Abstract
There are mechanism design problems for which an exclusive focus on equilibrium can be seriously misleading. If outcomes will be implemented whether or not an equilibrium has been achieved, then the desiderata by which we evaluate mechanisms in these situations need to include more than merely the properties of their equilibria (are the equilibria Pareto optimal; are they in dominant strategies; are they stable; etc.). For the classical public-goods problem, we describe some of our research in which (1) we showed, in an experiment, that several mechanisms with excellent equilibrium properties exhibited serious out-of-equilibrium failures; (2) by emulating the Walrasian exchange model, we designed a public-good mechanism to be transparent and to have reasonable properties even when out of equilibrium; and (3) we conducted an experiment in which this new mechanism performed better than previous mechanisms.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
For a more general cost function C(q), c is replaced by \(C(q)/\min \{q_{1},\ldots ,q_{N}\}\) in the equations defining the outcome function. Some of the properties described below do not hold for a nonlinear cost function.
References
Chen, Y. (2002). A family of supermodular Nash mechanisms implementing Lindahl allocations. Economic Theory, 19, 773–790.
Dubey, P. (1982). Price quantity strategic market games. Econometrica, 50, 111–126.
Hurwicz, L. (1979). Outcome functions yielding Walrasian and Lindahl allocations at Nash equilibrium points. The Review of Economic Studies, 46, 217–224.
Hurwicz, L., & Walker, M. (1990). On the generic nonoptimality of dominant-strategy allocation mechanisms: A general theorem that includes pure exchange economies. Econometrica, 58, 683–704.
Kim, T. (1993). A stable Nash mechanism implementing Lindahl allocations for quasi-linear environments. Journal of Mathematical Economics, 22, 359–371.
Milgrom, P. (2004). Putting auction theory to work. Cambridge: Cambridge University Press.
Van Essen, M., Lazzati, N., & Walker, M. (2012). Out-of-equilibrium performance of three lindahl mechanisms: Experimental evidence. Games and Economic Behavior, 74, 366–381.
Van Essen, M., & Walker, M. (2017). A simple market-like allocation mechanism for public goods. Games and Economic Behavior, 107, 6–19.
Van Essen, M., & Walker, M. (2018). An experimental evaluation of a price-quantity mechanism for public goods. University of Arizona working paper.
Walker, M. (1981). A simple incentive compatible scheme for attaining Lindahl allocations. Econometrica, 49, 65–71.
Wilson, R. (1987). Game theoretic anayses of trading processes. In T. F. Bewley (Ed.), Advances in Economic Theory: Fifth World Congress (pp. 33–70). Cambridge: Cambridge University Press.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Van Essen, M., Walker, M. (2019). Are We There Yet? Mechanism Design Beyond Equilibrium. In: Trockel, W. (eds) Social Design. Studies in Economic Design. Springer, Cham. https://doi.org/10.1007/978-3-319-93809-7_12
Download citation
DOI: https://doi.org/10.1007/978-3-319-93809-7_12
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-93808-0
Online ISBN: 978-3-319-93809-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)