2016 Working Paper Version

with Eduardo M. Azevedo.. [PDF]

We propose a criterion of approximate incentive compatibility, strategy-proofness in the large (SP-L), and argue that it is a useful second-best to exact strategyproofness (SP) for market design. Conceptually, SP-L requires that an agent who regards a mechanism’s “prices” as exogenous to her report – be they traditional prices as in an auction mechanism, or price-like statistics in an assignment or matching mechanism – has a dominant strategy to report truthfully. Mathematically, SP-L weakens SP both by considering incentives in a large-market limit rather than finite economies and by considering incentives from an interim perspective rather than ex-post.