Mechanism Design Theory Research Articles

The Partial Solution of First Price Sealed Bid Auction in the Scope of Mechanism Design Theory and With Uniformly Distributed Types

In the article the first price sealed bid auction has been analysed within the scope of mechanism design theory and with uniformly distributed types. The sealed bid auction consisting of two of agents has been observed finding the partial solution to the auction. Bayesian Nash equilibrium strategies, the equilibrium state, and the implemented social choice function for the auction have been evaluated. The mechanism has been designed to truthfully implement the social choice function for the auction consisting of two agents. The variables such as the probability of an agent to win, the expected utility of an agent and the expected revenue of the seller have been evaluated.

Research and Implementation of Pneumatic Amphibious Soft Bionic Robot

To meet the requirements of amphibious exploration, ocean exploration, and military reconnaissance tasks, a pneumatic amphibious soft bionic robot was developed by taking advantage of the structural characteristics, motion forms, and propulsion mechanisms of the sea lion fore-flippers, inchworms, Carangidae tails, and dolphin tails. Using silicone rubber as the main material of the robot, combined with the driving mechanism of the pneumatic soft bionic actuator, and based on the theory of mechanism design, a systematic structural design of the pneumatic amphibious soft bionic robot was carried out from the aspects of flippers, tail, head–neck, and trunk. Then, a numerical simulation algorithm was used to analyze the main executing mechanisms and their coordinated motion performance of the soft bionic robot and to verify the rationality and feasibility of the robot structure design and motion forms. With the use of rapid prototyping technology to complete the construction of the robot prototype body, based on the motion amplitude, frequency, and phase of the bionic prototype, the main execution mechanisms of the robot were controlled through a pneumatic system to carry out experimental testing. The results show that the performance of the robot is consistent with the original design and numerical simulation predictions, and it can achieve certain maneuverability, flexibility, and environmental adaptability. The significance of this work is the development of a pneumatic soft bionic robot suitable for amphibious environments, which provides a new idea for the bionic design and application of pneumatic soft robots.

Design and cooling of permanent magnet generator in MW-class space closed Brayton cycle system

The closed Brayton cycle (CBC) system is a prime energy conversion technology to convert heat from the reactor to electric power for space missions due to its light weight, compact and stable operation. The CBC system incorporates a permanent magnet generator (PMG) mounted on the CBC shaft with the turbine and compressor. To ensure safe operation of the CBC system, a small fraction of the working fluid is used to provide the required cooling. In this study, four different cooling schemes used in CBC system are concluded and the key dimensions of the PMG are obtained through mechanical design theory and electromagnetic theory. Comprehensive research on the electromagnetic field and loss calculation is then performed. Furthermore, the cooling paths of the PMG are designed and the resulting temperature profiles are calculated. Finally, different cooling schemes are compared and the appropriate cooling advice is proposed.

Mechanism Design Theory in Control Engineering: A Tutorial and Overview of Applications in Communication, Power Grid, Transportation, and Security Systems

Mechanism Design Theory in Control Engineering: A Tutorial and Overview of Applications in Communication, Power Grid, Transportation, and Security Systems

Optimal energy procurement with long-term photovoltaic energy contracts considering generation uncertainty: A two-dimensional auction approach

The procurement auction scheme for long-term photovoltaic (PV) energy contracts is being implemented in various countries to ensure stable profits for potential PV generators. However, in most of these auction formats, there is a deficiency in that they consider only the contract price and capacity, neglecting to account for the uncertainty of generation efficiency. In this regard, this study proposes a procurement auction scheme for long-term photovoltaic (PV) energy contracts based on mechanism design theory. We developed a two-dimensional auction model in which PV generators bid their cost and capacity. The energy buyer then determines the winners and enters into contracts with them for a fixed period. We incorporated the capacity factor into the payoff functions of both the buyer and the sellers to reflect different generation efficiencies of generators. Following the revelation principle, we characterized the incentive-compatible, individually rational direct mechanism that maximizes the buyer’s expected payoff during the contract period. We also proposed a computation algorithm to implement the auction. Numerical analysis using data from the Korean PV auction market suggested that the proposed model demonstrates results similar to the uniform price auction in terms of the levelized cost of electricity and contract price, and these results are lower than those of the Vickrey auction. Furthermore, despite the fact that the proposed auction results in a slight increase in social costs (approximately 1% more than the Vickrey auction), it maximizes the expected procured electricity and the auctioneer’s payoff.

