Conservative Rationalizability and The Second-Knowledge Mechanism
Name
MIT-CSAIL-TR-2010-060.pdf
Size
340.24 KB
Format
Adobe PDF
Checksum (MD5)
9a689719429a01f32bef0d7e449f0f5a
Author(s)
Chen, Jing
Micali, Silvio
Advisor(s)
Silvio Micali
Date Issued
December 20, 2010
Series/Report no.
MIT-CSAIL-TR-2010-060
Abstract
In mechanism design, the traditional way of modeling the players' incomplete information about their opponents is "assuming a Bayesian." This assumption, however, is very strong and does not hold in many real applications. Accordingly, we put forward (1) a set-theoretic way to model the knowledge that a player might have about his opponents, and (2) a new class of mechanisms capable of leveraging such more conservative knowledge in a robust way. In auctions of a single good, we show that such a new mechanism can perfectly guarantee a revenue benchmark (always lying in between the second highest and the highest valuation) that no classical mechanism can even approximate in any robust way.
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