Mechanism Design: Applications
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# Mechanism Design: Applications ## Beyond Auctions Mechanism design applies wherever information is private: - **Matching markets** (college admissions, organ donation) - **Public goods provision** (voting on projects) - **Regulation** (designing rules for natural monopolies) - **Social choice** (voting mechanisms)...
Mechanism Design: Applications
Beyond Auctions
Mechanism design applies wherever information is private:
- Matching markets (college admissions, organ donation)
- Public goods provision (voting on projects)
- Regulation (designing rules for natural monopolies)
- Social choice (voting mechanisms)
Key Results
| Result | Statement |
|---|---|
| Revelation Principle | Any social choice function implementable in some equilibrium is truthfully implementable in a direct revelation mechanism |
| Myerson-Satterthwaite | No efficient, budget-balanced, individually rational mechanism exists for bilateral trade |
| Myerson's Optimal Auction | With independent private values, the optimal auction is a second-price auction with a reserve price |
Myerson's Optimal Auction
Optimal reserve price solves:
Where is the seller's value, is the distribution of bidders' values.
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