Developing a region's economic security mechanism

Subject. This article discusses the role of healthcare in ensuring economic security. Objectives. The article aims to develop a model for assessing the level of economic security in the region, taking into account the costs of providing medical care in various conditions. Methods. For the study, I used a simulation approach based on the concept of mechanism design and game theory. Results. The article finds the dependence between the content of the development strategies of medical organizations and the level of economic security of the region. The article presents a developed mathematical model that helps predict the level of economic security in the region and determine priorities in financing the healthcare system. Conclusions. The article concludes that the probability of bankruptcy of private medical organizations is quite high, since the strategies chosen by them lead to the need to attract funding from extra-budgetary sources for all conditions of medical care.

How can China's subsidy promote the transition to electric vehicles?

Promoting the transition from traditional fuel vehicles to electric vehicles can significantly reduce carbon emissions and dependence on oil. Government subsidies play a pivotal role in this transition process. However, the extant research mainly quantifies the effects of these subsidies on research and development investments or patents, failing to depict the actual extent of transformation. This study emphasizes the influence of government subsidies on transformation rather than research and development performance, and the contingent conditions under which the subsidies prove effective. To achieve these objectives, this analysis utilizes unbalanced panel data from 128 listed companies in the Chinese auto industry, spanning from 2010 to 2020 with a fixed-effect model. The results show that: (1) government subsidies have a negative impact on the extent of enterprise transformation towards electric vehicles, moreover, (2) this negative effect is mitigated, and even reversed by tightening technical requirements and reducing subsidy intensity. To promote the transformation to electric vehicles, this work suggests that financial support should target the bottlenecked parts of the industrial chain; promote the development of emerging industries from the demand side, and interweave these efforts with market mechanisms. The study also advises policymakers to conduct thorough analyses of the incentive effects of various options, based on the principles of mechanism design theory.

Optimal cardinal contests

We study the design of crowdsourcing contests in settings where the outputs of the contestants are quantifiable, for example, a data science challenge. This setting is in contrast to those where the output is only qualitative and cannot be objectively quantified, for example, when the goal of the contest is to design a logo. The literature on crowdsourcing contests focuses largely on ordinal contests, where contestants' outputs are ranked by the designer and awards are based on relative ranks. Such contests are ideally suited for the latter setting, where output is qualitative. For our setting (quantitative output), it is possible to design cardinal contests, where awards could be based on the actual outputs and not on their ranking alone—thus, the family of cardinal contests includes the family of ordinal contests. We study the problem of designing an optimal cardinal contest. We use mechanism design theory to derive an optimal cardinal mechanism and provide a convenient implementation—a decreasing reward‐meter mechanism—of the optimal contest. We establish the practicality of our mechanism by showing that it is “Obviously Strategy‐Proof,” a recently introduced formal notion of simplicity in the literature. We also compare the optimal cardinal contest with the most popular ordinal contest—namely, the Winner‐Takes‐All (WTA) contest, along several metrics. In particular, the optimal cardinal mechanism delivers a superior expected best output, whereas the WTA contest yields a greater expected contestant welfare. Furthermore, under a sufficiently large budget, the contest designer's expected net‐benefit is higher under the optimal cardinal mechanism than that under the WTA contest, regardless of the number of contestants in the two mechanisms. Our numerical analysis suggests that, for the contest designer, the average improvement provided by the optimal cardinal mechanism over the WTA contest is about 23%. For a given number of contestants, the benefit of the optimal cardinal mechanism is especially appreciable for projects where the ratio of the designer's utility to agents' cost‐of‐effort falls within a wide practical range. For projects where this ratio is very high, the expected profit of the best WTA contest is reasonably close to that of the optimal cardinal mechanism.

