The authors thank Yaron Azrieli, Yan Chen, Vince Crawford, Federico Echenique, Guillaume Frechette, Matt Jackson, John Ledyard, Stephen Morris, Charlie Plott, William Sandholm, Steve Spear, Matt Van Essen, and Mark Walker for their helpful comments and conversations. Healy gratefully acknowledges the National Science Foundation for funding this research through Award SES-0847406.
Designing stable mechanisms for economic environments
Article first published online: 3 OCT 2012
Copyright © 2012 Paul J. Healy and Laurent Mathevet
Volume 7, Issue 3, pages 609–661, September 2012
How to Cite
Healy, P. J. and Mathevet, L. (2012), Designing stable mechanisms for economic environments. Theoretical Economics, 7: 609–661. doi: 10.3982/TE898
- Issue published online: 3 OCT 2012
- Article first published online: 3 OCT 2012
- Submitted 2010-11-7. Final version accepted 2011-8-16. Available online 2011-8-16.
- Mechanism design;
We study the design of mechanisms that implement Lindahl or Walrasian allocations and whose Nash equilibria are dynamically stable for a wide class of adaptive dynamics. We argue that supermodularity is not a desirable stability criterion in this mechanism design context, focusing instead on contractive mechanisms. We provide necessary and sufficient conditions for a mechanism to Nash-implement Lindahl or Walrasian allocations, show that these conditions are inconsistent with the contraction property when message spaces are one-dimensional, and then show how to use additional dimensions to achieve dynamic stability while gaining budget balance out of equilibrium.