Partition Obvious Preference and Mechanism Design: Theory and Experiment

33 Pages Posted: 6 Mar 2017 Last revised: 25 Jan 2021

See all articles by Luyao Zhang

Luyao Zhang

Duke Kunshan University

Dan Levin

Ohio State University (OSU) - Economics

Date Written: April 3, 2017

Abstract

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

Zhang, Luyao and Levin, Dan, Partition Obvious Preference and Mechanism Design: Theory and Experiment (April 3, 2017). Available at SSRN: https://ssrn.com/abstract=2927190 or http://dx.doi.org/10.2139/ssrn.2927190

Luyao Zhang (Contact Author)

Duke Kunshan University ( email )

No. 8 Duke Avenue
Kunshan, Jiangsu 215316
China

HOME PAGE: http://scholars.duke.edu/person/luyao.zhang

Dan Levin

Ohio State University (OSU) - Economics ( email )

1945 N. High Street
Columbus, OH 43210-1172
United States

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