Journal Article

Foundations of Dominant-Strategy Mechanisms

Kim-Sau Chung and J.C. Ely

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 74, issue 2, pages 447-476
Published in print April 2007 | ISSN: 0034-6527
Published online April 2007 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/j.1467-937X.2007.00427.x
Foundations of Dominant-Strategy Mechanisms

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  • Game Theory and Bargaining Theory
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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.

Keywords: C70; D44; D83

Journal Article.  15040 words.  Illustrated.

Subjects: Game Theory and Bargaining Theory ; Information, Knowledge, and Uncertainy ; Market Structure and Pricing

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