Mechanism Design and Robust Control

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Abstract

In this paper we introduce robust control methods in mechanism design problems. We assume that in the presence of an incentive compatible mechanism, players behave as if their types were in a δ-neighborhood of their true types. The designer’s problem is to set up a mechanism that implements a given social choice function taking these δ-perturbations into account. In our results we characterize the social choice functions that are robust to the δ-perturbations, in the sense that the designers’ loss is at most of order δk for a certain k. A notable finding is that in quasi-linear utilitarian environments the designer’s loss is of order of δ2.
Original languageEnglish
Place of PublicationBath, U. K.
PublisherDepartment of Economics, University of Bath
Number of pages18
Publication statusPublished - 8 May 2014

Publication series

NameBath Economics Research Working Papers
PublisherDepartment of Economics, University of Bath
No.22/14

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