Economic mechanism design for computerized agents (1995) [131 citations — 0 self]
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@INPROCEEDINGS{Varian95economicmechanism,author = {Hal R. Varian},
title = {Economic mechanism design for computerized agents},
booktitle = {In USENIX workshop on Electronic Commerce},
year = {1995},
pages = {13--21}
}
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Abstract:
The field of economic mechanism design has been an active area of research in economics for at least 20 years. This field uses the tools of economics and game theory to design ‘‘rules of interaction’ ’ for economic transactions that will, in principle, yield some desired outcome. In this paper I provide an overview of this subject for an audience interested in applications to electronic commerce and discuss some special problems that arise in this context. 1 Mechanism design As an example of mechanism design in action, let us consider the case of designing an auction to award an item to one of n individuals. Each individual i has a ‘‘maximum willingness to pay’ ’ or ‘‘value’ ’ for the item that we denote by vi. We assume that this value is private information known only by person i. Our goal is to design an auction that will award the item to the person with the highest value.
