Collaborative Research: Mechanism Design With Imperfect Commitment

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The investigators will conduct research on mechanism design with imperfect commitment. Their work will use the tools of mathematical economic theory to address an important real-world problem. In many decision and policy environments, the individual who makes a decision does not have all relevant information. For example, often the people who will be affected by a decision have important information that is not directly available to the person making the decision. In this case, the informed individuals may have an incentive to distort what they tell the uninformed decision-maker, in order to distort the eventual outcome towards their self-interest.Mechanism design economics uses tools from game theory to explore this situation. It uses tools from game theory to determine how accurate information can be elicited by providing participants with the right incentives. The theory originates in the study of auctions, taxation, and public goods, and it has also been applied to monetary economics, development economics, and labor economics. This theory has had a substantial impact on the advice economists provide to policy-makers, but it rests on a key assumption: the policy-maker must be able to commit to (or contract on) providing the promised incentives.In practice, this is sometimes difficult. Once the policy-maker has accurate information, he or she may choose to renege on his/her commitment to reward truthtelling. The goal of this research project is to extend the current theory to consider exactly this problem of "imperfect commitment". The result will be a theory that can be applied to a substantially wider range of real-world policy decisions.