Acknowledgements page ix<br/>Introduction 1<br/>1 Mechanisms and Mechanism Design 14<br/>1.0 Introduction 14<br/>1.1 Mechanisms and Design 18<br/>1.2 Environments and Goal Functions 25<br/>1.3 Mechanisms: Message Exchange Processes and<br/>Game Forms 26<br/>1.4 Initial Dispersion of Information and Privacy<br/>Preservation 29<br/>1.5 Mechanism Design 30<br/>1.6 Mechanism Design Illustrated in aWalrasian Example 31<br/>1.6.1 An Edgeworth Box Economy 31<br/>1.6.2 TheWalrasian Goal Function 32<br/>1.6.3 Mechanisms: The Competitive Mechanism 35<br/>1.6.4 Competitive Equilibrium Conditions 35<br/>1.6.5 The Competitive Mechanism Is a Mechanism 36<br/>1.6.6 The Competitive Mechanism Illustrates Some<br/>Concepts Used in Mechanism Design 37<br/>1.6.7 Privacy Preservation in the Competitive<br/>Mechanism 38<br/>1.6.8 Deriving a Mechanism (Not the Competitive<br/>Mechanism) from a Covering for theWalrasian<br/>Goal Function 40<br/>1.6.9 Informational Properties of the Two<br/>Mechanisms 42<br/>1.6.10 The Rectangles Method Applied to theWalrasian<br/>Goal Function – Informal 44<br/>v<br/>vi Contents<br/>1.7 Introductory Discussion of Informational Efficiency<br/>Concepts 46<br/>1.8 A National Forest 50<br/>2 From Goals to Means: Constructing Mechanisms 63<br/>2.1 Phase One: Mechanism Construction 74<br/>2.1.1 Two Examples 74<br/>2.1.2 Constructing a “Universal” Method of Designing<br/>Informationally Efficient Mechanisms Realizing a<br/>Given Goal Function 83<br/>2.1.3 The Method of Rectangles (RM) 86<br/>2.2 Phase 2: Constructing Decentralized Mechanisms,<br/>from Parameter Indexed Product Structures: Transition<br/>to Message-Indexed Product Structures 101<br/>2.2.0 Introduction 101<br/>2.2.1 Basic Concepts 102<br/>2.2.2 The L-dot Example 104<br/>2.2.3 More Examples 105<br/>2.2.4 General Issues in Mechanism Construction 109<br/>2.2.5 Mechanism Construction for L-dot 114<br/>2.3 Smooth Transversal Construction for Partitions<br/>by the “Flagpole” Method 117<br/>2.3.1 Flagpoles: General Principles 117<br/>2.3.2 Flagpoles: Example 2 (Augmented Inner Product) 120<br/>2.3.3 Flagpoles: A Walrasian Example 125<br/>2.3.4 Unique Solvability Implies Partition 129<br/>2.4 Analytic Aspects 130<br/>2.4.1 Phase Two via Condensation. General Principles 131<br/>2.4.2 The Mount–Reiter Condensation Theorem<br/>(Sufficiency) 136<br/>2.4.3 Walrasian Mechanism Construction 140<br/>2.4.4 Phase Two of Mechanism Design via Condensation<br/>for the Augmented Two-Dimensional Inner<br/>Product 149<br/>2.5 Overlaps 154<br/>2.5.0 Constructing a Mechanism When the<br/>Parameter-Indexed Product Structure Is Not a<br/>Partition: An Example 154<br/>Appendix 163<br/>2.6 Informational Efficiency 165<br/>2.6.1 Main Results 165<br/>2.6.2 The Maximality of Reflexive RM-Coverings 166<br/>2.6.3 Informational Efficiency: General Considerations 168<br/>Contents vii<br/>2.6.4 A Comment on Informational Efficiency Concepts 171<br/>2.6.5 Minimal Informational Size Is Achievable by an rRM<br/>Mechanism 172<br/>2.6.6 Two rRM Coverings of Different Informational Size<br/>for the Same Goal Function: An Example 175<br/>Appendix 180<br/>3 Designing Informationally Efficient Mechanisms Using the<br/>Language of Sets 182<br/>3.1 Introduction 182<br/>3.2 Mechanism Design 183<br/>3.2.1 Decentralization 184<br/>3.3 Mechanisms and Coverings 186<br/>3.4 A Systematic Process for Constructing an rRM Covering 188<br/>3.4.1 OrRM: An Algorithm for Constructing an rRM<br/>Covering of a Finite Parameter Space That Is Minimal<br/>in the Class of Rectangular, F-Contour Contained<br/>Coverings 197<br/>3.5 Constructing a Mechanism from a Covering by the<br/>Transversals Method (TM) 220<br/>3.6 Coverings and Partitions 230<br/>3.7 Informational Efficiency 244<br/>3.7.1 Introduction 244<br/>3.7.2 Observational Efficiency 245<br/>3.7.3 The Maximality of rRM-Coverings 246<br/>3.7.4 Informational Size and Coarseness 250<br/>3.8 Section 1.8 Revisited: A Graphical Presentation 263<br/>3.9 Strategic Behavior 274<br/>3.9.1 Dominant Strategy Implementation 274<br/>3.9.2 Designing Informationally Efficient<br/>Nash-Implementing Mechanisms 279<br/>Appendix: Characterizations of Partitions 290<br/>4 Revelation Mechanisms 296<br/>4.1 Introduction 296<br/>4.1.1 Computational Complexity of Functions 299<br/>4.1.2 Separator Sets and Quotients 303<br/>4.1.3 Algebraic Conditions 306<br/>4.1.4 Privacy-Preserving Mechanisms 307<br/>4.2 Initial Set-Theoretic Constructions 310<br/>4.2.1 Encoded and Essential Revelation Mechanisms 310<br/>4.2.2 F-Equivalence and Encoded Revelation<br/>Mechanisms 310<br/>viii Contents<br/>4.3 The Topological Case 313<br/>4.3.1 Differential Separability 315<br/>4.3.2 The Number of Variables on which F Really<br/>Depends 316<br/>4.3.3 Rank Conditions and Construction of an Essential<br/>Revelation Mechanism for F 317<br/>4.4 Proofs and Examples 322<br/>4.4.1 Leontief and Abelson Theorem 322<br/>4.4.2 Leontief ’s Theorem 324<br/>4.4.3 An Example of the Coordinate Construction 329<br/>4.4.4 Proof of Theorem 4.4.6 331<br/>References 335<br/>Index 341
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