ITR/AP:Computer Test Beds and Mechanism Design

California Institute Of Technology, Pasadena CA

Investigators

Abstract

Mechanisms allow individuals with dispersed information to achieve desired group outcomes. Experiments confirm theoretical predictions that different parameter values and different mechanism rules can have important effects on the efficiency of outcomes and the speed of convergence. A computer-based behavioral model will be developed to test a wide range of mechanisms and institutions. The model is to be based on evolutionary algorithms. Each smart agent has a collection of different strategies to use in its decision-making processes. Strategies compete for the right to make agent decisions through a selection process based on an evaluation of each strategy's hypothetical and actual performance. The model will first be tuned with mechanisms for which there are significant experimental data. Examples include the Groves-Ledyard mechanism, the voluntary contribution mechanism for public goods, the double auction, and simultaneous trading in a set of parallel markets. Then the model will be used to make predictions about behavior under those mechanisms that have not already been tested in experiments with human subjects. This project will develop a new methodology for economics research that has potential to be better, faster, and cheaper than experimental economics.