Data-driven incentive mechanism design for chronic disease prevention from the perspective of government

Current government subsidies on prevention fail to effectively incentive primary care providers and patients with chronic diseases, resulting in ineffective prevention. It hinders the shift from “the treatment-based” to “the combination of prevention and treatment” philosophy for chronic diseases. To encourage primary care provider and patients with chronic diseases to make better prevention efforts, a sequential game model for government-primary care provider-patients is developed. Using mechanism design theory, an incentive mechanism for chronic disease prevention is proposed. This mechanism aims to increase patients’ motivation for prevention and ensure truthful reporting of their prevention efforts. Moreover, by integrating data from a primary care provider in Jiangsu Province, a closed loop with problem analysis-model construction-results testing is established. Specifically, with the data, the severity of prevention inefficiencies is quantified, the key functions required for modelling are identified with a new and identifiable regression method. Furthermore, the proposed mechanism is compared to the original mechanism in terms of its impact on the government, primary care provider, and patients.The comparison demonstrates the superiority of the proposed mechanism. This study reveals that the mechanism aligns the interests of all subjects by redistributing government subsidies between the primary care provider and the patients. The mechanism adjusts the primary care provider's authority to use the left subsidies. Besides, it enables the primary care provider to actively monitor and motivate patients to take further prevention action. Meanwhile,it successfully makes patients increase their prevention efforts and report them truthfully. Finally,the robustness of the model has also been demonstrated and verified.

Game Analysis on the effect of consumer coupons and its impact on CPI

<p style="text-align: justify;">According to economic theory and common sense, the issuance of consumption coupons on one hand stimulated the increasing of residents' consumption, but on the other pushed up the price level. In this paper, using the theory of mechanism design, the game model was built to analyze the relationship between the effect of consumer coupons during the epidemic and the number of merchants participated. The results show that the smaller the merchants’ number, the weaker the coupons’ effect, vice versa. Then, using KNN regression method, combined with the monthly year-on-year data of CPI from 1998 to 2020, this paper analyzes the changes of CPI forecast value and actual value in the first 10 months of 2020, finding that the actual value of CPI is higher than the predicted one during the first two months of 2020, but lower from March 2020 on, which further verifies the conclusion of game analysis.</p>

Multi physical comprehensive design of a new type of FeCo based high speed permanent magnet motor

In order to solve the problem that the design of high-speed permanent magnet motor (HSPMM) is constrained by multi-physical fields, this paper starts with the comprehensive study of multi physical fields, introduces the finite element calculation model of rotor strength-rotor dynamics-electromagnetic field-fluid field and temperature field, carries out the comprehensive design of a 100 kW, 18 000 r/min FeCo based HSPMM, and gives the detailed and complete research process of the main parameters of HSPMM under multi-physical field constraints. First, the initial dimensions of the motor are obtained by electromagnetic and mechanical design theory. Secondly, the influence of design parameters on rotor stress is analyzed in detail, including the influence of bearing rigidity, impeller mass, rotor diameter, rotor core length and gyroscopic effect on critical speed. Subsequently, the electromagnetic characteristics of the motor are comprehensively studied, the cooling system is designed in the Flow-Heat coupling calculation model and the temperature field is studied. Finally, the prototype test verifies the correctness and validity of the comprehensive research method of multi physical field.

Optimal Contract Design for a National Brand Manufacturer Under Store Brand Private Information

Problem definition: We study an optimal contract design problem for a national brand (NB) manufacturer, which sells her product via a retailer. The retailer may introduce his store brand (SB) with private cost information. The manufacturer estimates that the retailer’s SB cost may be high or low with certain probabilities and offers a menu of two-part tariff contracts to screen the retailer’s cost information. Methodology/results: Following the mechanism design theory, we formulate the problem as a two-stage screening game to analyze the strategic interaction between the two players under asymmetric information. Despite the complexity resulting from type-dependent reservation profit of the retailer, we derive the NB manufacturer’s optimal contracts analytically. We prove that there exists a unique threshold such that when the NB cost is below the threshold, the manufacturer offers both types of retailers incentive-compatible contracts; when the NB cost is above the threshold, the manufacturer offers a menu of contracts to shut down the low-type retailer and engage the high-type retailer only. Managerial implications: We find that when the NB product becomes more competitive (i.e., a higher quality or a lower cost), both the NB manufacturer and the retailer are better off. This result implies that under asymmetric information, the retailer has incentive to enhance the NB product quality or reduce its cost. Additionally, the private information is valuable to both members only when a contract without shutdown is offered. Moreover, such information is more valuable to both players when the NB product becomes more competitive. However, when SB quality improves or when SB cost decreases, the value of information may increase or decrease to both supply chain members. Finally, we derive a surprising result that under asymmetric information, the expected consumer surplus may increase because of a lower SB quality or a higher low-type SB cost. Funding: G. Xiao acknowledges financial support from the Research Grants Council of Hong Kong [General Research Fund Grant PolyU 15505621]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2021.0187 .

