Econometrica: Jul, 2023, Volume 91, Issue 4
A Theory of Simplicity in Games and Mechanism Design
Marek Pycia, Peter Troyan
We study extensive‐form games and mechanisms allowing agents that plan for only a subset of future decisions they may be called to make (the planning horizon). Agents may update their so‐called strategic plan as the game progresses and new decision points enter their planning horizon. We introduce a family of simplicity standards which require that the prescribed action leads to unambiguously better outcomes, no matter what happens outside the planning horizon. We employ these standards to explore the trade‐off between simplicity and other objectives, to characterize simple mechanisms in a wide range of economic environments, and to delineate the simplicity of common mechanisms such as posted prices and ascending auctions, with the former being simpler than the latter.
Supplement to "A Theory of Simplicity in Games and Mechanism Design"
Marek Pycia and Peter Troyan
This supplementary appendix contains the proofs of the lemmas used in the proofs of the main theorems in Appendix A, as well as the full proofs of Theorem 6 and Lemma 1 from the main text.