Mechanism design is a field in economics and game theory that takes an objectives-first approach to designing economic mechanisms or incentives, toward desired objectives, in strategic settings, where players act rationally. Because it starts at the end of the game, then goes backwards, it is also called reverse game theory. It has broad applications, from economics and politics in such fields as
market design,
auction theory and
social choice theory
Social choice theory or social choice is a theoretical framework for analysis of combining individual opinions, preferences, interests, or welfares to reach a ''collective decision'' or ''social welfare'' in some sense. Amartya Sen (2008). "So ...
to networked-systems (internet interdomain routing, sponsored search auctions).
Mechanism design studies
solution concepts for a class of private-information games.
Leonid Hurwicz
Leonid Hurwicz (; August 21, 1917 – June 24, 2008) was a Polish-American economist and mathematician, known for his work in game theory and mechanism design. He originated the concept of incentive compatibility, and showed how desired outcome ...
explains that 'in a design problem, the goal function is the main "given", while the
mechanism is the unknown. Therefore, the design problem is the "inverse" of traditional economic theory, which is typically devoted to the analysis of the performance of a given mechanism.' So, two distinguishing features of these games are:
* that a game "designer" chooses the game structure rather than inheriting one
* that the designer is interested in the game's outcome
The 2007
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...
was awarded to
Leonid Hurwicz
Leonid Hurwicz (; August 21, 1917 – June 24, 2008) was a Polish-American economist and mathematician, known for his work in game theory and mechanism design. He originated the concept of incentive compatibility, and showed how desired outcome ...
,
Eric Maskin
Eric Stark Maskin (born December 12, 1950) is an American economist and mathematician. He was jointly awarded the 2007 Nobel Memorial Prize in Economic Sciences with Leonid Hurwicz and Roger Myerson "for having laid the foundations of mechanism ...
, and
Roger Myerson
Roger Bruce Myerson (born March 29, 1951) is an American economist and profe