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Implementation with farsighted agents

Author

Listed:
  • Ville Korpela

    (Turku School of Economics, University of Turku FI-20014, Finland)

  • Michele Lombardi

    (Adam Smith Business School, University of Glasgow; Department of Economics and Statistics, University of Naples)

  • Hannu Vartiainen

    (University of Helsinki and Helsinki Graduate School of Economics, Finland)

Abstract
Agents are farsighted when they consider the ultimate consequences of their actions. We re-examine the classical questions of implementation theory under complete information in a setting with transfers, where farsighted coalitions are considered fundamental behavioral units, and the equilibrium outcomes of their interactions are predicted via the stability notion of the largest consistent set. The designer’s exercise consists of designing a rights structure that formalizes the idea of power distribution in society. The designer’s challenge lies in forming a rights structure in which the equilibrium behavior of agents always coincides with the recommendation given by a social choice rule. We show that (Maskin) monotonicity fully identifies the class of implementable single-valued social choice rules. Even though, monotonicity is not necessary for implementation in general, we show that every monotonic social choice rule can be implemented. These findings imply that the class of implementable social choice rules in core equilibria is unaltered by farsighted reasoning.

Suggested Citation

  • Ville Korpela & Michele Lombardi & Hannu Vartiainen, 2021. "Implementation with farsighted agents," Discussion Papers 140, Aboa Centre for Economics.
    • Handle: RePEc:tkk:dpaper:dp140
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Implementation; rights structures; largest consistent set; core; (Maskin) monotonicity;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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