Implementation in Nash Equilibrium (II): Applications

  • Luis C. Corchón


In the previous chapter we presented a general mechanism that implements in Nash equilibrium any social choice correspondence satisfying monotonicity and no veto power. A general criticism of the Nash equilibrium approach to the theory of implementation is that, in the case where a correspondence is implemented, this kind of equilibrium requires a good deal of coordination among agents in order to select those strategies corresponding to a particular equilibrium.1 This problem is well-known in game theory: when playing, say, The Battle of the Sexes agents may, by means of strategies that are part of different Nash equilibria of the game, achieve outcomes that are not Nash equilibria. In our case, if the mechanism is run by a real person, she can suggest what strategy agents have to use (truth-telling). This is of course cheap talk, but it makes slightly more palatable the assumption that agents know the particular Nash equilibrium that is going to be played.


Nash Equilibrium Market Game Strong Equilibrium Walrasian Equilibrium Feasible Allocation 
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  1. A criticism of integer games can be found in: M.O. Jackson (1992), ‘Implementation in Undominated Strategies: A Look at Bounded Mechanisms’, Review of Economic Studies, vol. 59, pp. 757–75.CrossRefGoogle Scholar
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  5. The following papers present particular mechanisms for implementing the Lindahl correspondence with three or more agents: T. Groves and J. Ledyard (1977), ‘Optimal Allocation of Public Goods: A Solution to the “Free Rider” Problem’, Econometrica, 45, pp. 783–809CrossRefGoogle Scholar
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  8. The paper by Hurwicz also considered the implementation of the Walras correspondence. The case of two agents is studied in L. Hurwicz (1979b), ‘Balanced Outcome Functions Yielding Walrasian and Lindahl Allocations at Nash Equilibrium Points for Two or More Agents’ in J. Green and J.A. Scheinkman (eds), General Equilibrium Growth and Trade (New York: Academic Press).Google Scholar
  9. The issue of the so-called ‘completely feasible implementation’ of the Lindahl and Walras correspondences when the feasible set is unknown to the designer has been considered by L. Hurwicz, E. Maskin and A. Postlewaite (1995), ‘Feasible Nash Implementation of Social Choice Rules when the Designer Does not Know Endowments or Production Sets’, in J.O. Ledyard (ed.), The Economics of Informational Decentralization, Complexity, Efficiency and Stability (Kluwer Academic Publishers).Google Scholar
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  11. Implementation of the Walrasian correspondence by means of market games has been considered by: J.P. Benassy (1986), ‘On Competitive Market Mechanisms’, Econometrica, 1986 no. 54, pp. 95–108CrossRefGoogle Scholar
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  22. W. Thomson (1993), ‘Monotonic Extensions’, Working Paper, University of Rochester, NovemberGoogle Scholar
  23. A. Sen (1987), ‘Approximate Implementation of Non-Dictatorial Social Choice Functions’, Mimeo, Princeton UniversityGoogle Scholar
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  25. Implementation of matching rules is discussed in T. Kara, and T. Sönmez: ‘Nash Implementation of Matching Rules’ Journal of Economic Theory, (forthcoming) and T. Sönmez, ‘Implementation in Generalized Matching Problems’, Journal of Mathematical Economics (forthcoming).Google Scholar
  26. Implementation with ‘nice’ mechanisms is the concern of the following papers B. Dutta, A. Sen and R. Vohra ‘Nash Implementation through Elementary Mechanisms in Economic Environments’. Economic Design, 1995, pp. 173–204; T. Sjöström ‘Implementation by Demand Mechanisms’. Economic Design (forthcoming) and Saijo, T., Y. Tatamitani and T. Yomato: ‘Toward Natural Implementation’, International Economic Review (forthcoming).Google Scholar

Copyright information

© Luis C. Corchón 1996

Authors and Affiliations

  • Luis C. Corchón
    • 1
  1. 1.Universidad de AlicanteAlicanteSpain

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