A Theory of Simplicity in Games and Mechanism Design

University of Zurich, Department of Economics, Working Paper No. 393

83 Pages Posted: 8 Jul 2021

See all articles by Marek Pycia

Marek Pycia

University of Zurich

Peter Troyan

University of Virginia (UVA) - Economics

Multiple version iconThere are 3 versions of this paper

Date Written: June 2021

Abstract

We introduce a general class of simplicity standards that vary the foresight abilities required of agents in extensive-form games. Rather than planning for the entire future of a game, agents are presumed to be able to plan only for those histories they view as simple from their current perspective. Agents may update their so-called strategic plan as the game progresses, and, at any point, for the called-for action to be simply dominant, it must lead to unambiguously better outcomes, no matter what occurs at non-simple histories. We use our gradated approach to simplicity to provide characterizations of simple mechanisms. While more demanding simplicity standards may reduce the flexibility of the designer in some cases, this is not always true, and many well-known mechanisms are simple, including ascending auctions, posted prices, and serial dictatorship-style mechanisms. In particular, we explain the widespread popularity of the well-known Random Priority mechanism by characterizing it as the unique mechanism that is efficient, fair, and simple to play.

Keywords: Simplicity, simple dominance, limited foresight, obvious dominance, strongly obvious dominance, market design, mechanism design, extensive-form games, auctions, allocation

JEL Classification: C72, C78, D01, D02, D44, D47, D82

Suggested Citation

Pycia, Marek and Troyan, Peter, A Theory of Simplicity in Games and Mechanism Design (June 2021). University of Zurich, Department of Economics, Working Paper No. 393, Available at SSRN: https://ssrn.com/abstract=3881072 or http://dx.doi.org/10.2139/ssrn.3881072

Marek Pycia (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Peter Troyan

University of Virginia (UVA) - Economics ( email )

1400 University Ave
Charlottesville, VA 22903
United States

HOME PAGE: http://people.virginia.edu/~pgt8y

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