Almost-Dominant Strategy Implementation: Exchange Economies, Games and Economic Behavior
Though some environments yield reasonable allocation rules that are implementable in dominant strategies (i.e., strategy-proof),a significant number yield impossibility results.On the other hand, while there are general possibility results for implementation in Nash or Bayesian equilibrium, these equilibrium concepts make strong assumptions about the players' knowledge. Since such assumptions may not be practical in various design scenarios, we formulate a solution concept built on one premise: Players who do not have much to gain by manipulating will not bother to do so. For an exchange economy model, we search for efficient rules that never provide players with large gains from manipulation. Though the rules we describe are inequitable, they are significantly more flexible than those that satisfy the stronger condition of strategy-proofness, even when the allowable gains from manipulation are made arbitrarily small. This demonstrates a type of non-robustness in previous impossibility results.
Schummer, James. 2004. Almost-Dominant Strategy Implementation: Exchange Economies. Games and Economic Behavior. 48(1): 321-336.