The human side of mechanism design : a tribute to Leo Hurwicz and Jean-Jacque Laffont

This paper considers the human side of mechanism design, the behavior of economic agents in gathering and processing information and responding to incentives. I first give an overview of the subject of mechanism design, and then examine a pervasive premise in this field that economic agents are rational in their information processing and decisions. Examples from applied mechanism design identify the roles of perceptions and inference in agent behavior, and the influence of systematic irrationalities and sociality on agent responses. These examples suggest that tolerance of behavioral faults be added to the criteria for good mechanism design. In principleagent problems for example, designers should consider using experimental treatments in contracts, and statistical post-processing of agent responses, to identify and mitigate the effects of agent non-compliance with contract incentives.

[1]  利久 亀井,et al.  California Institute of Technology , 1958, Nature.

[2]  Robert K. Davis.  Recreation Planning as an Economic Problem , 1963 .

[3]  S. Karlin,et al.  Mathematical Methods in the Social Sciences , 1962 .

[4]  Peter A. Diamond,et al.  Optimal taxation and public production , 1968 .

[5]  J. Mirrlees.  An Exploration in the Theory of Optimum Income Taxation an Exploration in the Theory of Optimum Income Taxation L Y 2 , 2022 .

[6]  R. Zeckhauser,et al.  Insurance, Information, and Individual Action , 1971 .

[7]  E. H. Clarke.  Multipart pricing of public goods , 1971 .

[8]  M. Greenberger.  Computers, Communications and the Public Interest , 1971 .

[9]  Roy Radner,et al.  Existence of Equilibrium of Plans, Prices, and Price Expectations in a Sequence of Markets , 1972 .

[10]  Peter Bohm,et al.  Estimating the demand for public goods: An experiment , 1972 .

[11]  A. Gibbard.  Manipulation of Voting Schemes: A General Result , 1973 .

[12]  Berry Ives,et al.  Bidding games for valuation of aesthetic environmental improvements , 1974 .

[13]  M. Satterthwaite.  Strategy-proofness and Arrow's conditions: Existence and correspondence theorems for voting procedures and social welfare functions , 1975 .

[14]  Martin P. Loeb,et al.  INCENTIVES AND PUBLIC INPUTS , 1975 .

[15]  Roy Radner,et al.  A STOCHASTIC DECENTRALIZED RESOURCE ALLOCATION PROCESS: PART I , 1975 .

[16]  Jerry R. Green,et al.  Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods , 1977 .

[17]  T. Groves,et al.  Optimal Allocation of Public Goods: A Solution to the 'Free Rider Problem' , 1977 .

[18]  Jerry R. Green,et al.  Sampling Approach to the Free-Rider Problem , 1978 .

[19]  P. Diamond.  THE ROLE OF A STOCK MARKET IN A GENERAL EQUILIBRIUM MODEL WITH TECHNOLOGICAL UNCERTAINTY , 1978 .

[20]  Jerry R. Green,et al.  Incentives in public decision-making , 1979 .

[21]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[22]  Theodore Groves,et al.  The Existence of Efficient and Incentive Compatible Equilibria with Public Goods , 1980 .

[23]  H. P. Binswanger.  Attitudes toward risk: Experimental measurement in rural india , 1980 .

[24]  J. Chipman,et al.  Compensating Variation, Consumer's Surplus, and Welfare , 1980 .

[25]  V. Smith.  Experiments with a Decentralized Mechanism for Public Good Decisions , 1980 .

[26]  D. McFadden.  Econometric Models for Probabilistic Choice Among Products , 1980 .

[27]  Sanford J. Grossman,et al.  AN ANALYSIS OF THE PRINCIPAL-AGENT PROBLEM , 1983 .

[28]  D. Brookshire,et al.  Contingent valuation surveys for evaluating environmental assets. , 1983 .

[29]  Jerry R. Green,et al.  Partially Verifiable Information and Mechanism Design , 1986 .

[30]  Alan Randall,et al.  A satisfactory benefit cost indicator from contingent valuation , 1987 .

[31]  A. Tversky,et al.  Contingent weighting in judgment and choice , 1988 .

[32]  Ian Jewitt,et al.  Justifying the First-Order Approach to Principal-Agent Problems , 1988 .

[33]  Thomas R. Palfrey,et al.  Mechanism Design with Incomplete Information: A Solution to the Implementation Problem , 1989, Journal of Political Economy.

[34]  H. Rosenthal,et al.  Digitized by the Internet Archive in 2011 With^ Funding from Testing Game-theoretic Models of Free Riding: New Evidence on Probability Bias and Learning , 2022 .

[35]  Moshe Ben-Akiva,et al.  Estimation of switching models from revealed preferences and stated intentions , 1990 .

[36]  J. Feinstein,et al.  Detection Controlled Estimation , 1990, The Journal of Law and Economics.

[37]  Thomas R. Palfrey,et al.  Nash Implementation Using Undominated Strategies , 1991 .

[38]  C. L. Sheng.  A Theory of Value , 1991 .

