A mechanism is robust individually rational for estimated bidder distribution and consistent set of distributions if for all. It discusses joint work of the two of us with each other and with coauthors hanming fang, moritz. We show that, under some conditions, distortions in the optimal mechanism are decreasing in types. We show experimentally that this new class of mechanisms can significantly outperform traditional mechanism design techniques when the mechanism designer has an estimate of the distribu. Dec 16, 2009 economists analysis of mechanism design under incomplete information relies on strong assumptions about economic agents beliefs and common knowledge of those beliefs. Robust mechanism design, the study of optimal mechanisms in settings where the designer has less information about the beliefs of the agents, is the natural next step in the evolution of this field. Robust mechanism design, social preferenes,c bilateral adert jel classi cation. Robust mechanism design setephen morriseco512 lectures summary by n. We ask when ex post implementation is equivalent to.
Distributionally robust mechanism design optimization online. One can view privacy concerns as a form of strategic play. Bergemann, dirk and morris, stephen edward, robust mechanism design may 2003. Robustness and endogenous types 5 another body of the literature studies the design of ef. Foreword by eric maskin nobel laureate in economics, 2007. We relax this assumption by studying implementation on richer type spaces. Non robust models to illustrate some of the motivation for robust modeling in mechanism design, it will help to begin with a few examples of non robust mechanisms at the core of the traditional canon. An introduction to robust mechanism design brings together and presents a number of results on the theme of robust mechanism design and robust implementation that the authors have been working on in the past decade. Much work in mechanism design assumes smaller type spaces than the universal. Apr 27, 2018 the robustness property of the optimal mechanism imposes restrictions on the principals expost payoff function. Robust mechanism design responds to the concerns from various aspects, and to different degrees.
Introduction when traders from the ottoman empire rst brought tulip bulbs to holland in the seventeenth century, the combination of a limited supply and a rapidly increasing popularity led to highly nonstationary and volatile prices. The key aspect of robust mechanism design as initiated by bergemann and morris 2005, and the wilson 1987doctrine more generally, is relaxing the implicit common knowledge assumption to obtain. The relevance of social preferences robustness is confirmed by laboratory experiments. A nash equilibrium of such game will then correspond to the robust mechanism and the worstcase distribution. The agents perceive the ensemble of all bidder values as a random vector governed by an ambiguous probability distribution, which belongs to a commonly. This volume brings together the collected contributions on the theme of robust mechanism design and robust implementation that dirk bergemann and stephen morris have been working on for the past decade. Robust mechanism design robust incentive compatibility.
Whereas game theory takes the rules of the game as a given and makes predictions about the behavior of strategic players, the theory of mechanism design goes a step further and selects the optimal rules of the game. We propose an axiomatic approach to study the superior performance of mechanisms with obviously dominan. We study a mechanism design problem in which an indivisible good is auctioned to multiple bidders for each of whom it has a private value that is unknown to the seller and the other bidders. Robust mechanism design and social preferences sciencedirect. The mechanism design literature assumes too much common knowledge of the environment among the. This talk will survey an approach to mechanism design that aims to relax those assumptions and thus derives more robust mechanisms. Robust mechanism design of exchange pavel andreyanov and tomasz sadzik, ucla july 25th, 2017 abstract we provide a robust priorfree strategic foundation for the walrasian equilibrium. The subject of this paper is optimal and robust mechanism design in the classic model of interdependent values introduced by milgrom and weber 1982. Robust mechanism design, gibbardsatterthwaite theorem. This series of lecture notes intend to introduce the new concept of robust mechanism design recently proposed by a group of researchers in csail. Distributionally robust mechanism design management science.
A optimal and robust mechanism design with interdependent. The model of interdependent values is not only of economic importance in itself, but also sheds new light on the inherent tradeoff between revenue maximization and robustness in the design. A social choice functionfsolves the relaxed problem of robust mechanism design if and only if it has the following properties. Design mec hanism design is the sub eld of micro economics and game theory that considers ho w to implemen t go o d systemwide solutions to problems that in v olv em ultiple selfin terested agen ts, eac h with priv ate information ab out their preferences.
Pdf this essay is the introduction for a collection of papers by the two of us on robust mechanism design to be published by world scientific. Mechanism design has been one of the great successes of economic theory in the last 30 years. On the futility of dynamics in robust mechanism design. Robust mechanism design and dominant strategy voting rules. This work examines the implications of relaxing the strong informational assumptions that drive much of the mechanism design.
Consider the informational assumptions of a standard bayesian auction environment, where bidders have privatelyknown information. Non robust models to illustrate some of the motivation for robust modeling in mechanism design, it will help. Robust mechanism design by dirk bergemann overdrive. This work examines the implications of relaxing the strong informational assumptions that drive much of the mechanism design literature. Transmission ratio based analysis and robust design of.
