Equilibrium Selection and Stability for the Groves Ledyard Mechanism
Article first published online: 20 APR 2004
Journal of Public Economic Theory
Volume 6, Issue 2, pages 311–335, May 2004
How to Cite
Page, S. E. and Tassier, T. (2004), Equilibrium Selection and Stability for the Groves Ledyard Mechanism. Journal of Public Economic Theory, 6: 311–335. doi: 10.1111/j.1467-9779.2004.00168.x
- Issue published online: 20 APR 2004
- Article first published online: 20 APR 2004
- Received April 2003; Accepted June 2003.
In their seminal paper Groves and Ledyard (1976) construct a balanced incentive compatible mechanism that solves the free rider problem. In subsequent research, Bergstrom, Simon, and Titus (1983) prove that there exist numerous asymmetric equilibria in addition to the symmetric equilibrium. In the present paper, we explicitly solve for the additional equilibria and use computational experiments to examine the structure and stability of the set of equilibria of the Groves Ledyard Mechanism. We find that all of the equilibria found by Berstrom, Simon, and Titus are unstable and that for a high level of the punishment parameter these equilibria do not exist. Further, we find that there exists an additional boundary equilibrium for each of the equilibria found by Bergstrom, Simon, and Titus. The boundary equilibria are all stable.