Finite supermodular design with interdependent valuations

Laurent Mathevet, Ina Taneva

    Research output: Contribution to journalArticle

    Abstract

    This paper studies supermodular mechanism design in environments with arbitrary (finite) type spaces and interdependent valuations. In these environments, the designer may have to use Bayesian equilibrium as a solution concept, because ex-post implementation may not be possible. We propose direct (Bayesian) mechanisms that are robust to certain forms of bounded rationality while controlling for equilibrium multiplicity. In quasi-linear environments with informational and allocative externalities, we show that any Bayesian mechanism that implements a social choice function can be converted into a supermodular mechanism that also implements the original decision rule. The proposed supermodular mechanism can be chosen in a way that minimizes the size of the equilibrium set, and we provide two sets of sufficient conditions to this effect. This is followed by conditions for supermodular implementation in unique equilibrium.

    Original languageEnglish (US)
    Pages (from-to)327-349
    Number of pages23
    JournalGames and Economic Behavior
    Volume82
    DOIs
    StatePublished - Nov 2013

    Keywords

    • Implementation
    • Learning
    • Mechanisms
    • Multiple equilibrium problem
    • Strategic complementarities
    • Supermodular games

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

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