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Published 1992 | public
Book Section - Chapter

Implementation in Bayesian equilibrium: The multiple equilibrium problem in mechanism design


Implementation theory links together social choice theory and game theory. At a less abstract level, its application provides an approach to welfare economics based on individual incentives. The underlying motivation for implementation theory is most easily seen from the point of view of a relatively uninformed planner who wishes to optimize a social welfare function that depends on environmental parameters about which relevant information is scattered around in the economy. Thus, the planner wishes to both collect as much of this relevant information as possible, and, with this information, make a social decision (e.g., an allocation of resources). This is the classic problem identified by Hurwicz (1972). In the twenty years since, we find numerous research agendas falling into the general category of implementation problems: the study of planning procedures, contracts, optimal regulation and taxation, agency relationships, agendas and committee decision-making, comparative electoral systems, non-cooperative foundations of general equilibrium theory, and even much of the recent theoretical work in accounting and the economics of law.

Additional Information

© Cambridge University Press 1992. Prepared for presentation at the invited symposium on Implementation Theory at the 6th World Congress of the Econometric Society, Barcelona, Spain, August 28, 1990. Support from the National Science Foundation is gratefully acknowledged. Mathias Dewatripont, Matthew Jackson, John Ledyard, and John Moore provided useful comments on an earlier draft. The author especially acknowledges many valuable discussions with Sanjay Srivastava, over a span of several years of collaboration on the subject. Formerly SSWP 760.

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August 20, 2023
January 14, 2024