Mechanism Theory

46 Pages Posted: 28 Dec 2014

See all articles by Matthew O. Jackson

Matthew O. Jackson

Stanford University - Department of Economics; Santa Fe Institute

Date Written: December 26, 2014


Some of the basic results and insights of the literature on mechanism design are presented. In that literature game theoretic reasoning is used to model social institutions as varied as voting systems, auctions, bargaining protocols, and methods for deciding on public projects. A theme that comes out of the literature is the difficulty of finding mechanisms compatible with individual incentives that simultaneously result in efficient decisions (maximizing total welfare), the voluntary participation of the individuals, and balanced transfers (taxes and subsidies that net to zero across individuals). This is explored in the context of various incentive compatibility requirements, public and private goods settings, small and large societies, and forms of private information held by individuals.

Keywords: Mechanism, Mechanism Design, Dominant Strategy, Public Goods, Auction, Bargaining, Bayesian Equilibrium, Bayesian Incentive Compatibility, Revelation Principle, Efficiency, Individual Rationality, Balance, Strategy-Proof, Direct Mechanism, Social Choice Function, Single-Peaked Preferences, Impleme

JEL Classification: C71, D71, D72, D78

Suggested Citation

Jackson, Matthew O., Mechanism Theory (December 26, 2014). Available at SSRN: or

Matthew O. Jackson (Contact Author)

Stanford University - Department of Economics ( email )

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Stanford, CA 94305-6072
United States
1-650-723-3544 (Phone)


Santa Fe Institute

1399 Hyde Park Road
Santa Fe, NM 87501
United States

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