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Mechanism Design In Public Decisions And The Clarke-Groves Mechanism

Erlanson, Albin (2008)
Department of Economics
Abstract
This is a thesis in the field of mechanism design theory, a field of economic theory
closely related to game theory. Instead of determine equilibriums of various games
as in game theory, mechanism design tries to design a mechanism with respect to
a desirable outcome of the game induced by the mechanism. The thesis can be
viewed as an introduction to mechanism design theory in general, via a particular
mechanism called the Clarke-Groves mechanism. Though the main aim with the
thesis is to explain and discuss the Clarke-Groves mechanism. It is accomplished
by using illustrative examples, definitions, theorems and proofs in relation to the
Clarke-Groves mechanism.
The Clarke-Groves mechanism is a possible solution to the problem with deci-... (More)
This is a thesis in the field of mechanism design theory, a field of economic theory
closely related to game theory. Instead of determine equilibriums of various games
as in game theory, mechanism design tries to design a mechanism with respect to
a desirable outcome of the game induced by the mechanism. The thesis can be
viewed as an introduction to mechanism design theory in general, via a particular
mechanism called the Clarke-Groves mechanism. Though the main aim with the
thesis is to explain and discuss the Clarke-Groves mechanism. It is accomplished
by using illustrative examples, definitions, theorems and proofs in relation to the
Clarke-Groves mechanism.
The Clarke-Groves mechanism is a possible solution to the problem with deci-
sions over public goods. For several settings and situations it is unlikely to achieve
an efficient outcome of a decision over a public good. There are problems with exter-
nalities and free-riding in almost all contexts where the good decided over is public.
Decisions over public goods concerns all agents in the society, since everybody is
affected by the outcome of a decision over a public good. There are two delicate
advantages with the Clarke-Groves mechanism. Firstly no agent can increase their
own utility by misreporting their preferences, truthful report of the preferences is
a dominant strategy, and secondly the efficient decision, the decision maximizing
joint utility, is picked by the mechanism. Results for a general set of preferences re-
garding strategyproofness, efficiency and feasibility for the mechanism is presented
in the thesis.
A generalization of the mechanism characterizing all strategyproof and efficient
mechanisms is stated, these mechanisms are called pivotal mechanisms. What is
more a theorem is established about the weigh between strategyproof and efficient
mechanisms on the one hand and budget balanced mechanisms on the other hand.
For a general set of preferences there exist no strategyproof, efficient and budget
balanced mechanism. As a concluding remark of the thesis a discussion on the lack
of applications of the Clarke-Groves mechanism is undertaken. While doing this
the concept of secure implementation is examined. For a securely implementable
mechanism all Nash Equilibriums and dominant strategy coincides. Thus the pos-
sibility of agents’ ending up in other Nash equilibriums than the dominant strategy
of truth telling is removed. (Less)
Please use this url to cite or link to this publication:
@misc{1336166,
  abstract     = {This is a thesis in the field of mechanism design theory, a field of economic theory
closely related to game theory. Instead of determine equilibriums of various games
as in game theory, mechanism design tries to design a mechanism with respect to
a desirable outcome of the game induced by the mechanism. The thesis can be
viewed as an introduction to mechanism design theory in general, via a particular
mechanism called the Clarke-Groves mechanism. Though the main aim with the
thesis is to explain and discuss the Clarke-Groves mechanism. It is accomplished
by using illustrative examples, definitions, theorems and proofs in relation to the
Clarke-Groves mechanism.
The Clarke-Groves mechanism is a possible solution to the problem with deci-
sions over public goods. For several settings and situations it is unlikely to achieve
an efficient outcome of a decision over a public good. There are problems with exter-
nalities and free-riding in almost all contexts where the good decided over is public.
Decisions over public goods concerns all agents in the society, since everybody is
affected by the outcome of a decision over a public good. There are two delicate
advantages with the Clarke-Groves mechanism. Firstly no agent can increase their
own utility by misreporting their preferences, truthful report of the preferences is
a dominant strategy, and secondly the efficient decision, the decision maximizing
joint utility, is picked by the mechanism. Results for a general set of preferences re-
garding strategyproofness, efficiency and feasibility for the mechanism is presented
in the thesis.
A generalization of the mechanism characterizing all strategyproof and efficient
mechanisms is stated, these mechanisms are called pivotal mechanisms. What is
more a theorem is established about the weigh between strategyproof and efficient
mechanisms on the one hand and budget balanced mechanisms on the other hand.
For a general set of preferences there exist no strategyproof, efficient and budget
balanced mechanism. As a concluding remark of the thesis a discussion on the lack
of applications of the Clarke-Groves mechanism is undertaken. While doing this
the concept of secure implementation is examined. For a securely implementable
mechanism all Nash Equilibriums and dominant strategy coincides. Thus the pos-
sibility of agents’ ending up in other Nash equilibriums than the dominant strategy
of truth telling is removed.},
  author       = {Erlanson, Albin},
  keyword      = {Mechanism design,Clarke-Groves mechanism,Public decision,Strategyproof,E?cient,Feasible.,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Mechanism Design In Public Decisions And The Clarke-Groves Mechanism},
  year         = {2008},
}