Designing efficient and incentive compatible mechanisms is almost impossible in quasi-linear environments

Jianxin Yi, Hefei Wang, Yong Li*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

In quasi-linear environments, classic theories state that it is possible to design efficient and incentive-compatible mechanisms, such as Vickrey, Clarke and Groves (VCG) mechanisms. However, once financial constraints are taken into account, we find that almost no financial constraint is compatible with efficiency and individual incentives over unrestricted domains and some restricted domains. Therefore, our results imply that even in quasi-linear environments, it is still impossible to design an efficient and incentive compatible mechanism because of financial constraints.

Original languageEnglish
Pages (from-to)113-117
Number of pages5
JournalEconomics Letters
Volume173
DOIs
Publication statusPublished - Dec 2018
Externally publishedYes

Keywords

  • Efficiency
  • Financial constraints
  • Impossibility
  • Incentive compatibility
  • Mechanism design

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