Partition Obvious Preference and Mechanism Design: Theory and Experiment
33 Pages Posted: 6 Mar 2017 Last revised: 25 Jan 2021
Date Written: April 3, 2017
Substantial evidence from field and laboratory experiments in multiple disciplines shows that decision-makers often choose dominated strategies, violating economic rationality. We offer an axiomatic approach that accounts for such shortcomings in reasoning and provides an explanation to a broad range of such choices. Next, we extend our approach to games and mechanism design and identify a rich class of mechanisms that successfully achieve desirable goals despite the agents’ shortcomings. Finally, we design and conduct laboratory experiments to test the usefulness of our approach; the results suggest that it can help design mechanisms with fewer such violations
Keywords: Mechanism Design, Robust Mechanism, Bounded Rationality, Behavioral Economics.
JEL Classification: D81, D82, D91
Suggested Citation: Suggested Citation