Skip to main content
SpringerLink
Log in

Mechanism Design (New Developments)

  • Reference work entry
  • First Online:
The New Palgrave Dictionary of Economics

  • 102 Accesses

Abstract

Mechanism design concerns the question: given some desirable outcome, can we design a game which produces it? This theory provides a foundation for many important fields, such as auction theory and contract theory. We survey the recent literature dealing with topics such as robustness of mechanisms, renegotiation and collusion. An important issue is whether simple and intuitively appealing mechanisms can be optimal. Finally, we discuss what can be learned from recent experiments.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 6,499.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 8,499.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Bibliography

  • Abreu, D., and A. Sen. 1991. Virtual implementation in Nash equilibria. Econometrica 59: 997–1022.

    Article  Google Scholar 

  • Andreoni, J. 1995. Cooperation in public goods experiments: Kindness or confusion? American Economic Review 85: 891–904.

    Google Scholar 

  • Armstrong, M. 1996. Multiproduct nonlinear pricing. Econometrica 64: 51–75.

    Article  Google Scholar 

  • Attiyeh, G., R. Franciosi, and R.M. Isaac. 2000. Experiments with the pivotal process for providing public goods. Public Choice 102: 95–114.

    Article  Google Scholar 

  • Baliga, S., and T. Sjöström. 1998. Decentralization and collusion. Journal of Economic Theory 83: 196–232.

    Article  Google Scholar 

  • Baliga, S., and T. Sjöström. 2006. Contracting with third parties. Working Paper No. 75, CSIO, Northwestern University.

    Google Scholar 

  • Baliga, S., L. Corchón, and T. Sjöström. 1997. The theory of implementation when the planner is a player. Journal of Economic Theory 77: 15–33.

    Article  Google Scholar 

  • Bergemann, D., and S. Morris. 2005a. Robust mechanism design. Econometrica 73: 1771–1813.

    Google Scholar 

  • Bergemann, D., and S. Morris. 2005b. Robust implementation: The role of large type spaces. Discussion Paper No. 1519, Cowles Foundation, Yale University.

    Google Scholar 

  • Bergemann, D., and J. Välimäki. 2002. Information acquisition and efficient mechanism design. Econometrica 70: 1007–1034.

    Article  Google Scholar 

  • Cabrales, A., and G. Ponti. 2000. Implementation, elimination of weakly dominated strategies and evolutionary dynamics. Review of Economic Dynamics 3: 247–282.

    Article  Google Scholar 

  • Cabrales, A., G. Charness, and L. Corchón. 2003. An experiment on Nash implementation. Journal of Economic Behavior and Organization 51: 161–193.

    Article  Google Scholar 

  • Cason, T., T. Saijo, T. Sjöström, and T. Yamato. 2006. Secure implementation experiments: Do strategy-proof mechanisms really work? Games and Economic Behavior 57: 206–235.

    Article  Google Scholar 

  • Che, Y.K., and D. Hausch. 1999. Cooperative investments and the value of contracting. American Economic Review 89: 125–147.

    Article  Google Scholar 

  • Che, Y.K., and J. Kim. 2006. Robustly collusion-proof implementation. Econometrica 74: 1063–1107.

    Article  Google Scholar 

  • Chen, Y., and R. Gazzale. 2004. When does learning in games generate convergence to Nash equilibria? American Economic Review 94: 1505–1535.

    Article  Google Scholar 

  • Chen, Y., and F.F. Tang. 1998. Learning and incentive compatible mechanisms for public goods provision: An experimental study. Journal of Political Economy 106: 633–662.

    Article  Google Scholar 

  • Choi, J., and T. Kim. 1999. A nonparametric, efficient public decision mechanism: Undominated Bayesian Nash implementation. Games and Economic Behavior 27: 64–85.

    Article  Google Scholar 

  • Chung, K., and J. Ely. 2003. Implementation with near-complete information. Econometrica 71: 857–871.

    Article  Google Scholar 

  • Crémer, J. 1995. Arm’s length relationships. Quarterly Journal of Economics 110: 275–295.

    Article  Google Scholar 

  • Crémer, J., and R. McLean. 1988. Full extraction of the surplus in Bayesian and dominant strategy auctions. Econometrica 56: 1247–1257.

    Article  Google Scholar 

  • d’Aspremont, C., and L.A. Gérard-Varet. 1979. Incentives and incomplete information. Journal of Public Economics 11: 25–45.

