Implementation in adaptive better-response dynamics: Towards a general theory of bounded rationality in mechanisms Articles uri icon

publication date

  • November 2011

start page

  • 360

end page

  • 374


  • 73

International Standard Serial Number (ISSN)

  • 0899-8256

Electronic International Standard Serial Number (EISSN)

  • 1090-2473


  • We study the classic implementation problem under the behavioral assumption that agents myopically adjust their actions in the direction of better-responses or best-responses. First, we show that a necessary condition for recurrent
    implementation in better-response dynamics (BRD) is a small variation of Maskin
    monotonicity, which we call quasimonotonicity. We also provide a mechanism for
    implementation in BRD if the rule is quasimonotonic and excludes worst
    alternatives &- no worst alternative (NWA). Quasimonotonicity and NWA are
    both necessary and sufficient for absorbing implementation in BRD. Moreover,
    they characterize implementation in strict Nash equilibria. Under incomplete
    information, incentive compatibility is necessary for any kind of stable
    implementation in our sense, while Bayesian quasimonotonicity is necessary for
    recurrent implementation in interim BRD. Both conditions are also essentially
    sufficient for recurrent implementation, together with a Bayesian NWA. A
    characterization of implementation in strict Bayesian equilibria is also
    provided. Partial implementation results are also obtained