QoS-Based Contract Design for Profit Maximization in IoT-Enabled Data Markets

The massive deployment of Internet of Things (IoT) devices, including sensors and actuators, is ushering in smart and connected communities of the future. The massive deployment of Internet of Things (IoT) devices, including sensors and actuators, is ushering in smart and connected communities of the future. The availability of real-time and high-quality sensor data is crucial for various IoT applications, particularly in healthcare, energy, transportation, etc. However, data collection may have to be outsourced to external service providers (SPs) due to cost considerations or lack of specialized equipment. Hence, the data market plays a critical role in such scenarios where SPs have different quality levels of available data, and IoT users have different application-specific data needs. The pairing between data available to the SP and users in the data market requires an effective mechanism design that considers the SPs’ profitability and the quality-of-service (QoS) needs of the users. We develop a generic framework to analyze and enable such interactions efficiently, leveraging tools from contract theory and mechanism design theory. It can enable and empower emerging data sharing paradigms such as Sensing-as-a-Service (SaaS). The contract design creates a pricing structure for on-demand sensing data for IoT users. By considering a continuum of user types, we capture a diverse range of application requirements and propose optimal pricing and allocation rules that ensure QoS provisioning and maximum profitability for the SP. Furthermore, we provide analytical solutions for fixed distributions of user types to analyze the developed approach. For comparison, we consider the benchmark case assuming complete information of the user types and obtain optimal contract solutions. Finally, a case study based on the example of virtual reality application delivered using unmanned aerial vehicles (UAVs) is presented to demonstrate the efficacy of the proposed contract design framework.

Breaking the traditional: a survey of algorithmic mechanism design applied to economic and complex environments.

The mechanism design theory can be applied not only in the economy but also in many fields, such as politics and military affairs, which has important practical and strategic significance for countries in the period of system innovation and transformation. As Nobel Laureate Paul said, the complexity of the real economy makes it difficult for "Unorganized Markets" to ensure supply-demand balance and the efficient allocation of resources. When traditional economic theory cannot explain and calculate the complex scenes of reality, we require a high-performance computing solution based on traditional theory to evaluate the mechanisms, meanwhile, get better social welfare. The mechanism design theory is undoubtedly the best option. Different from other existing works, which are based on the theoretical exploration of optimal solutions or single perspective analysis of scenarios, this paper focuses on the more real and complex markets. It explores to discover the common difficulties and feasible solutions for the applications. Firstly, we review the history of traditional mechanism design and algorithm mechanism design. Subsequently, we present the main challenges in designing the actual data-driven market mechanisms, including the inherent challenges in the mechanism design theory, the challenges brought by new markets and the common challenges faced by both. In addition, we also comb and discuss theoretical support and computer-aided methods in detail. This paper guides cross-disciplinary researchers who wish to explore the resource allocation problem in real markets for the first time and offers a different perspective for researchers struggling to solve complex social problems. Finally, we discuss and propose new ideas and look to the future.

Bridging principal-agent and mechanism design theories: an integrated conceptual framework for policy evaluation

Bridging principal-agent and mechanism design theories: an integrated conceptual framework for policy evaluation

Karl Homann’s Contractarian Approach to Ethics

This paper gives an account of Homann’s moral legacy from an economic point of view, both positive and normative. While the economic approach to ethics makes broad use of new institutional economics, it failed in formulating a closed and self-contained moral theory. Moreover, Economic Ethics disregards important strands of the economic literature, such as the theory of market failure and the insights of mechanism design theory. Besides the neglect of a substantiated normative approach to ethics, the use of an oversimplified model of economic interactions leaves this approach theoretically underdeveloped and unsuitable for the assessment of real-world phenomena.