    Article  Google Scholar 

  • Deb, R., P. Pattanaik, and L. Razzolini. 1997. Game forms, rights and the efficiency of social outcomes. Journal of Economic Theory 72: 74–95.

    Article  Google Scholar 

  • Dewatripont, M. 1989. Renegotiation and information revelation over time: The case of optimal labor contracts. Quarterly Journal of Economics 104: 589–619.

    Article  Google Scholar 

  • Dewatripont, M., and E. Maskin. 1995a. Credit and efficiency in centralized and decentralized economies. Review of Economic Studies 62: 541–555.

    Article  Google Scholar 

  • Dewatripont, M., and E. Maskin. 1995b. Contractual contingencies and renegotiation. RAND Journal of Economics 26: 704–719.

    Article  Google Scholar 

  • Duggan, J. 1997. Virtual Bayesian implementation. Econometrica 67: 1175–1199.

    Article  Google Scholar 

  • Edlin, A., and S. Reichelstein. 1996. Hold-ups, standard breach remedies and optimal investment. American Economic Review 86: 478–501.

    Google Scholar 

  • Eliaz, K. 2002. Fault tolerant implementation. Review of Economic Studies 69: 589–610.

    Article  Google Scholar 

  • Eliaz, K., and R. Spiegler. 2006. Contracting with diversely naive agents. Review of Economic Studies 73: 689–714.

    Article  Google Scholar 

  • Esteban, S., and E. Miyagawa. 2005. Optimal menu of menus with self-control preferences. Unpublished paper, Penn State University.

    Google Scholar 

  • Freixas, X., R. Guesnerie, and J. Tirole. 1985. Planning under incomplete information and the ratchet effect. Review of Economic Studies 52: 173–192.

    Article  Google Scholar 

  • Gaspart, F. 1995. Fair implementation in the cooperative production problem: Two properties of normal form mechanisms. Unpublished manuscript, FUNDP Namur.

    Google Scholar 

  • Gul, F., and W. Pesendorfer. 2001. Temptation and self-control. Econometrica 69: 1403–1435.

    Article  Google Scholar 

  • Hart, O., and J. Moore. 1999. Foundations of incomplete contracts. Review of Economic Studies 66: 115–138.

    Article  Google Scholar 

  • Hurwicz, L., and S. Reiter. 2006. Designing economic mechanisms. New York: Cambridge University Press.

    Book  Google Scholar 

  • Jackson, M. 1991. Bayesian implementation. Econometrica 59: 461–477.

    Article  Google Scholar 

  • Jackson, M., T. Palfrey, and S. Srivastava. 1994. Undominated Nash implementation in bounded mechanisms. Games and Economic Behavior 6: 474–501.

    Article  Google Scholar 

  • Jehiel, P., and B. Moldovanu. 2001. Efficient design with interdependent valuations. Econometrica 69: 1237–1259.

    Article  Google Scholar 

  • Kawagoe, T., and T. Mori. 2001. Can the pivotal mechanism induce truthtelling? Public Choice 108: 331–354.

    Article  Google Scholar 

  • Krishna, V., and M. Perry. 1997. Efficient mechanism design. Unpublished manuscript, Penn State University.

    Google Scholar 

  • Laffont, J.J., and D. Martimort. 1997. Collusion under asymmetric information. Econometrica 65: 875–911.

    Article  Google Scholar 

  • Maskin, E. 1992. Auctions and privatization. In Privatization, ed. H. Siebert. Tübingen: J.C.B. Mohr.

    Google Scholar 

  • Maskin, E. 1999. Nash equilibrium and welfare optimality. Review of Economic Studies 66: 23–38.

    Article  Google Scholar 

  • Maskin, E., and J. Moore. 1999. Implementation and renegotiation. Review of Economic Studies 66: 39–56.

    Article  Google Scholar 

  • Maskin, E., and J. Tirole. 1999. Two remarks on the property rights literature. Review of Economic Studies 66: 139–150.

    Article  Google Scholar 

  • McAfee, P., and P. Reny. 1992. Correlated information and mechanism design. Econometrica 60: 395–421.

    Article  Google Scholar 

  • McLean, R., and A. Postlewaite. 2002. Informational size and incentive compatibility. Econometrica 70: 2421–2453.