[39]  Jonathan S. Feinstein,et al.  An Econometric Analysis of Income Tax Evasion and its Detection , 1991 .

[40]  Jeffrey A. Dubin,et al.  State Income Tax Amnesties: Causes , 1992 .

[41]  Rosa L. Matzkin.  Nonparametric and Distribution-Free Estimation of the Binary Threshold Crossing and the Binary Choice Models , 1992 .

[42]  A. Tversky,et al.  Thinking through uncertainty: Nonconsequential reasoning and choice , 1992, Cognitive Psychology.

[43]  Thomas R. Palfrey,et al.  Voting and Lottery Drafts as Efficient Public Goods Mechanisms , 1994 .

[44]  J. Hausman,et al.  Contingent Valuation: Is Some Number Better than No Number? , 1994 .

[45]  H. Rosenthal,et al.  Repeated Play, Cooperation and Coordination: An Experimental Study , 1994 .

[46]  R. G. Cummings,et al.  Homegrown Values and Hypothetical Surveys: Is the Dichotomous Choice Approach Incentive-Compatible? , 1995 .

[47]  Ronald M. Harstad.  Dominant Strategy Adoption, Efficiency, and Bidders' Experience with Pricing Rules , 1996 .

[48]  John B. Loomis,et al.  Improving Validity Experiments of Contingent Valuation Methods: Results of Efforts to Reduce the Disparity of Hypothetical and Actual Willingness to Pay , 1996 .

[49]  Charles R. Plott,et al.  The Groves-Ledyard mechanism: An experimental study of institutional design , 1996 .

[50]  T. Brown,et al.  Evaluating the Validity of the Dichotomous Choice Question Format in Contingent Valuation , 1997 .

[51]  Tomas J. Philipson,et al.  Data Markets and the Production of Surveys , 1997 .

[52]  R. G. Cummings,et al.  Are Hypothetical Referenda Incentive Compatible? , 1997, Journal of Political Economy.

[53]  J. Shogren,et al.  Cvm‐X: Calibrating Contingent Values with Experimental Auction Markets , 1998 .

[54]  Daniel Kahneman,et al.  Referendum contingent valuation, anchoring, and willingness to pay for public goods , 1998 .

[55]  Neil A. Powe,et al.  Contingent Valuation and Real Economic Commitments: A Private Good Experiment , 1998 .

[56]  Per-Olov Johansson,et al.  An experimental comparison of dichotomous choice contingent valuation questions and real purchase decisions , 1998 .

[57]  E. Fehr.  A Theory of Fairness, Competition and Cooperation , 1998 .

[58]  Colin Camerer,et al.  The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework , 1999 .

[59]  Gregory L. Poe,et al.  Voluntary revelation of the demand for public goods using a provision point mechanism , 1999 .

[60]  E. Fehr,et al.  Cooperation and Punishment in Public Goods Experiments , 1999, SSRN Electronic Journal.

[61]  Anup Malani,et al.  Measurement errors: A principal investigator-agent approach , 1999 .

[62]  J. Whitehead,et al.  Are Hypothetical Referenda Incentive Compatible? A comment , 1999, Journal of Political Economy.

[63]  J. Feinstein,et al.  Approaches for Estimating Noncompliance: Examples from Federal Taxation in the United States , 1999 .

[64]  Ilana Ritov,et al.  Economic Preferences or Attitude Expressions?: An Analysis of Dollar Responses to Public Issues , 1999 .

[65]  Nicholas E. Flores,et al.  Contingent Valuation: Controversies and Evidence , 2000 .

[66]  D. Hensher,et al.  Stated Choice Methods: Analysis and Applications , 2000 .

[67]  P. Frykblom.  Willingness to pay and the choice of question format: experimental results , 2000 .

[68]  John Morgan,et al.  Financing Public Goods by Means of Lotteries , 2000 .

[69]  J. Laffont,et al.  Mechanism Design with Collusion and Correlation , 2000 .

[70]  Emmanuel Saez,et al.  You have printed the following article : Using Elasticities to Derive Optimal Income Tax Rates , 2007 .

[71]  R. Mark Isaac,et al.  Experiments With the Pivot Process for Providing Public Goods , 2000 .

[72]  J. Shogren,et al.  An Experimental Testing of Anchoring Effects in Discrete Choice Questions , 2000 .

[73]  Richard T. Carson,et al.  Incentive and informational properties of preference questions , 2007 .

[74]  Toshiji Kawagoe,et al.  Can the Pivotal mechanism induce truth-telling? An experimental study , 2001 .

[75]  John A. List,et al.  What Experimental Protocol Influence Disparities Between Actual and Hypothetical Stated Values? , 2001 .

[76]  Paolo Belli.  How adverse selection affects the health insurance market , 2001 .

[77]  E. Fehr,et al.  Psychological Foundations of Incentives , 2002 .

[78]  Richard C. Bishop,et al.  Donation Payment Mechanisms and Contingent Valuation: An Empirical Study of Hypothetical Bias , 2001 .

