Discrete implementation of the Groves-Ledyard mechanism

J. Todd Swarthout, Mark A Walker

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

When implementing an economic institution in the field or in the laboratory, the participants' action spaces and the institution's outcomes are typically discrete, while our theoretical analysis of the institution often assumes the sets are continuous. Predictions by the continuous model generally turn out to be good approximations to the performance of the discrete implementation. We present an example in which the continuous version has a unique and Pareto efficient equilibrium, but in which the discrete version often has vastly more equilibria, many of them far from efficient. We show that the same phenomenon appears in two experiments investigating the Groves-Ledyard mechanism, and that it may account for the experimental results.

Original languageEnglish (US)
Pages (from-to)101-114
Number of pages14
JournalReview of Economic Design
Volume13
Issue number1-2
DOIs
StatePublished - Apr 2009

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Groves mechanisms
Pareto
Prediction
Economic institutions
Theoretical analysis
Experiment
Approximation

Keywords

  • Dominant strategies
  • Groves-Ledyard mechanism
  • Implementation in discrete strategies
  • Multiple equilibria
  • Public goods

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

Cite this

Discrete implementation of the Groves-Ledyard mechanism. / Swarthout, J. Todd; Walker, Mark A.

In: Review of Economic Design, Vol. 13, No. 1-2, 04.2009, p. 101-114.

Research output: Contribution to journalArticle

Swarthout, J. Todd ; Walker, Mark A. / Discrete implementation of the Groves-Ledyard mechanism. In: Review of Economic Design. 2009 ; Vol. 13, No. 1-2. pp. 101-114.
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