Paper #179

Title:

Adaptive dynamics and the implementation problem with complete information

Author:

Antonio Cabrales

Date:

July 1996

Abstract:

This paper studies the equilibrating process of several implementation mechanisms using naive adaptive dynamics. We show that the dynamics converge and are stable, for the canonical mechanism of implementation in Nash equilibrium. In this way we cast some doubt on the criticism of ``complexity'' commonly used against this mechanism. For mechanisms that use more refined equilibrium concepts, the dynamics converge but are not stable. Some papers in the literature on implementation with refined equilibrium concepts have claimed that the mechanisms they propose are ``simple'' and implement ``everything'' (in contrast with the canonical mechanism). The fact that some of these ``simple'' mechanisms have unstable equilibria suggests that these statements should be interpreted with some caution.

Keywords:

Implementation, bounded rationality, evolutionary dynamics, mechanisms

JEL codes:

C72, D70, D78

Area of Research:

Microeconomics

Published in:

Journal of Economic Theory, 86, (1999), pp. 159-184

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