Strategically Simple Mechanisms

TL;DR

This paper introduces the concept of strategic simplicity in mechanisms, where agents only need first-order beliefs to determine optimal strategies, simplifying strategic decision-making beyond dominant strategies.

Contribution

It formally defines strategic simplicity, expanding the class of mechanisms that require limited strategic reasoning, and explores its implications in trade and voting problems.

Findings

All dominant strategy mechanisms are strategically simple.

Many mechanisms beyond dominant strategies are strategically simple.

Strategically simple mechanisms offer more flexibility in trade and voting contexts.

Abstract

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 require limited strategic sophistication. We define a mechanism to be strategically simple if choices can be based on first-order beliefs about the other agents' preferences and first-order certainty about the other agents' rationality alone, and there is no need for agents to form higher-order beliefs, because such beliefs are irrelevant to the optimal strategies. 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 the bilateral trade problem and the voting problem.