Strategically simple Mechanisms

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We define and investigate a property of mechanisms that we call “strategic simplicity,” and that is meant to capture the idea that, in strategically simple mechanisms, strategic choices are easy. We define a mechanism to be strategically simple if optimal strategic choices can be based on first-order beliefs alone, and there is no need for agents to form higher-order beliefs because such beliefs are irrelevant to agents’ optimal choices. In many mechanisms, agents who want to make an optimal choice cannot avoid having to form higher-order beliefs. But in some mechanisms, there is no need for this. These are the mechanisms that we investigate and characterize in this paper. All dominant strategy mechanisms are strategically simple. But many more mechanisms are strategically simple. In particular, strategically simple mechanisms may be more flexible than dominant strategy mechanisms in examples such as the voting problem and the bilateral trade problem.

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