Stable by Design: Incorporating Core Stability into Mechanisms
This paper synthesizes non-cooperative and cooperative game theories to deepen our understanding of market design. We study the complex interplay between stability, efficiency, and revenue maximization in centralized mechanisms for two-sided markets. A stable mechanism is one whose equilibrium withstands deviations by participants, whether individual or collective, deterring external contracting. Gale and Shapley’s (1962) marriage model, and the competitive equilibrium theory of Arrow and Debreu (1954) underscore the importance of stability in securing favorable market outcomes. We establish that in two-sided trade model, it is possible to design mechanisms that are incentive compatible, individually rational, and budget balanced, with equilibria that align with the core. Additionally, this paper explores how the core’s convergence properties toward competitive equilibria under changes in information symmetry and market thickness.
Date: 17 May 2024, 12:45 (Friday, 4th week, Trinity 2024)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar Room G or https://zoom.us/j/96595245637?pwd=dEdBSGpXN0xoNEdhSUs4Z3JlVHl3dz09
Speaker: Toan Le (University of Oxford)
Organising department: Department of Economics
Part of: Student Research Workshop in Micro Theory
Booking required?: Not required
Audience: Members of the University only
Editor: Edward Clark