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Evolutionary robustness of dominant strategy implementation

Author

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  • Sarvesh Bandhu

    (Indian Institute of Management, Bangalore)

  • Ratul Lahkar

    (Ashoka University)

Abstract

We consider dominant strategy implementation in a large population aggregative game. The model has strategic complementarities which generates multiple Nash equilibria. Moreover, externalities are positive due to which, all equilibria are socially inefficient. The planner, therefore, constructs a direct mechanism and assigns efficient strategies and transfer levels to agents. Truthful revelation then becomes strictly dominant, which implements efficiency. In our new evolutionary approach to this mechanism, the reported type distribution evolves under dynamics satisfying monotone percentage growth. Such dynamics eliminate dominated strategies thereby ensuring convergence to truthful revelation by all agents. Dominant strategy implementation is, therefore, robust under such evolutionary dynamics. Our evolutionary approach differs from existing models of evolutionary implementation based on potential games. That approach may fail to implement efficiency under strategic complementarities as a Pareto inferior Nash equilibrium can remain asymptotically stable under evolutionary dynamics. Our evolutionary approach is effective even under such strategic complementarities.

Suggested Citation

  • Sarvesh Bandhu & Ratul Lahkar, 2023. "Evolutionary robustness of dominant strategy implementation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(2), pages 685-721, August.
    • Handle: RePEc:spr:joecth:v:76:y:2023:i:2:d:10.1007_s00199-022-01474-w
    DOI: 10.1007/s00199-022-01474-w
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    More about this item

    Keywords

    Aggregative games; Implementation; Evolutionary game theory; Potential games;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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