Mechanism design with set-theoretic beliefs
Name
Chen, Micali (2011) Mechanism design with set-theoretic belief.pdf
Description
Final published version.
Size
3.14 MB
Format
Adobe PDF
Checksum (MD5)
f25afd517cd46b571e6fe95e4de38121
Author(s)
Chen, Jing
Micali, Silvio
Date Issued
October 22, 2011
Publisher
© IEEE
Citation
Chen, J., & Micali, S. (2011). Mechanism design with set-theoretic beliefs. Proceedings of the 2011 IEEE 52nd Annual Symposium on Foundations of Computer Science, 87–96.
Version
Final published version.
Abstract
In settings of incomplete information, we put forward (1) a very conservative -- indeed, purely set-theoretic -- model of the beliefs (including totally wrong ones) that each player may have about the payoff types of his opponents, and (2) a new and robust solution concept, based on mutual belief of rationality, capable of leveraging such conservative beliefs. We exemplify the applicability of our new approach for single-good auctions, by showing that, under our solution concept, a normal-form, simple, and deterministic mechanism guarantees -- up to an arbitrarily small, additive constant -- a revenue benchmark that is always greater than or equal to the second-highest valuation, and sometimes much greater. By contrast, we also prove that the same benchmark cannot even be approximated within any positive factor, under classical solution concepts.
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