Formerly Graduate School of Industrial Administration (GSIA)
William Larimer Mellon, Founder
Schenley Park
Pittsburgh, Pennsylvania 15213-3890
United States of America

Pierre Jinghong Liang
Associate Professor of Accounting

Quasi-Robust Multiagent Contracts

Anil Arya
Ohio State University

Joel Demski
University of Florida

Jonathan Glover
Pierre Jinghong Liang
Carnegie Mellon University
 

Management Science, vol. 55, (May 2009), p. 752-762.
 
Downloading the paper
2007-Dec version
 
Abstract
A criticism of mechanism design theory is that the optimal mechanism designed for one environment can produce drastically different actions, outcomes, and payoffs in a second, even slightly different, environment. In this sense, the theoretically optimal mechanisms usually studied are not "robust." In order to study robust mechanisms while maintaining an optimal contracting approach, we study a multiagent model in which the contract must be designed before the environment is as well understood as is usually assumed. The particular model is of an auction setting. Our main result is that if the prior about the correlation in the agents' environments is diffuse enough, the optimal Bayesian-Nash auction is a simple dominant strategy auction (a modified second-price auction) that completely ignores the correlation in the agents' environments.
   
   
   
   

  English Version
Last updated March 6, 2011
send comments to liangj@andrew.cmu.edu 		Chinese Version
Last updated January 6, 2004
send comments to liangj@andrew.cmu.edu