# Economic mechanism design

Designing markets and games to achieve what we collectively want from what we individually want

September 22, 2014 — October 7, 2024

Theory of incentive mechanisms, where we can plug numbers into sufficiently abstract models and maybe extract computational complexity results, and get economic optimality as a side effect. Or the other way around.

Every blockchain-style cryptowhatsit is a mechanism design problem. Better governance is a mechanism design problem.

I would like to keep this page for the provable and elegant pure economic arguments; but in reality we face a much more heuristic, messy world, where we do not simply solve for economic optimality, but also for political feasibility. I think of that as soft mechanism design.

## 1 Public goods

See public goods for more.

## 2 Voting systems

See voting systems.

## 3 Fair division

Especially cake-cutting.

~~spliddit~~, a website to use optimal cake cutting algorithms to allocate credit/rent/whatever (Goldman and Procaccia 2015).Oops, their site went down (N. Shah 2017). Code here: nisarg89/spliddit

Alternative: the New York Times rent calculator, as mentioned in Albert Sun’s article Sun (2014) about Su’s research into Sperner’s lemma (Su 1999).

Erica Klarreich’s exposé: The Mathematics of Cake Cutting

## 4 In machine learning

For now, see adversarial learning and adversarial networks.

## 5 Tutorials

Aaron Roth’s Algorithmic Game theory course:

In this course, we will take an algorithmic perspective on problems in game theory. We will consider questions such as: how should an auction for scarce goods be structured if the seller wishes to maximize his revenue? How badly will traffic be snarled if drivers each selfishly try to minimize their commute time, compared to if a benevolent dictator directed traffic? How can couples be paired so that no two couples wish to swap partners in hindsight? How can you be as successful at betting on horse races as the best horse racing expert, without knowing anything about horse racing? How can we set prices so that all goods get sold, and everyone gets their favorite good?

## 6 Quota tokens

Case study. One that I studied in my honours thesis back in the day was the transferred quota system for fisheries management. This is a system where the government sets a total allowable catch for a fishery, and then divides this up into individual quotas that can be traded. It is an elegant system; it looks like it makes the fishers internalise the externalities of overfishing, and it can be shown to be efficient in a competitive equilibrium.

## 7 Incoming

player vs game

Mechanism Design on the AI Alignment Forum

**Related Pages:**Game Theory, Incentives, Principal-Agent Problems, Cryptocurrencies and blockchain, Public discourse**Related Sequences:**Mechanism Design

## 8 References

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*Artificial Intelligence*.

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*The Journal of Socio-Economics*.

*An Introduction to the Theory of Mechanism Design*.

*Artificial Intelligence*.

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*arXiv:1305.4002 [Cs]*.

*Journal of Artificial Intelligence Research*.

*Physica A: Statistical and Theoretical Physics*.

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*Journal of Korean Medical Science*.

*The Journal of Political Economy*.

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*Economics and Computation: An Introduction to Algorithmic Game Theory, Computational Social Choice, and Fair Division*. Springer Texts in Business and Economics.

*Eastern Economic Journal*.

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*Algorithmic Game Theory*.

*arXiv:2106.03007 [Cs, Econ, Stat]*.

*Artificial Intelligence*.

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*XRDS: Crossroads, The ACM Magazine for Students*.

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*The American Mathematical Monthly*.

*The New York Times*.

*Public Choice*.

*arXiv:1411.2139 [Cs]*.

*Mathematical Programming*.