, regulatory economics, and the economics of organizations into fields of study that put primary emphasis on conflicts in incentives. In a dozen books and many scores of articles, he examined these conflicts, which arise when the objectives of a society, industry, or organization differ from those of the agents—e.g., people or firms—who belong to them. Second, as an institution builder, Laffont assembled a formidable array of economic talent at IDEI, now one of the finest educational and research groups in the world. Somehow Laffont overcame the gravitational attraction of Paris and brought this talent to Toulouse, then a relative backwater. On a continent where universities are
Mechanism Design with Bilateral Contracting
, 2007
"... We consider a setting where a principal cannot commit to a centralized grandmechanism with all his agents but can only sign bilateral contracts with each of them. The principal can manipulate what he learns by contracting with an agent when dealing with others. Introducing this possibility for mani ..."
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Cited by 1 (0 self)
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We consider a setting where a principal cannot commit to a centralized grandmechanism with all his agents but can only sign bilateral contracts with each of them. The principal can manipulate what he learns by contracting with an agent when dealing with others. Introducing this possibility for manipulations simplifies significantly optimal mechanisms. It restores both the continuity of the principal’s and the agents’ payoffs and that of the optimal mechanism with respect to the information structure. Still, correlation remains useful to better extract the agents’ information rent. A Revelation Principle with bilateral contracting characterizes the set of implementable allocations by means of simple nonmanipulability constraints. Equipped with this tool, we derive optimal nonmanipulable mechanisms in various environments.
Incentive Compatible Market Design with an Application to Matching with Wages ∗
, 2010
"... Abstract: This paper studies markets for heterogeneous goods using mechanismdesign theory. For each combination of desirable properties, I derive an assignment process with these properties in the form of a corresponding directrevelation game, or I show that it does not exist. Each participant’s pr ..."
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Abstract: This paper studies markets for heterogeneous goods using mechanismdesign theory. For each combination of desirable properties, I derive an assignment process with these properties in the form of a corresponding directrevelation game, or I show that it does not exist. Each participant’s preferences are quasilinear in money, and depend upon the allocation that he gets — thus, a participant’s privately known ‘type ’ is multidimensional. The key properties are individual rationality, incentive compatibility, budget balance, efficiency, and stability against coalitional deviations. The main results characterize mechanisms that are ex post incentive compatible in combination with other properties.