Econometrica Vol. 91 No. 6 2023

Algorithmic Mechanism Design With Investment

Mohammad Akbarpour¹; Scott Duke Kominers^2,3,4; Kevin Michael Li⁵; Shengwu Li³; Paul Milgrom^5,6

¹ Graduate School of Business, Stanford University · ² Entrepreneurial Management Unit, Harvard Business School · ³ Department of Economics, Harvard University · ⁴ a16z crypto · ⁵ Department of Economics, Stanford University · ⁶ Auctionomics

Abstract

We study the investment incentives created by truthful mechanisms that allocate resources using approximation algorithms. Some approximation algorithms guarantee nearly 100% of the optimal welfare in the allocation problem but guarantee nothing when accounting for investment incentives. An algorithm's allocative and investment guarantees coincide if and only if its confirming negative externalities are sufficiently small. We introduce fast approximation algorithms for the knapsack problem that have no confirming negative externalities and guarantees close to 100% for both allocation and investment.

DOI

10.3982/ecta19559

Volume

91

Issue

6

Pages

1969-2003

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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