Algorithmic mechanism design (AMD) lies at the intersection of economic game theory

Game theory

Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...

 and computer science

Computer science

Computer science or computing science is the study of the theoretical foundations of information and computation and of practical techniques for their implementation and application in computer systems...

.

Noam Nisan and Amir Ronen, from the Hebrew University of Jerusalem

Hebrew University of Jerusalem

The Hebrew University of Jerusalem ; ; abbreviated HUJI) is Israel's second-oldest university, after the Technion – Israel Institute of Technology. The Hebrew University has three campuses in Jerusalem and one in Rehovot. The world's largest Jewish studies library is located on its Edmond J...

, first coined "Algorithmic mechanism design" in a research paper published in 2001.

It combines ideas such as utility maximization and mechanism design from economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, rationality and Nash equilibrium

Nash equilibrium

In game theory, Nash equilibrium is a solution concept of a game involving two or more players, in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his own strategy unilaterally...

  from game theory, with such concepts as complexity

Complexity

In general usage, complexity tends to be used to characterize something with many parts in intricate arrangement. The study of these complex linkages is the main goal of complex systems theory. In science there are at this time a number of approaches to characterizing complexity, many of which are...

 and algorithm design from discrete mathematics

Discrete mathematics

Discrete mathematics is the study of mathematical structures that are fundamentally discrete rather than continuous. In contrast to real numbers that have the property of varying "smoothly", the objects studied in discrete mathematics – such as integers, graphs, and statements in logic – do not...

 and theoretical computer science

Computer science

Computer science or computing science is the study of the theoretical foundations of information and computation and of practical techniques for their implementation and application in computer systems...

. Examples of topics include networking, peering

Peering

In computer networking, peering is a voluntary interconnection of administratively separate Internet networks for the purpose of exchanging traffic between the customers of each network. The pure definition of peering is settlement-free or "sender keeps all," meaning that neither party pays the...

, online auctions and exchanges, online advertising, and search engine's page ranking.

Algorithmic mechanism design differs from classical economic mechanism design in several respects. It typically employs the analytic tools of theoretical computer science

Theoretical computer science

Theoretical computer science is a division or subset of general computer science and mathematics which focuses on more abstract or mathematical aspects of computing....

, such as worst case analysis and approximation ratios, in contrast to classical mechanism design in economics which often makes distributional assumptions about the agents. It also considers computational constraints to be of central importance: mechanisms that cannot be efficiently implemented in polynomial time are not considered to be viable solutions to a mechanism design problem. This often, for example, rules out the classic economic mechanism, the Vickrey–Clarke–Groves auction.

Further reading

Available for download (PDF)

External links

• http://iew3.technion.ac.il/~amirr/AMDJ.pdf Algorithmic mechanism design [broken link]
• http://www.rainsoft.de/publications/mech_design.pdf Algorithmic Mechanism Design
• http://video.google.com/videoplay?docid=6121409064231775355 Noam Nisan discussing algorithmic mechanism design
• http://nobelprize.org/nobel_prizes/economics/laureates/2007/ecoadv07.pdf Mechanism Design Theory Compiled by the Prize Committee of the Royal Swedish Academy of Sciences

See also

• Algorithmic game theory
  Algorithmic game theory
  Algorithmic game theory is an area in the intersection of game theory and algorithm design, whose objective is to design algorithms in strategic environments. Typically, in Algorithmic Game Theory problems, the input to a given algorithm is distributed among many players who have a personal...
  
  
• Game theory
  Game theory
  Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
  
  
• Mechanism design
  Mechanism design
  Mechanism design is a field in game theory studying solution concepts for a class of private information games...
  
  
• Metagame
• Incentive compatible