Best-Response Mechanisms.

Abstract

Abstract: Under many protocols—in computerized settings and in economics settings—participants repeatedly “best respond ” to each others ’ actions until the system “converges ” to an equilibrium point. We ask when does such myopic “local rationality ” imply “global rationality”, i.e., when is it best for a player, given that the others are repeatedly best-responding, to also repeatedly best-respond? We exhibit a class of games where this is indeed the case. We identify several environments of interest that fall within our class: models of the Border Gateway Protocol (BGP) [7], that handles routing on the Internet, and of the Transmission Control Protocol (TCP) [5], and also stable-roommates [3] and cost-sharing [9, 10], that have been extensively studied in economic theory. Keywords:best response, mechanism design, incentive compatible dynamics. 1

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