Research Article
Strategyproofness for “Price Takers” as a Desideratum for Market Design
@INPROCEEDINGS{10.1007/978-3-642-30913-7_1, author={Eduardo Azevedo and Eric Budish}, title={Strategyproofness for “Price Takers” as a Desideratum for Market Design}, proceedings={Auctions, Market Mechanisms, and Their Applications. Second International ICST Conference, AMMA 2011, NewYork, NY, USA, August 22-23, 2011, Revised Selected Papers}, proceedings_a={AMMA}, year={2012}, month={10}, keywords={}, doi={10.1007/978-3-642-30913-7_1} }- Eduardo Azevedo
Eric Budish
Year: 2012
Strategyproofness for “Price Takers” as a Desideratum for Market Design
AMMA
Springer
DOI: 10.1007/978-3-642-30913-7_1
Abstract
We distinguish between two ways a mechanism can fail to be strategyproof. A mechanism may have manipulations that (first-order manipulations); and, a mechanism may have manipulations that (second-order manipulations). We say that a non-strategyproof mechanism is (SP-L) if all of its manipulations vanish with market size; that is, if it is strategyproof for “price takers”. We put “price takers” in quotes because our notion is not limited to mechanisms that explicitly use prices. Our main result is that, given a mechanism with Bayes-Nash or complete information Nash equilibria, there exists a prior free mechanism that is SP-L and that coincides exactly with the original mechanism in the limit. It coincides approximately in large finite markets, with exponential rate of convergence. Thus, while strategyproofness often severely limits what kinds of mechanisms are possible, for our class of problems SP-L does not, and hence may be a useful second-best. We illustrate our concepts with examples from single-unit assignment, multi-unit assignment, matching and auctions.