[79]  Peter Martinsson,et al.  Do Hypothetical and Actual Marginal Willingness to Pay Differ in Choice Experiments?: Application to the Valuation of the Environment , 2001 .

[80]  Tomas J. Philipson,et al.  Data Markets, Missing Data, and Incentive Pay , 2001 .

[81]  Gregory L. Poe,et al.  Provision Point Mechanisms and Field Validity Tests of Contingent Valuation , 2002 .

[82]  J. Whitehead.  Incentive Incompatibility and Starting-Point Bias in Iterative Valuation Questions , 2002, Land Economics.

[83]  G. Imbens,et al.  Identification and Estimation of Triangular Simultaneous Equations Models without Additivity , 2002 .

[84]  Nicholas E. Flores,et al.  Contingent Valuation and Incentives , 2002, Land Economics.

[85]  U. Fischbacher,et al.  Why Social Preferences Matter - the Impact of Non-Selfish Motives on Competition, Cooperation and Incentives , 2002 .

[86]  John A. List,et al.  BIDDING BEHAVIOR AND DECISION COSTS IN FIELD EXPERIMENTS , 2002 .

[87]  U. Fischbacher,et al.  A Nation-Wide Laboratory: Examining Trust and Trustworthiness by Integrating Behavioral Experiments into Representative Survey , 2003, SSRN Electronic Journal.

[88]  Charles F. Manski,et al.  Confidence Intervals for Partially Identified Parameters , 2003 .

[89]  Andrew Chesher,et al.  Nonparametric Identification under Discrete Variation , 2003 .

[90]  J. Herriges,et al.  Combining Revealed and Stated Preferences: Consistency Tests and Their Interpretations , 2003 .

[91]  J. List.  Does market experience eliminate market anomalies , 2003 .

[92]  B. Provencher,et al.  Experience, Expectations and Hindsight: Evidence of a Cognitive Wedge in Stated Preference Retrospectives , 2004 .

[93]  E. Maskin.  The Unity of Auction Theory , 2004 .

[94]  T. Schroeder,et al.  Are Choice Experiments Incentive Compatible? A Test with Quality Differentiated Beef Steaks , 2004 .

[95]  L. Venkatachalam.  The contingent valuation method: a review , 2004 .

[96]  Paul Klemperer,et al.  Auctions: Theory and Practice , 2004 .

[97]  D. McFadden.  Welfare Economics at the Extensive Margin Giving Gorman Polar Consumers Some Latitude , 2004 .

[98]  U. Fischbacher,et al.  Social norms and human cooperation , 2004, Trends in Cognitive Sciences.

[99]  Mark A Walker,et al.  Behavior in second-price auctions by highly experienced eBay buyers and sellers , 2004 .

[100]  Paul Milgrom,et al.  Putting Auction Theory to Work , 2004 .

[101]  Junyi Shen,et al.  A Review of Stated Choice Method , 2005 .

[102]  Youngseo Kim.  Audit Misperception, Tax Compliance, and Optimal Uncertainty , 2005 .

[103]  Charles F. Manski,et al.  Social Choice with Partial Knowledge of Treatment Response , 2020 .

[104]  Crowley Js.  Medicare prescription drug coverage: preparing for January 1, 2006. , 2005 .

[105]  D. McFadden,et al.  Who failed to enroll in Medicare Part D, and why? Early results. , 2006, Health affairs.

[106]  M. David.  The Theory of Incentives , 2006 .

[107]  E. Maasland,et al.  Auction Theory , 2021, Springer Texts in Business and Economics.

[108]  A. Temimi,et al.  Lotteries, Group Size, and Public Good Provision , 2006 .

[109]  Timothy N. Cason,et al.  Secure Implementation Experiments: Do Strategy-proof Mechanisms Really Work? † , 2003 .

[110]  John A. List,et al.  Using Choice Experiments to Value Non-Market Goods and Services: Evidence from Field Experiments , 2006 .

[111]  Mick P. Couper,et al.  Survey Incentives: Cash vs. In-Kind; Face-to-Face vs. Mail; Response Rate vs. Nonresponse Error , 2006 .

[112]  Joachim Winter,et al.  Medicare prescription drug coverage: Consumer information and preferences , 2006, Proceedings of the National Academy of Sciences of the United States of America.

[113]  S. Chilton,et al.  Contingent Valuation and Social Choices Concerning Public Goods : An Overview of Theory, Methods and Issues , 2007 .

[114]  D. McFadden,et al.  Mind the Gap! Consumer Perceptions and Choices of Medicare Part D Prescription Drug Plans , 2007 .

[115]  A. C. van der Klauw,et al.  Nonparametric identification , 2020, Modeling, Identification and Simulation of Dynamical Systems.

[116]  Mind the Gap! Perceptions and choices of medicare part D prescription drug plans , 2008 .

[117]  D. McFadden,et al.  Consumer-Directed Health Care: Can Consumers Look After Themselves? , 2008 .