Mechanism design with level-k types: Theory and an application to bilateral trade

• 成果类型: Article
• 署名作者: Kneeland, Terri
• 署名单位: University of London; University College London
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2022.105421
• 发表日期: 2022
• 关键词: Mechanism design; bounded rationality; Level-k thinking; bilateral trade

摘要

We develop necessary and sufficient conditions for level-k implementation that apply in independent private value environments. These conditions establish a set of level-k incentive constraints that are analogous to Bayesian incentive constraints. We show that in two special environments, the level-k incentive constraints collapse down to Bayesian incentive constraints. We then show, via a bilateral trade application, that this is not a general implication. Bilateral trade is ex post efficient under level-k implementation while it is not Bayesian implementable. We also address a robustness question concerning the common prior assumption embedded in level-k implementation by developing the concept of ex post level-k implementation. We develop necessary and sufficient conditions for ex post level-k implementation and show the relationship between ex post level-k and ex post implementation is analogous to the relationship between level-k and Bayesian implementation. (C) 2022 Published by Elsevier Inc.