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Approximation in Mechanism Design

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  • Jason D. Hartline

Abstract

This paper considers three challenge areas for mechanism design and describes the role approximation plays in resolving them. Challenge 1: optimal mechanisms are finely tuned to precise details of the distribution on agent preferences. Challenge 2: in environments with multi-dimensional agent preferences economic analysis has failed to provide general characterizations optimal mechanisms. Challenge 3: optimal mechanisms are parameterized by unrealistic knowledge of the distribution of agents' private preferences. This paper surveys positive resolutions to these challenges with emphasis on basic techniques and their relevance to theory and practice.

Suggested Citation

  • Jason D. Hartline, 2012. "Approximation in Mechanism Design," American Economic Review, American Economic Association, vol. 102(3), pages 330-336, May.
    • Handle: RePEc:aea:aecrev:v:102:y:2012:i:3:p:330-36
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.3.330
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    References listed on IDEAS

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    1. Manelli, Alejandro M. & Vincent, Daniel R., 2007. "Multidimensional mechanism design: Revenue maximization and the multiple-good monopoly," Journal of Economic Theory, Elsevier, vol. 137(1), pages 153-185, November.
    2. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    3. Ilya Segal, 2003. "Optimal Pricing Mechanisms with Unknown Demand," American Economic Review, American Economic Association, vol. 93(3), pages 509-529, June.
    4. Thanassoulis, John, 2004. "Haggling over substitutes," Journal of Economic Theory, Elsevier, vol. 117(2), pages 217-245, August.
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    Cited by:

    1. Alaei, Saeed & Hartline, Jason & Niazadeh, Rad & Pountourakis, Emmanouil & Yuan, Yang, 2019. "Optimal auctions vs. anonymous pricing," Games and Economic Behavior, Elsevier, vol. 118(C), pages 494-510.
    2. Jason Milionis & Ciamac C. Moallemi & Tim Roughgarden, 2023. "A Myersonian Framework for Optimal Liquidity Provision in Automated Market Makers," Papers 2303.00208, arXiv.org, revised Nov 2023.
    3. Nima Anari & Rad Niazadeh & Amin Saberi & Ali Shameli, 2018. "Linear Programming Based Near-Optimal Pricing for Laminar Bayesian Online Selection," Papers 1807.05477, arXiv.org, revised Mar 2024.
    4. Babaioff, Moshe & Blumrosen, Liad & Roth, Aaron, 2015. "Auctions with online supply," Games and Economic Behavior, Elsevier, vol. 90(C), pages 227-246.
    5. Li, Yunan, 2017. "Approximation in mechanism design with interdependent values," Games and Economic Behavior, Elsevier, vol. 103(C), pages 225-253.
    6. Marco Battaglini & Rohit Lamba, 2012. "Optimal Dynamic Contracting," Working Papers 1431, Princeton University, Department of Economics, Econometric Research Program..
    7. Shraman Banerjee & Swagata Bhattacharjee, 2023. "Virtue of Simplicity in Asymmetric Auctions," Working Papers 2023-01, Shiv Nadar University, Department of Economics.
    8. Devanur, Nikhil R. & Hartline, Jason D. & Yan, Qiqi, 2015. "Envy freedom and prior-free mechanism design," Journal of Economic Theory, Elsevier, vol. 156(C), pages 103-143.
    9. Kleinberg, Robert & Weinberg, S. Matthew, 2019. "Matroid prophet inequalities and applications to multi-dimensional mechanism design," Games and Economic Behavior, Elsevier, vol. 113(C), pages 97-115.
    10. Hemant K. Bhargava & Gergely Csapó & Rudolf Müller, 2020. "On Optimal Auctions for Mixing Exclusive and Shared Matching in Platforms," Management Science, INFORMS, vol. 66(6), pages 2653-2676, June.
    11. Chawla, Shuchi & Devanur, Nikhil R. & Karlin, Anna R. & Sivan, Balasubramanian, 2022. "Simple pricing schemes for consumers with evolving values," Games and Economic Behavior, Elsevier, vol. 134(C), pages 344-360.
    12. Rahul Deb & Mallesh Pai, 2013. "Symmetric Auctions," Working Papers tecipa-486, University of Toronto, Department of Economics.
    13. Lazzati, Natalia & Van Essen, Matt, 2014. "A nearly optimal auction for an uninformed seller," Economics Letters, Elsevier, vol. 122(3), pages 396-399.
    14. Saeed Alaei & Ali Makhdoumi & Azarakhsh Malekian & Rad Niazadeh, 2022. "Descending Price Auctions with Bounded Number of Price Levels and Batched Prophet Inequality," Papers 2203.01384, arXiv.org.

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