Bounded Rationality and Robust Mechanism Design: An Axiomatic Approach

• Published in: The American economic review Vol. 107; no. 5; pp. 235 - 239
• Main Authors: Zhang, Luyao, Levin, Dan
• Format: Journal Article
• Language: English
• Published: Nashville American Economic Association 01.05.2017
• Subjects: Auctions; Axioms; Bounded rationality; Decision theory; Dominant strategy; Dynamic games; Economic models; Equilibrium; Expected utility; Game theory; Mechanism design; MISTAKES IN DOMINANT-STRATEGY MECHANISMS; Nash equilibrium; Rationality; Reason; Utility theory

We propose an axiomatic approach to study the superior performance of mechanisms with obviously dominant strategies to those with only dominant strategies. Guided by the psychological inability to reason state-by-state, we develop Obvious Preference as a weakening of Subjective Expected Utility Theo...