Shape Embedding: A Means of Superimposing Alternative Design Descriptions on Shape Models

In 1989, Shapiro and Voelcker introduced three principles for relating shape and function with the goal of establishing an appropriate formal role for geometry in a theory of mechanical design. This technical note contributes to the establishment of such a theory by using an example from their technical note to illustrate the potential value of incorporating shape embedding, used in the shape computation and shape grammar community to support shape synthesis, into CAD packages that are used primarily to support shape definition and analysis. • Recollections of collaborations with Prof Herb Voelcker since the early 1970s. • There is a need, in engineering design, for multiple descriptions of a given design. • These descriptions are used for different purposes through the lifecycle of a product. • Embedding is a mechanism that can be used to superimpose multiple design descriptions on a given shape model. • The use of embedding promises underlying consistency across design descriptions without the need for deep integration of said descriptions.

Mechanism Design Under Approximate Incentive Compatibility

An assumption that is pervasive in revenue management and economics is that buyers are perfect optimizers. However, in practice, buyers may be limited by their computational capabilities or lack of information and may not be able to perfectly optimize their response to a selling mechanism. This has motivated the introduction of approximate incentive compatibility as a solution concept for practical mechanisms. In “Mechanism Design under Approximate Incentive Compatibility,” Balseiro, Besbes, and Castro study, for the first time, the problem of designing optimal selling mechanisms when buyers are imperfect optimizers. Their work characterizes structural properties of approximate incentive compatible mechanisms and establishes fundamental bounds on how much revenue can be garnered by moving from exact to approximate incentive constraints. Their work brings a new perspective to the theory of mechanism design by shedding light on a novel class of optimization problems, techniques, and challenges that emerge when relaxing incentive constraints.

Empowering Permanent Minorities: Foot Voting and Positive Freedom for Radicals

Foot voting—that is, an individual’s choice of a government, or of a governance regime such as that offered by a corporation or a homeowner’s association--has been advocated by libertarian law professor Ilya Somin in two recent books (2016, 2021) that emphasize the relative thoughtfulness of foot voters who are making important personal choices compared to the relative ignorance of ballot box voters whose individual votes are hardly ever outcome-determinative. This paper adopts Somin’s case for foot voting and suggests an additional ground for supporting it: giving radical minorities opportunities to exercise self-determination in a way that they are unable to do in majoritarian democratic and business systems in which public policies and corporate governance are targeted to the median voter, shareholder, employee, and consumer. Relying centrally on Mill (1859), Rawls (1999, 2005), and mechanism design theory (Maskin, 1999), it argues that it is in the practical and moral interest of non-radicals and radicals alike that there should be more support in business ethics and elsewhere than there is now for voluntary, partly self-governing, radical local political communities—“codominia”--and to serve and link these communities with small and large radical businesses—“coenterprises.” Although the paper is primarily conceptual, it also includes a qualitative empirical component, in the forms of introductory discussions of a survey on interest in joining radical communities that was administered to students in Southeast Asia, and of how the reforms proposed have a precedent in the long-standing Dutch and Belgian systems of pillarized community self-determination.

Understanding platform market value through decentralization governance — An integrative model from signaling and mechanism design theory

Although previous research has provided insights into the direct effects of platform decentralization governance on market value, scholars have failed to theorize and empirically examine the mediating mechanisms through which platform decentralization governance transfers into increased or decreased market value. This article draws on signaling (Spence, 1973) and mechanism design theory (Hurwicz, 1973) to provide a theoretical understanding of how voluntary disclosures and developers' activities mediate the relationship between platform decentralization and market value. We test our model with a sample of 682 largest market capitalization blockchain platforms. The results confirm our proposed mediation relationships that (1) centralization (or low decentralization) governance enhances platform market value via more voluntary disclosures, (2) decentralization enhances platform market value via facilitating developers' activities, and (3) centralization enhances market value via more voluntary disclosures that in turn facilitate developers' activities. Overall, our study offers both theoretical and practical implications regarding the governance structures that drive value for digital and blockchain platforms.