Approximately Optimal Mechanism Design

Posted: 4 Sep 2019

See all articles by Tim Roughgarden

Tim Roughgarden

Stanford University - Computer Science Department

Inbal Talgam-Cohen

Technion-Israel Institute of Technology

Date Written: August 2019

Abstract

The field of optimal mechanism design enjoys a beautiful and well-developed theory, as well as several killer applications. Rules of thumb produced by the field influence everything from how governments sell wireless spectrum licenses to how the major search engines auction off online advertising. There are, however, some basic problems for which the traditional optimal mechanism design approach is ill suited—either because it makes overly strong assumptions or because it advocates overly complex designs. This article reviews several common issues with optimal mechanisms, including exorbitant communication, computation, and informational requirements; it also presents several examples demonstrating that relaxing the goal to designing an approximately optimal mechanism allows us to reason about fundamental questions that seem out of reach of the traditional theory.

Suggested Citation

Roughgarden, Tim and Talgam-Cohen, Inbal, Approximately Optimal Mechanism Design (August 2019). Annual Review of Economics, Vol. 11, pp. 355-381, 2019. Available at SSRN: https://ssrn.com/abstract=3445881 or http://dx.doi.org/10.1146/annurev-economics-080218-025607

Tim Roughgarden (Contact Author)

Stanford University - Computer Science Department ( email )

353 Serra Mall
Stanford, CA 94305
United States

Inbal Talgam-Cohen

Technion-Israel Institute of Technology ( email )

Technion City
Haifa 32000, Haifa 32000
Israel

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