Non-Optimal Mechanism Design
- (pp. 3102-24)
Abstract
The optimal allocation of resources in complex environments—like allocation of dynamic wireless spectrum, cloud computing services, and Internet advertising—is computationally challenging even given the true preferences of the participants. In the theory and practice of optimization in complex environments, a wide variety of special and general purpose algorithms have been developed; these algorithms produce outcomes that are satisfactory but not generally optimal or incentive compatible. This paper develops a very simple approach for converting any, potentially non-optimal, algorithm for optimization given the true participant preferences, into a Bayesian incentive compatible mechanism that weakly improves social welfare and revenue. (JEL D82, H82, L82)Citation
Hartline, Jason D., and Brendan Lucier. 2015. "Non-Optimal Mechanism Design." American Economic Review, 105 (10): 3102-24. DOI: 10.1257/aer.20130712Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- H82 Governmental Property
- L82 Entertainment; Media