UNDOMINATED NASH IMPLEMENTATION IN BOUNDED MECHANISMS

We study implementation in undominated Nash equilibrium by bounded mec hanisms. (An undominated Nash equilibrium is a Nash equilibrium in whi ch no agent uses a weakly dominated strategy. A mechanism is bounded i f every dominated strategy is dominated by some undominated strategy.) We identify necessary conditions and sufficient conditions for such i mplementation. These conditions are satisfied in virtually all economi c environments, and are also satisfied by interesting correspondences from the social choice literature. For economic settings, we provide a particularly simple implementing mechanism for which the undominated equilibrium outcomes coincide with those obtained from the iterative e limination of weakly dominated strategies. Journal of Economic Literat ure Classification Numbers: 022, 025, 026. (C) 1994 Academic Press, In c.