Incentive Compatibility in Two-Stage Repeated Stochastic Games

Abstract

We address mechanism design for two-stage repeated stochastic games — a setting using which many emerging problems in electricity markets can be readily modeled. We introduce the notion of Dominant Strategy Non-Bankrupting Equilibrium (DNBE) which requires players to make very few assumptions about the behaviors of other players in order to employ their equilibrium strategy. Consequently, a mechanism that renders truth-telling a DNBE could be quite effective in molding real-world behavior along truthful lines. We present a mechanism for two-stage repeated stochastic games that renders truth-telling a Dominant Strategy Non-Bankrupting Equilibrium.