    Article  Google Scholar 

  • Mezzetti, C. 2004. Mechanism design with interdependent valuations: Efficiency. Econometrica 72: 1617–1626.

    Article  Google Scholar 

  • Mezzetti, C. 2007. Mechanism design with interdependent valuations: Surplus extraction. Economic Theory 3: 473–499.

    Article  Google Scholar 

  • Mookherjee, D., and S. Reichelstein. 1992. Dominant strategy implementation of Bayesian incentive compatible allocation rules. Journal of Economic Theory 56: 378–399.

    Article  Google Scholar 

  • Mookherjee, D., and M. Tsumagari. 2004. The organization of supplier networks: Effects of delegation and intermediation. Econometrica 72: 1179–1219.

    Article  Google Scholar 

  • Nöldeke, G., and K. Schmidt. 1995. Option contracts and renegotiation: A solution to the hold–up problem. RAND Journal of Economics 26: 163–179.

    Article  Google Scholar 

  • Palfrey, T., and S. Srivastava. 1989a. Implementation with incomplete information in exchange economies. Econometrica 57: 115–134.

    Article  Google Scholar 

  • Palfrey, T., and S. Srivastava. 1989b. Mechanism design with incomplete information: A solution to the implementation problem. Journal of Political Economy 97: 668–691.

    Article  Google Scholar 

  • Palfrey, T., and S. Srivastava. 1991. Nash implementation using undominated strategies. Econometrica 59: 479–501.

    Article  Google Scholar 

  • Peleg, B., and E. Winter. 2002. Constitutional implementation. Review of Economic Design 7: 187–204.

    Article  Google Scholar 

  • Persico, N. 2004. Committee design with endogenous information. Review of Economic Studies 71: 165–191.

    Article  Google Scholar 

  • Postlewaite, A., and D. Schmeidler. 1986. Implementation in differential information economies. Journal of Economic Theory 39: 14–33.

    Article  Google Scholar 

  • Saijo, T. 1987. On constant Maskin monotonic social choice functions. Journal of Economic Theory 42: 382–386.

    Article  Google Scholar 

  • Saijo, T. 2003. Spiteful behavior in voluntary contribution mechanism experiments. In Handbook of experimental economics results, ed. C. Plott and V. Smith. Amsterdam: Elsevier Science.

    Google Scholar 

  • Segal, I. 1999. Complexity and renegotiation: A foundation for incomplete contracts. Review of Economic Studies 66: 57–82.

    Article  Google Scholar 

  • Segal, I. 2004. The communication requirements of social choice rules and supporting budget sets. Working Paper No. 39, School of Social Science, Institute for Advanced Study, Princeton.

    Google Scholar 

  • Segal, I., and M. Whinston. 2002. The Mirrlees approach to mechanism design with renegotiation. Econometrica 70: 1–46.

    Article  Google Scholar 

  • Sen, A. 1970. The impossibility of a Paretian liberal. Journal of Political Economy 78: 152–157.

    Article  Google Scholar 

  • Serrano, R., and R. Vohra. 2001. Some limitations of virtual Bayesian implementation. Econometrica 69: 785–792.

    Article  Google Scholar 

  • Sjöström, T. 1994. Implementation in undominated Nash equilibria without using integer games. Games and Economic Behavior 6: 502–511.

    Article  Google Scholar 

  • Sjöström, T. 1999. Undominated Nash implementation with collusion and renegotiation. Games and Economic Behavior 26: 337–352.

    Article  Google Scholar 

  • Smith, V. 1979. Incentive compatible experimental processes for the provision of public goods. In Research in experimental economics, vol. 1, ed. V. Smith. Greenwich: JAI Press.

    Google Scholar 

  • Tirole, J. 1986. Hierarchies and bureaucracies. Journal of Law, Economics, and Organization 2: 181–214.

    Google Scholar 

  • Williams, S. 1999. A characterization of efficient, Bayesian incentive compatible mechanisms. Economic Theory 14: 155–180.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Sandeep Baliga & Tomas Sjöström

Authors
  1. Sandeep Baliga
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Tomas Sjöström
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Copyright information

© 2018 Macmillan Publishers Ltd.

About this entry

Check for updates. Verify currency and authenticity via CrossMark

Cite this entry

Baliga, S., Sjöström, T. (2018). Mechanism Design (New Developments). In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2134

Download citation

Publish with us

Policies and ethics

Search

Navigation