Behavioral Mechanism Design


  • Serkan Kucuksenel, Department of Economics, Middle East Technical University, Ankara, 06800, Turkey (

  • I thank John Ledyard, Thomas Palfrey, Federico Echenique, and Antonio Rangel for their help and encouragement. I also wish to thank seminar participants at Caltech, METU, and Sabanci University for valuable comments and suggestions on an earlier version of this paper.


This paper studies the mechanism design problem for the class of Bayesian environments where agents do care for the well-being of others. For these environments, we fully characterize interim efficient (IE) mechanisms and examine their properties. This set of mechanisms is compelling, since IE mechanisms are the best in the sense that there is no other mechanism which generates unanimous improvement. For public good environments, we show that these mechanisms produce public goods closer to the efficient level of production as the degree of altruism in the preferences increases. For private good environments, we show that altruistic agents trade more often than selfish agents.