An Experiment on Nash Implementation

46 Pages Posted: 10 Sep 1998

See all articles by Antonio Cabrales

Antonio Cabrales

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics

Luis C. Corchón

Universidad Carlos III de Madrid - Department of Economics

Date Written: September 13, 2000

Abstract

We perform an experimental test of a modification of the controversial canonical mechanism for Nash implementation, using 3 subjects in non-repeated groups, as well as 3 outcomes, states of nature, and integer choices. We find that this mechanism successfully implements the desired outcome a large majority of the time, providing empirical evidence for the feasibility of such implementation. In addition, the performance is further improved by imposing a fine on a dissident, so that the mechanism implements strict Nash equilibria. However, the strategy profile corresponding to the pure Nash equilibrium is seldom played. Thus, we are left with the puzzle that implementation of the desired result occurs by means of strategy profiles that are not pure Nash equilibria. We offer an explanation based on a mild degree of risk aversion and a taste for truth-telling. While our environment is stylized, our results offer hope that experiments can identify reasonable features for practical implementation mechanisms.

Keywords: Implementation, Experiments, Mechanisms

JEL Classification: C72, C92, D70, D78

Suggested Citation

Cabrales, Antonio and Charness, Gary and Corchón Diaz, Luis Carlos, An Experiment on Nash Implementation (September 13, 2000). Available at SSRN: https://ssrn.com/abstract=108560 or http://dx.doi.org/10.2139/ssrn.108560

Antonio Cabrales (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 65 (Phone)
(34-93) 542 17 46 (Fax)

Gary Charness

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States
805-893-2412 (Phone)
805-893-8830 (Fax)

Luis Carlos Corchón Diaz

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain

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