convincing people about optimal strategies

In some of the applied game theoretic mechanism design work that I do, and that I hear other people present, I’ve noticed a recurring concern. In some mechanism (for auctions, for example), the designer of the mechanism may be able to prove that some strategy (say, honest revelation of one’s preferences) is part of an equilibrium (an optimal strategy given some assumption about others’ strategies), or is even a dominant strategy (an optimal strategy no matter what everyone else does). But it might not be obvious to participants in the game that they cannot gain from deviating.

For example, in my paper with Nolan Miller and Richard Zeckhauser on eliciting effort and honest evaluations, honest reporting of one’s evaluation of a product is a best response (in expected value terms) if everyone else is also reporting honestly. It’s best in expected value terms, but in particular realizations, an individual may regret reporting honestly. And the proof that it’s best in expected value terms depends on understanding: a) the logarithm function, and b) either Jensen’s inequality, or the ability to take a derivative of the log function.

The issue came up again today in a talk I saw incoming SI Ph.D. student John Lin give about lab experiments with different mutli-unit auction formats.

Someone should do some research about how to convince users that non-strategic behavior is incentive compatible when mathematical analysis demonstrates that it is. If you know of any work related to this, I’d love to hear about it.

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About Paul Resnick

Professor, University of Michigan School of Information Personal home page
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