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Mechanism Design
Mechanism design is an analytical framework for thinking clearly and carefully
aboutexactlywhatagiveninstitutioncanachievewhentheinformationnecessary
tomakedecisionsisdispersedandprivatelyheld.Thisbookprovidesanaccount
oftheunderlyingmathematicsofmechanismdesignbasedonlinearprogramming.
Threeadvantagescharacterizetheapproach.Thefirstissimplicity:argumentsbased
onlinearprogrammingarebothelementaryandtransparent.Thesecondisunity:
themachineryoflinearprogrammingprovidesawaytounifyresultsfromdisparate
areasofmechanismdesign.Thethirdisreach:thetechniqueofferstheabilityto
solveproblemsthatappeartobebeyondthereachoftraditionalmethods.Noclaim
is made that the approach advocated should supplant traditional mathematical
machinery. Rather, the approach represents an addition to the tools of the eco-
nomictheoristwhoproposestounderstandeconomicphenomenathroughthelens
ofmechanismdesign.
RakeshV.VohraistheJohnL.andHelenKelloggProfessorofManagerialEco-
nomicsandDecisionSciencesattheKelloggSchoolofManagement,Northwest-
ernUniversity,whereheisalsoDirectoroftheCenterforMathematicalStudiesin
EconomicsandManagementScience.HepreviouslytaughtattheFisherSchoolof
Business,OhioStateUniversity,andistheauthorofAdvancedMathematicalEco-
nomics(2005).ProfessorVohrahasalsocompletedamanuscriptontheprinciples
of pricing with Lakshman Krishnamurthi, Professor of Marketing at the Kellogg
School.ProfessorVohrareceivedhisdoctorateinmathematicsfromtheUniversity
ofMaryland.
EconometricSocietyMonographs
Editors:
RosaL.Matzkin,UniversityofCalifornia,LosAngeles
GeorgeJ.Mailath,UniversityofPennsylvania
TheEconometricSocietyisaninternationalsocietyfortheadvancementofeconomictheoryin
relationto statistics and mathematics. The EconometricSociety Monographseries is designed
to promote the publication of original research contributions of high quality in mathematical
economicsandtheoreticalandappliedeconometrics.
Othertitlesintheseries:
G.S.Maddala,Limiteddependentandqualitativevariablesineconometrics,9780521241434,
9780521338257
GerardDebreu,Mathematicaleconomics:TwentypapersofGerardDebreu,9780521237369,
9780521335614
Jean-MichelGrandmont,Moneyandvalue:Areconsiderationofclassicalandneoclassical
monetaryeconomics,9780521251419,9780521313643
FranklinM.Fisher,Disequilibriumfoundationsofequilibriumeconomics,9780521378567
AndreuMas-Colell,Thetheoryofgeneralequilibrium:Adifferentiableapproach,
9780521265140,9780521388702
TrumanF.Bewley,Editor,Advancesineconometrics–FifthWorldCongress(VolumeI),
9780521467261
TrumanF.Bewley,Editor,Advancesineconometrics–FifthWorldCongress(VolumeII),
9780521467254
Herve´Moulin,Axiomsofcooperativedecisionmaking,9780521360555,9780521424585
L.G.Godfrey,Misspecificationtestsineconometrics:TheLagrangemultiplierprincipleand
otherapproaches,9780521424592
TonyLancaster,Theeconometricanalysisoftransitiondata,978052143789
AlvinE.RothandMarildaA.OlivieraSotomayor,Editors,Two-sidedmatching:Astudyin
game-theoreticmodelingandanalysis,9780521437882
WolfgangHa¨rdle,Appliednonparametricregression,9780521429504
Jean-JacquesLaffont,Editor,Advancesineconomictheory–SixthWorldCongress(VolumeI),
9780521484596
Jean-JacquesLaffont,Editor,Advancesineconomictheory–SixthWorldCongress(VolumeII),
9780521484602
HalbertWhite,Estimation,inferenceandspecification,9780521252805,9780521574464
ChristopherSims,Editor,Advancesineconometrics–SixthWorldCongress(VolumeI),
9780521444590,9780521566100
ChristopherSims,Editor,Advancesineconometrics–SixthWorldCongress(VolumeII),
9780521444606,9780521566094
RogerGuesnerie,Acontributiontothepuretheoryoftaxation,9780521629560
DavidM.KrepsandKennethF.Wallis,Editors,Advancesineconomicsandeconometrics–
SeventhWorldCongress(VolumeI),9780521589833
DavidM.KrepsandKennethF.Wallis,Editors,Advancesineconomicsandeconometrics–
SeventhWorldCongress(VolumeII),9780521589826
DavidM.KrepsandKennethF.Wallis,Editors,Advancesineconomicsandeconometrics–
SeventhWorldCongress(VolumeIII),9780521580137,9780521589819
DonaldP.Jacobs,EhudKalai,andMortonI.Kamien,Editors,Frontiersofresearchineconomic
theory:TheNancyL.SchwartzMemorialLectures,1983–1997,9780521632225,
9780521635387
A.ColinCameronandPravinK.Trivedi,Regressionanalysisofcountdata,9780521632010,
9780521635677
SteinarStrom,Editor,Econometricsandeconomictheoryinthe20thcentury:TheRagnarFrisch
CentennialSymposium,9780521633239,9780521633659
Continuedonpagefollowingtheindex
Mechanism Design
A Linear Programming Approach
Rakesh V. Vohra
NorthwesternUniversity,Illinois
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(cid:2)c RakeshV.Vohra2011
Thispublicationisincopyright.Subjecttostatutoryexception
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Firstpublished2011
PrintedintheUnitedStatesofAmerica
AcatalogrecordforthispublicationisavailablefromtheBritishLibrary.
LibraryofCongressCataloginginPublicationdata
Vohra,RakeshV.
Mechanismdesign:alinearprogrammingapproach/RakeshV.Vohra.
p. cm.–(EconometricSocietymonographs;47)
Includesbibliographicalreferencesandindex.
ISBN978-1-107-00436-8(hardback)–ISBN978-0-521-17946-1(paperback)
1. Decision making – Linear programming. 2. Organizational behavior – Mathematical
models. 3.Machinetheory. I.Title.
HD30.23.V637 2011
658.4(cid:2)033–dc22 2011009042
ISBN978-1-107-00436-8Hardback
ISBN978-0-521-17946-1Paperback
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thetruth.”
MortonKamien
“Ifyouweretoreciteevenasinglepageintheopenair,birdswould
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