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Mechanism Design 2017

Organization

The official course description (including schedule, exam requirements etc.) can be found here. A tentative lecture schedule is at the end of the page.

Lectures: Friday 12.00-15.00, CSS 35-0-12

If you have not taken Micro C (or forgotten most of it…), you might want to (re-)read chapters 1.1-1.3 and 3.1-3.2 in Robert Gibbons’ “Game Theory” book before the course starts. You should also familiarize yourself with the maths handout.

Internal Evaluation

The results of the internal evaluation are now available.

Midterm

The midterm is a take home exam. You have to pass the midterm in order to be admitted to the final exam. The midterm should be done in groups of up to three people. The deadline for handing in is Tuesday April 4, 18:00. Please, hand in via email to “christoph.schottmueller {at} econ.ku.dk”. The questions can be found here.

Please check whether you have passed the midterm in this form.

Exam

The final exam is a take home exam. The date is May 22 at 10am to May 29 at 10am, 2017. This is an individual exam (i.e. no groups). The exam is available via “Digital Exam”.

Material

Lecture slides

(tentative, later changes are possible)

  • W01 Mechanism Design
  • W02 Gibbard Satterthwaite
  • W03 Clarke Groves
  • W04 Expected Externality Mechanism
  • W05 Myerson Satterthwaite
  • W06 Non-linear Pricing
  • W07 Principal Agent / Auctions
  • W09 Correlated Types
  • Information design 1 and 2

Other material

  • Maths for Mechanism Design
  • Handout on a more general proof of the Myerson-Satterthwaite theorem
  • Handout on envelope theorem and single crossing in the non-linear pricing model
  • Contests with risk averse contestants, jupyter notebook

Literature

The main text book for the first part is

  • Mas-Colell, Andreu, Michael Dennis Whinston, and Jerry R. Green. Microeconomic theory. New York: Oxford University Press, 1995. only chapter 23

It is not absolutely necessary to buy the book (though it is a classic for serious micro theorists) and you might want to wait until after the first lecture. Another very interesting book (though with a slightly different approach) of which we will use a chapter or two is

We will also cover (parts of) a few papers. A tentative list of papers is the following (you have to use the on campus internet or connect via VPN in order to download the papers for free):

  • Bergemann, Dirk and Stephen Morris. ”Information Design: A Unified Perspective”, Cowles Foundation Working Paper 2075, (February 2017), link
  • Milgrom, Paul and Segal, Ilya. “Envelope Theorems for Arbitrary Choice Sets.” Econometrica 70.2 (2002): 583–601. http://dx.doi.org/10.1111/1468-0262.00296
  • Cremer, Jacques, and Richard P. McLean. “Full extraction of the surplus in Bayesian and dominant strategy auctions.” Econometrica (1988): 1247-1257. http://www.jstor.org/stable/1913096

Tentative lecture schedule

W1: Introduction

  • administrative things
  • the mechanism design problem
    • social choice function
    • examples
    • mechanism and implementation
  • reading: MWG 23.A and 23.B

W2: Dominant strategy implementation

  • dominant strategy implementation
  • truthful implementation and revelation principle for dominant strategy implementation
  • Gibbard-Satterthwaite theorem
  • reading: MWG p. 869-876

W3: Dominant strategy implementation with quasilinear preferences

  • Groves-Clarke mechanism
  • the problem of budget balance
  • reading: MWG p. 876-882

W4: Bayesian implementation

  • revelation principle for Bayesian implementation
  • expected externality mechanism
  • reading: MWG p. 883-887

W5: lecture cancelled

W6: Participation constraints

  • Myerson-Satterthwaite theorem
  • reading: 887-889 and MWG 23.E
  • optional extra reading on envelope theorems: Milgrom and Segal (2002)

W7: Optimal Bayesian mechanisms in quasilinear environments I

  • efficiency and timing
  • optimal non-linear pricing
  • reading: handout on envelope theorem etc., MWG p. 897-900 and Martimort and Stole (2009) p.84-86 (read the rest of the paper if you are interested)

W8: Optimal Bayesian mechanisms in quasilinear environments II

  • principal-agent problem with hidden information
  • optimal auctions and revenue equivalence
  • reading: MWG p. 889-891 and 900-906 (also 906-910 for those who are interested)

W9: Solution to midterm

  • going through some exercises of the midterm

W10: Correlated types

  • reading: Börgers ch. 6.4 or Cremer and McLean (1988)

W11-13: Information design

  • Bayesian persuasion
  • Buyer optimal learning and monopoly pricing
  • reading: Bergemann and Morris (2017), p. 1-11 and 24-32, Roesler and Szentes (forthcoming)
  • optional reading: Kamenica and Gentzkow (2011)