The relationship to priorfree optimal mechanism design in the computer science. Introduction in this paper, we consider the design of voting rules from the perspective of the theory of robust mechanism design. Robust mechanism design, cowles foundation discussion papers 1421r, cowles foundation for research in economics, yale university, revised apr 2004. The bidders all know the probability distribution of the. Judicial mechanism design ron siegel and bruno strulovici august 2019 abstract this paper studies the design of welfaremaximizing criminal judicial processes. This mechanism design algorithm is primarily targeted at applications with few bidders, or thin markets, due to exponential scaling in the number of bidders. In the classic formulation of a moral hazard model e. Robust mechanism design of exchange uchicago economics. The mechanism design literature assumes too much common knowledge of the environment among the players and planner. Contract theory, mechanism design, nonbayesian modeling, robustness, uncertainty, worstcase. Robustness in mechanism design a second goal of this paper is the design of robust mechanisms. Antic incomplete information environments can be modeled as bayesian games where there is common knowledge of each players type space and each types beliefs over types of other players. We relax this assumption by studying implementation on richer type spaces, with more higher order uncertainty. Robust mechanism design with correlated distributions.
Incomplete information environments can be modeled as bayesian. Lecture notes mechanism design simon board and moritz meyertervehn october 27, 2011 1 introduction adverse selection agents have private information, their type i examples. We compare optimal mechanisms for selfish agents and the optimal socialpreferencerobust mechanisms. An axiomatic approach by luyao zhang and dan levin. Robustness in mechanism design and contracting stanford. A relatively new economic theory, mechanism design studies the instrument itself as well. We study two classic challenges in mechanism design, the. Robust mechanism design by dirk bergemann, stephen morris. An introduction to robust mechanism design now publishers. Evaluating the conditions for robust mechanism design. Oct 11, 2005 the mechanism design literature assumes too much common knowledge of the environment among the players and planner. Robust mechanism design world scientific series in economic. On the futility of dynamics in robust mechanism design, santiago balseiro, anthony kim, daniel russo columbia university, motivation repeated interactions between a principal and an agent.
Robust mechanism design by dirk bergemann, stephen morris ssrn. Dirk bergemann1 and stephen morris2 1 department of economics, yale university, new haven, usa dirk. Pdf an introduction to the theory of mechanism design. Optimal restricted robust mechanism the optimal restricted robust mechanism given an estimated distribution. The robust mechanism entails exclusion of low types, distortions at the intensive margin and efficiency at the top. Finally, an earlier work of the first author of this paper considers a preliminary model for. We study two classic challenges in mechanism design, the bilateral trade problem and optimal income taxation. Robust mechanism design bergemann 2005 econometrica. Robust mechanism design by dirk bergemann, stephen.
We nally show that this mechanism is more pro table only if deviations from sel sh behavior are su ciently frequent. We identify properties of the generically unique optimal processes for two notions of welfare distinguished by their treatment of deterrence. Request pdf bounded rationality and robust mechanism design. How should a group of people organize themselves to ensure the best provision of public goods. A optimal and robust mechanism design with interdependent values. Lecture notes mechanism design simon board and moritz meyertervehn october 27, 2011 1 introduction adverse selection agents have private information, their type. We compare optimal mechanisms for selfish agents and the optimal socialpreference robust mechanisms. An introduction dirk bergemanny stephen morrisz august 2011 abstract this essay is the introduction for a collection of papers by the two of us on. We characterize an optimal mechanism in this class and present experimental evidence that it successfully controls behavior. Finally, we show experimentally that robust mechanisms can signi. Robust mechanism design of exchange bla pavel andreyanov and tomasz sadzik, ucla pavel andreyanov. We ask when ex post implementation is equivalent to interim or. In robust mechanism design 9, 2, 10, the players have arbitrary probabilistic belief hierarchies.
This monotonicity has relevant consequences for several applications discussed. These strong assumptions are relaxed in robust mechanism design bergemann and morris, 2005, automated mechanism design conitzer and sandholm, 2002, and recent work in using deep learning. Bergemann, dirk and morris, stephen edward, robust mechanism design april 2004. Our starting point is the classic result due to gibbard 1973. We relax this assumption by studying mechanism design on richer type spaces. We ask when ex post implementation is equivalent to interim or bayesian implementation for all possible type spaces. Robust mechanism design yale campuspress yale university. An introduction to the theory of mechanism design provides rigorous but accessible explanations of classic results in the theory of mechanism design, such as myersons theorem on expected revenue maximizing auctions, myerson and satterthwaites theorem on the impossibility of ex post efficient bilateral trade with asymmetric information, and. In all of the papers collected here, a completely priorfree approach is adopted, that is, both priorfree solution concepts and priorfree objective functions are imposed.
The relationship to priorfree optimal mechanism design in the computer science literature. The mechanism design literature assumes too much common knowledge of the en vironment among the. Robust mechanism design world scientific series in. Economists analysis of mechanism design under incomplete information relies on strong assumptions about economic agents beliefs and common knowledge of those beliefs. In an introduction to the theory of mechanism design, tilman borgers addresses these questions and more through an exploration of the economic theory of mechanism design, also known as reverse game theory. Transmission ratio based analysis and robust design of mechanisms.
Robustness and endogenous types 3 about other agents past and current types but provided they expect others to report truthfully. In recen t y ears mec hanism design has found man y imp ortan t applications. Discussion paper, yale university smorrispdfsrobustmechanism2001. An introduction into robust mechanism design yale campuspress. Introduction to the theory of mechanism design oxford. We show that while no mechanism in this class can guarantee better performance than an expost mechanism in all cases, experimentally this new class of mechanisms can signi.
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