Mechanism Design In Public Decisions And The Clarke-Groves Mechanism
Author
Summary, in English
This is a thesis in the field of mechanism design theory, a field of economic theory
closely related to game theory. Instead of determine equilibriums of various games
as in game theory, mechanism design tries to design a mechanism with respect to
a desirable outcome of the game induced by the mechanism. The thesis can be
viewed as an introduction to mechanism design theory in general, via a particular
mechanism called the Clarke-Groves mechanism. Though the main aim with the
thesis is to explain and discuss the Clarke-Groves mechanism. It is accomplished
by using illustrative examples, definitions, theorems and proofs in relation to the
Clarke-Groves mechanism.
The Clarke-Groves mechanism is a possible solution to the problem with deci-
sions over public goods. For several settings and situations it is unlikely to achieve
an efficient outcome of a decision over a public good. There are problems with exter-
nalities and free-riding in almost all contexts where the good decided over is public.
Decisions over public goods concerns all agents in the society, since everybody is
affected by the outcome of a decision over a public good. There are two delicate
advantages with the Clarke-Groves mechanism. Firstly no agent can increase their
own utility by misreporting their preferences, truthful report of the preferences is
a dominant strategy, and secondly the efficient decision, the decision maximizing
joint utility, is picked by the mechanism. Results for a general set of preferences re-
garding strategyproofness, efficiency and feasibility for the mechanism is presented
in the thesis.
A generalization of the mechanism characterizing all strategyproof and efficient
mechanisms is stated, these mechanisms are called pivotal mechanisms. What is
more a theorem is established about the weigh between strategyproof and efficient
mechanisms on the one hand and budget balanced mechanisms on the other hand.
For a general set of preferences there exist no strategyproof, efficient and budget
balanced mechanism. As a concluding remark of the thesis a discussion on the lack
of applications of the Clarke-Groves mechanism is undertaken. While doing this
the concept of secure implementation is examined. For a securely implementable
mechanism all Nash Equilibriums and dominant strategy coincides. Thus the pos-
sibility of agents’ ending up in other Nash equilibriums than the dominant strategy
of truth telling is removed.
closely related to game theory. Instead of determine equilibriums of various games
as in game theory, mechanism design tries to design a mechanism with respect to
a desirable outcome of the game induced by the mechanism. The thesis can be
viewed as an introduction to mechanism design theory in general, via a particular
mechanism called the Clarke-Groves mechanism. Though the main aim with the
thesis is to explain and discuss the Clarke-Groves mechanism. It is accomplished
by using illustrative examples, definitions, theorems and proofs in relation to the
Clarke-Groves mechanism.
The Clarke-Groves mechanism is a possible solution to the problem with deci-
sions over public goods. For several settings and situations it is unlikely to achieve
an efficient outcome of a decision over a public good. There are problems with exter-
nalities and free-riding in almost all contexts where the good decided over is public.
Decisions over public goods concerns all agents in the society, since everybody is
affected by the outcome of a decision over a public good. There are two delicate
advantages with the Clarke-Groves mechanism. Firstly no agent can increase their
own utility by misreporting their preferences, truthful report of the preferences is
a dominant strategy, and secondly the efficient decision, the decision maximizing
joint utility, is picked by the mechanism. Results for a general set of preferences re-
garding strategyproofness, efficiency and feasibility for the mechanism is presented
in the thesis.
A generalization of the mechanism characterizing all strategyproof and efficient
mechanisms is stated, these mechanisms are called pivotal mechanisms. What is
more a theorem is established about the weigh between strategyproof and efficient
mechanisms on the one hand and budget balanced mechanisms on the other hand.
For a general set of preferences there exist no strategyproof, efficient and budget
balanced mechanism. As a concluding remark of the thesis a discussion on the lack
of applications of the Clarke-Groves mechanism is undertaken. While doing this
the concept of secure implementation is examined. For a securely implementable
mechanism all Nash Equilibriums and dominant strategy coincides. Thus the pos-
sibility of agents’ ending up in other Nash equilibriums than the dominant strategy
of truth telling is removed.
Department/s
Publishing year
2008
Language
English
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Document type
Student publication for Bachelor's degree
Topic
- Business and Economics
Keywords
- Mechanism design
- Clarke-Groves mechanism
- Public decision
- Strategyproof
- E?cient
- Feasible.
- Economics, econometrics, economic theory, economic systems, economic policy
- Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
Supervisor
- Tommy Andersson