Ulric B. and Evelyn L. Bray Social Sciences Seminar
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, be-cause 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.