Document Type
Discussion Paper
Publication Date
12-1-2018
CFDP Number
2148
CFDP Pages
58
Journal of Economic Literature (JEL) Code(s)
D82
Abstract
We define and investigate a property of mechanisms that we call “strategic simplicity,” and that is meant to capture the idea that, in strategically simple mechanisms, strategic choices require limited strategic sophistication. We define a mechanism to be strategically simple if choices can be based on first-order beliefs about the other agents’ preferences and first-order certainty about the other agents’ rationality alone, and there is no need for agents to form higher-order beliefs, because such beliefs are irrelevant to the optimal strategies. All dominant strategy mechanisms are strategically simple. But many more mechanisms are strategically simple. In particular, strategically simple mechanisms may be more flexible than dominant strategy mechanisms in the bilateral trade problem and the voting problem.
Recommended Citation
Börgers, Tilman and Li, Jiangtao, "Strategically Simple Mechanisms" (2018). Cowles Foundation Discussion Papers. 117.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/117