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Mechanism design with farsighted agents

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  • Korpela, Ville
  • Lombardi, Michele

Abstract

Agents are farsighted when they consider the ultimate results to which their own actions may lead to. We re-examine the classical questions of implementation theory under complete information in a setting with transfers where farsighted coalitions are regarded as fundamental behavioral units and the equilibrium outcomes of their interactions are predicted via the stability notion of the largest consistent set. The designer's exercise consists of designing a rights structure, which formalizes the idea of power distribution in society. His or her challenge lies in designing a rights structure in which the equilibrium behavior of agents always coincides with the recommendation given by a social choice function. We show that (Maskin) monotonicity fully identifies the class of social choice functions that are implementable by a rights structure. We also discuss how this result changes when social choice correspondences are considered.

Suggested Citation

  • Korpela, Ville & Lombardi, Michele, 2019. "Mechanism design with farsighted agents," MPRA Paper 94436, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:94436
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    File URL: https://mpra.ub.uni-muenchen.de/94436/1/MPRA_paper_94436.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Farsightedness; implementation; transfers; rights structures; coaltions; largest consistent set; monotonicity;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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