Robust Implementation in Approximate Payoff-monotone Equilibrium

Speaker: Prof Rodrigo Velez

Affiliation: The University of Texas

Zoom: https://uqz.zoom.us/j/82603079317

Abstract: We introduce an approach to full implementation that is informed by empirical evidence. We search for mechanisms that fully implement an scf for a range of information structures. We depart from previous literature in that we use Velez and Brown (2025, https://doi.org/10.1016/j.geb.2025.01.005)'s approximate payoff-monotone equilibrium (APME) as our prediction. APME balances the need to discard implausible Nash equilibria ---so the design is not burdened by them, and also to retain Nash equilibria for which there is a plausible model of behavior that produces them. Our results allow us to identify the conditions in which a dominant strategy mechanism has undesirable equilibria that are both empirically relevant and produce outcomes that are not intended by the mechanism designer. We identify the empirical foundation of our design approach and present evidence in favor of it. We also show that the conclusions of our analysis are supported by experimental data.