Publication: Implementation in adaptive better-response dynamics: Towards a general theory of bounded rationality in mechanisms
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2011-03-21
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Elsevier
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Abstract
We study the classic implementation problem under the behavioral assumption that
agents myopically adjust their actions in the direction of better-responses or bestresponses.
First, we show that a necessary condition for recurrent implementation in
better-response dynamics (BRD) is a small variation of Maskin monotonicity, which
we call quasimonotonicity. We also provide a mechanism for implementation in BRD
if the rule is quasimonotonic and excludes worst alternatives – no worst alternative
(NWA). Quasimonotonicity and NWA are both necessary and sufficient for absorbing
implementation in BRD. Moreover, they characterize implementation in strict Nash
equilibria. Under incomplete information, incentive compatibility is necessary for any kind
of stable implementation in our sense, while Bayesian quasimonotonicity is necessary for
recurrent implementation in interim BRD. Both conditions are also essentially sufficient
for recurrent implementation, together with a Bayesian NWA. A characterization of
implementation in strict Bayesian equilibria is also provided. Partial implementation results
are also obtained.
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Robust implementation, Bounded rationality, Evolutionary dynamics, Mechanisms
Bibliographic citation
Games and Economic Behavior, vol. 73, nº 2, November 2011, p. 360-374