The human side of mechanism design: a tribute to Leo Hurwicz and Jean-Jacque Laffont View Full Text


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Article Info

DATE

2009-02-26

AUTHORS

Daniel McFadden

ABSTRACT

This paper considers the human side of mechanism design, the behavior of economic agents in gathering and processing information and responding to incentives. I first give an overview of the subject of mechanism design, and then examine a pervasive premise in this field that economic agents are rational in their information processing and decisions. Examples from applied mechanism design identify the roles of perceptions and inference in agent behavior, and the influence of systematic irrationalities and sociality on agent responses. These examples suggest that tolerance of behavioral faults be added to the criteria for good mechanism design. In principle-agent problems for example, designers should consider using experimental treatments in contracts, and statistical post-processing of agent responses, to identify and mitigate the effects of agent non-compliance with contract incentives. More... »

PAGES

77-100

References to SciGraph publications

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  • 2001-11. What Experimental Protocol Influence Disparities Between Actual and Hypothetical Stated Values? in ENVIRONMENTAL AND RESOURCE ECONOMICS
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  • 2007-05-16. Incentive and informational properties of preference questions in ENVIRONMENTAL AND RESOURCE ECONOMICS
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    DOI

    http://dx.doi.org/10.1007/s10058-009-0075-x

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