The Dynamic Cost of Ex Post Incentive Compatibility in Repeated Games of Private Information

Author(s):  
David A. Miller A. Miller
2021 ◽  
Vol 16 (3) ◽  
pp. 943-978
Author(s):  
Simon Loertscher ◽  
Claudio Mezzetti

The price mechanism is fundamental to economics but difficult to reconcile with incentive compatibility and individual rationality. We introduce a double clock auction for a homogeneous good market with multidimensional private information and multiunit traders that is deficit‐free, ex post individually rational, constrained efficient, and makes sincere bidding a dominant strategy equilibrium. Under a weak dependence and an identifiability condition, our double clock auction is also asymptotically efficient. Asymptotic efficiency is achieved by estimating demand and supply using information from the bids of traders that have dropped out and following a tâtonnement process that adjusts the clock prices based on the estimates.


2015 ◽  
Vol 105 (7) ◽  
pp. 2141-2182 ◽  
Author(s):  
Vianney Dequiedt ◽  
David Martimort

We consider vertical contracting arrangements between a manufacturer and a retailing network when retailers have private information and the organization is run through bilateral contracts. We highlight a new form of informational opportunism arising when the manufacturer manipulates information learned separately in each relationship. We characterize the set of allocations robust to such opportunism by means of simple ex post incentive compatibility constraints. Those constraints limit the manufacturer's ability to use yardstick competition among retailers. They simplify contracts and restore a rent/efficiency trade-off even with correlated information. We show that sell-out contracts are optimal under a wide range of circumstances. (JEL D21, D86, L14, L60, L81)


Author(s):  
Boaz Zik

Abstract The current literature on mechanism design in models with social preferences discusses social-preference-robust mechanisms, i.e., mechanisms that are implementable in any environment with social preferences. The literature also discusses payoff-information-robust mechanisms, i.e., mechanisms that are implementable for any belief and higher-order beliefs of the agents about the payoff types of the other agents. In the present paper, I address the question of whether deterministic mechanisms that are robust in both of these dimensions exist. I consider environments where each agent holds private information about his personal payoff and about the existence and extent of his social preferences. In such environments, a mechanism is robust in both dimensions only if it is ex-post implementable, i.e., only if incentive compatibility holds for every realization of payoff signals and for every realization of social preferences. I show that ex-post implementation of deterministic mechanisms is impossible in such environments; i.e., deterministic mechanisms that are both social-preference-robust and payoff-information-robust do not exist.


2018 ◽  
Vol 10 (1) ◽  
pp. 278-314 ◽  
Author(s):  
Melis Kartal

New relationships are often plagued with uncertainty because one of the players has some private information about her “type.” The reputation literature has shown that equilibria that reveal this private information typically involve breach of trust and conflict. But are these inevitable for equilibrium learning? I analyze self-enforcing relationships where one party is privately informed about her time preferences. I show that there always exist honest reputation equilibria, which fully reveal information and support cooperation without breach or conflict. I compare these to dishonest reputation equilibria from several perspectives. My results are applicable to a broad class of repeated games. (JEL C73, D82, D83, D86, Z13)


Author(s):  
Samuel Bowles ◽  
Herbert Gintis

This chapter examines whether recent advances in the theory of repeated games, as exemplified by the so-called folk theorem and related models, address the shortcomings of the self-interest based models in explaining human cooperation. It first provides an overview of folk theorems and their account of evolutionary dynamics before discussing the folk theorem with either imperfect public information or private information. It then considers evolutionarily irrelevant equilibrium as well as the link between social norms and the notion of correlated equilibrium. While the insight that repeated interactions provide opportunities for cooperative individuals to discipline defectors is correct, the chapter argues that none of the game-theoretic models mentioned above is successful. Except under implausible conditions, the cooperative outcomes identified by these models are neither accessible nor persistent, and are thus labeled evolutionarily irrelevant Nash equilibria.


2018 ◽  
Author(s):  
Jens David Ohlin

Although politicians and intelligence analysts have criticized Russian interference in the 2016 and 2018 elections, international lawyers seem to be at a loss for how to understand the particular harm posed by this interference. In addition to the hacking of email accounts and disclosure of private information, the most salient aspect of the interference was the use of social media platforms, including Twitter and Facebook, to sow division and heighten nativist tendencies within the electorate. Strictly speaking, the goal of the 2016 interference was to delegitimize a potential Clinton presidency or to help elect Donald Trump as president. But far more important was the method used to accomplish these goals: the impersonation of American citizens during participation in the political process. This latter development points to the real harm of election interference, which has less to do with sovereignty and more to do with the collective right of self- determination. Foreign interference is a violation of the membership rules for political decision-making, i.e., the idea that only members of a polity should participate in elections—not only with regard to voting but also with regard to financial contributions and other forms of electoral participation. Outsiders are free to express their opinions but covertly representing themselves as insiders constitutes a violation of these political norms, which are constitutive of the notion of self- determination, just as much as covertly funneling foreign money to one candidate. The only solution to this form of election interference is transparency, i.e., to expose such interventions for what they are: attempts by foreigners to make political statements while pretending to be Americans. This article ends by cataloguing the mistakes of the Obama Administration in failing to expose this interference in real time—which is the only way to nullify its insidious impact. Ex post investigations, prosecutions, and counter-measures designed to deter future misbehavior are all insufficient to nullify the impact of electoral interference. However, recent efforts by the Justice Department and the FBI, including a new policy codified in the US Attorneys Manual, and contemporaneous indictments of Russians for interference in the 2018 election, suggest that some government actors finally understand that transparency is the only solution to election interference.


2006 ◽  
Vol 96 (1) ◽  
pp. 422-434 ◽  
Author(s):  
Patrick W Schmitz

The property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives, while bargaining is ex post efficient. In contrast, transaction cost economics emphasizes ex post inefficiencies. In the present paper, a party may invest and acquire private information about the default payoff that it can realize on its own. Inefficient rent seeking can overturn prominent implications of the property rights theory. In particular, ownership by party B may be optimal, even though only the indispensable party A makes an investment decision.


2021 ◽  
Author(s):  
Bing Shi ◽  
Yaping Deng ◽  
Han Yuan

Abstract As a green and low-carbon transportation way, bike-sharing provides lots of convenience in the daily life. However, the daily usage of sharing bikes results in dispatching problems, i.e. dispatching bikes to the specific destinations. The bike-sharing platform can hire and pay to workers in order to incentivize them to accomplish the dispatching tasks. However, there exist multiple workers competing for the dispatching tasks, and they may strategically report their task accomplishing costs (which are private information only known by themselves) in order to make more profits, which may result in inefficient task dispatching results. In this paper, we first design a dispatching algorithm named GDY-MAX to allocate tasks to workers, which can achieve good performance. However it cannot prevent workers strategically misreporting their task accomplishing costs. Regarding this issue, we further design a strategy proof mechanism under the budget constraint, which consists of a task dispatching algorithm and a worker pricing algorithm. We theoretically prove that our mechanism can satisfy the properties of incentive compatibility, individual rationality and budget balance. Furthermore we run extensive experiments to evaluate our mechanism based on a dataset from Mobike. The results show that the performance of the proposed strategy proof mechanism and GDY-MAX is similar to the optimal algorithm in terms of the coverage ratio of accomplished task regions and the sum of task region values, and our mechanism has better performance than the uniform algorithm in terms of the total payment and the unit cost value.


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