Mechanism design

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Mechanism design is a field that applies economics and game theory to the design of incentive structures, or mechanisms. Mechanisms are often designed to achieve specific social objectives. Conventionally, mechanism design assumes that players have private information about their preferences and act rationally so as to maximize those preferences.

There are several types of mechanisms:

  • Markets facilitate the provision and exchange of goods between buyers and sellers.
    • Auctions are a type of market in which buyers place bids and the prices and allocation of items are determined by the bids.
    • Matching markets are markets in which members of two sets of players are matched, or goods are allocated to players without prices.
  • Voting systems are mechanisms that aggregate the preferences of individual players into a collective decision.

Mechanisms can be evaluated based on the following criteria:...

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