Incentive compatibility

A mechanism is called incentive-compatible (IC) if every participant can achieve the best outcome to him/herself just by acting according to his/her true preferences. [1]:225

There are several different degrees of incentive-compatibility:

Every DSIC mechanism is also BNIC, but a BNIC mechanism may exist even if no DSIC mechanism exists.

Typical examples of DSIC mechanisms are majority voting between two alternatives, and second-price auction.

Typical examples of a mechanisms that are not DSIC are plurality voting between three or more alternatives and first-price auction.

Incentive-compatibility in randomized mechanisms

A randomized mechanism is a probability-distribution on deterministic mechanisms. There are two ways to define incentive-compatibility of randomized mechanisms:[1]:231-232

Revelation principles

Main article: Revelation principle

The famous Revelation principle comes in two flavors corresponding to the two flavors of incentive-compatibility:

See also


References

  1. 1 2 3 4 5 6 7 Vazirani, Vijay V.; Nisan, Noam; Roughgarden, Tim; Tardos, Éva (2007). Algorithmic Game Theory (PDF). Cambridge, UK: Cambridge University Press. ISBN 0-521-87282-0.
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