Obviously Strategy-Proof Mechanisms
62 Pages Posted: 6 Feb 2015 Last revised: 27 Aug 2017
Date Written: June 19, 2017
A strategy is obviously dominant if, for any deviation, at any information set where both strategies first diverge, the best outcome under the deviation is no better than the worst outcome under the dominant strategy. A mechanism is obviously strategy-proof (OSP) if it has an equilibrium in obviously dominant strategies. This has a behavioral interpretation: A strategy is obviously dominant iff a cognitively limited agent can recognize it as weakly dominant. It also has a classical interpretation: A choice rule is OSP-implementable iff it can be carried out by a social planner under a particular regime of partial commitment. I fully characterize the set of OSP mechanisms in a canonical setting, with one-dimensional types and quasi-linear utility. A laboratory experiment tests and corroborates the theory.
Keywords: strategy-proof, mechanism design, auction theory, matching, market design, microeconomic theory
JEL Classification: C72, C73, C78, C91
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