Abstract
Robert Wilson criticizes applied game theory's reliance on common-knowledge assumptions. In reaction to Wilson's critique, the recent literature of mechanism design has adopted the goal of finding detail-free mechanisms in order to eliminate this reliance. In practice this has meant restricting attention to simple mechanisms such as dominant-strategy mechanisms. However, there has been little theoretical foundation for this approach. In particular it is not clear the search for an optimal mechanism that does not rely on common-knowledge assumption would lead to simpler mechanisms rather than more complicated ones. This paper tries to fill the void. In the context of an expected revenue maximizing auctioneer, we investigate some foundations for using simple, dominant-strategy auctions.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 447-476 |
| Number of pages | 30 |
| Journal | Review of Economic Studies |
| Volume | 74 |
| Issue number | 2 |
| DOIs | |
| State | Published - Apr 2007 |
Funding
Thus,foranyµ∈M(ν),thereexistsamechanismΓ(µ)∈ΨsuchthatRµ(Γ(µ))−ΠD(ν)>0,andthemapping µ′→Rµ′(Γ(µ))−ΠD(ν)iscontinuousatthepointµ′=µ.WecanhenceapplyLemma10,takingK=M(ν)and F={R(·)(Γ)−ΠD(ν):Γ∈Ψ}. ‖ Acknowledgements. Thanks to Larry Epstein, Stephen Morris, and Balasz Szentes for discussions. The authors also thank the Editor and two anonymous referees for helpful suggestions for revising the paper. Support from the National Science Foundation under grant #SES 99-85462 to author Jeffrey C. Ely is gratefully acknowledged.
ASJC Scopus subject areas
- Economics and Econometrics