Mechanism design is the game-theoretic setting where a designer chooses the game played in order to ensure some desired behavior or some desirable outcome occurs. We cover the VCG mechanism and Revelation Principle.
We consider a highly simplified game between two players.
For a number of differing auction settings, we consider the sale of a single item amongst fixed number of auction participants. It is interesting that under a certain game-theoretic construction all these auctions can be seen to be equivalent.
The Gale-Eisenberg is a nice example were the distributed decisions of buyers and sellers have an equilibrium which solves an optimization problem.
- Utility functions and their equivalence
- Risk Aversion.
- CRRA utility and its equivalence with Iso-elastic utilities.