Quotation Zhang, Luyao, Levin, Dan . 2017. Bounded Rationality and Robust Mechanism Design: An Axiomatic Approach. American Economic Review Papers and Proceedings. 107 (5), 235-239.


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Abstract

We propose an axiomatic approach to study the superior performance of mechanisms with obviously dominant strategies to those with only dominant strategies. Guided by the psychological inability to reason state-by-state, we develop Obvious Preference as a weakening of Subjective Expected Utility Theory. We show that a strategy is an obviously dominant if and only if any Obvious Preference prefer it to any deviating strategy at any reachable information set. Applying the concept of Nash Equilibrium to Obvious Preference, we propose Obvious Nash Equilibrium to identify a set of mechanisms that are more robust than mechanisms with only Nash Equilibria.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal American Economic Review Papers and Proceedings
WU-Journal-Rating new FIN-A, VW-B
Language English
Title Bounded Rationality and Robust Mechanism Design: An Axiomatic Approach
Volume 107
Number 5
Year 2017
Page from 235
Page to 239
URL https://www.aeaweb.org/articles?id=10.1257/aer.p20171030
DOI http://dx.doi.org/10.1257/aer.p20171030
Open Access N
JEL C72, D11, D82

Associations

People
Zhang, Luyao (Former researcher)
External
Levin, Dan (Ohio State University, United States/USA)
Organization
Department of Economics (Sausgruber) (Details)
Department of Economics DP (Details)
Competence Center for Experimental Research WE (Details)
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