Communication requirements and strategic mechanisms for market organization

Jan 1, 1991
By: Chakravorti B Journal of Mathematical Economics 35 - 47
Abstract
A mechanism realizes an objective if, when agents are honest, the objective is met when the mechanism is used. A mechanism implements an objective if, when agents act strategically, the objective is met when the mechanism is used. This paper addresses the question: do we incur an 'informational cost', in terms of increased communication requirements, when we insist on implementation of the (constrained) Walrasian correspondence as opposed to, simply, its realization? Communication requirements of a mechanism are measured by the size of its message space. We prove the existence of a mechanism that implements the (constrained) Walrasian correspondence with a message space which is no larger than that of the competitive allocation mechanism. We explore implementation with quasi-games which generalize games in the sense that they have outcome correspondences. Since a quasi-game designer is free to specify a set of outcomes rather than a single outcome for each strategy profile, a smaller amount of information needs to be conveyed to the center. We prove our result using a quasi-game whose solution is well-defined and invariant with respect to alternative beliefs held by agents about selections from the set of out-of-equilibrium outcomes. © 1990.
Copy Citation Chakravorti, B. (1991). Communication requirements and strategic mechanisms for market organization. Journal of Mathematical Economics, 20(1), 35-47. doi:10.1016/0304-4068(91)90016-M Copied to clipboard.
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