Economic mechanism design

Designing markets and games to achieve what we collectively want from what we individually want

September 22, 2014 — October 7, 2024

economics
faster pussycat
game theory
incentive mechanisms
institutions
Figure 1

Theory of incentive mechanisms, where we can plug numbers into sufficiently abstract models and maybe extract computational complexity results, and get economic optimality as a side effect. Or the other way around.

Every blockchain-style cryptowhatsit is a mechanism design problem. Better governance is a mechanism design problem.

I would like to keep this page for the provable and elegant pure economic arguments; but in reality we face a much more heuristic, messy world, where we do not simply solve for economic optimality, but also for political feasibility. I think of that as soft mechanism design.

1 Public goods

See public goods for more.

Figure 2: Mecha design, courtesy blueprintbox.

2 Voting systems

See voting systems.

3 Fair division

Especially cake-cutting.

4 In machine learning

For now, see adversarial learning and adversarial networks.

5 Tutorials

Aaron Roth’s Algorithmic Game theory course:

In this course, we will take an algorithmic perspective on problems in game theory. We will consider questions such as: how should an auction for scarce goods be structured if the seller wishes to maximize his revenue? How badly will traffic be snarled if drivers each selfishly try to minimize their commute time, compared to if a benevolent dictator directed traffic? How can couples be paired so that no two couples wish to swap partners in hindsight? How can you be as successful at betting on horse races as the best horse racing expert, without knowing anything about horse racing? How can we set prices so that all goods get sold, and everyone gets their favorite good?

Figure 3: A mechanism incentivising coordination.

6 Quota tokens

Case study. One that I studied in my honours thesis back in the day was the transferred quota system for fisheries management. This is a system where the government sets a total allowable catch for a fishery, and then divides this up into individual quotas that can be traded. It is an elegant system; it looks like it makes the fishers internalise the externalities of overfishing, and it can be shown to be efficient in a competitive equilibrium.

7 Incoming

8 References

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