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Unformatted text preview: CS 573: Algorithmic Game Theory Lecture date: March 14, 2008 Instructor: Chandra Chekuri Scribe: James Lai Contents 1 Bayesian Nash Equilibrium 1 2 Mechanisms Without Money 2 2.1 SinglePeaked Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.2 Motivation for Singlepeaked preferences . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.3 House exchange/ Kidney allocation problem . . . . . . . . . . . . . . . . . . . . . . . 3 2.4 Stable Matchings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1 Bayesian Nash Equilibrium Our previous definition of mechanisms is suitable if there exist dominant strategy equilibriums. However, this may be too strong a requirement. For example, there is no dominant strategy equilibrium for a fixed price auction. Also, economists favor the Bayesian approach to knowledge in which instead of the strict private value model, they assume that there is prior distributional knowledge about other peoples valuations. Definition 1.1 (Bayesian Game) A Bayesian game on a set of N players has the following: every i N has a typespace T i every i N has a set of possible actions X i every i N has a probability distribution D i on T i every i N has a utility function u i : T 1 X 1 X 2 ... X n R We assume that All players know D 1 ,...,D n The type t i of i is the outcome drawn from D i independently of other players Players are risk neutral expectation maximizers Definition 1.2 (Bayesian Nash Equilibrium) A strategy for i is a function s i : T i X i . A profile of strategies ( s 1 ,...,s n ) is a Bayesian Nash Equilibrium if and only if for all i , for all t 1 ,...,t n , and for all x i X i E D i [ u i ( t i ,s i ( t i ) ,s i ( t i )] E D i [ u i ( t i ,x i ,s i ( t i )] Note that the expectation is over the random choices of t i from D i We can define mechanisms as before except now the D i is public information. A mechanism implements a social choice function f if for all t 1 ,...,t n , there is a Bayesian Nash equilibrium ( s 1 ,...,s n ) such that a ( s 1 ( t 1 ) ,...,s n ( t n )) = f ( t 1 ,...,t n ) Remark 1.3 It can be shown that a direct revleation mechanism exists whenever a mechanism exists (both with respect to Bayesian Nash equilibrium) 2 Mechanisms Without Money Recall that the GibbardSatterthwaite theorem precludes incentive compatible mechanisms for social choice functions f if  A ...
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This note was uploaded on 02/09/2012 for the course ECON 401 taught by Professor Siyang during the Spring '11 term at Rice.
 Spring '11
 Siyang
 Economics, Game Theory

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