Strategically Analogous Mechanisms

Abstract

This paper studies when strategic understanding acquired in one mechanism can be transferred to another. It introduces a framework in which agents have a limited understanding of how actions affect payoffs, and formalizes how they use analogies to transfer this understanding between mechanisms. We ask when such reasoning allows agents to transfer their understanding of equilibrium between mechanisms. We first consider mechanisms that are strategically equivalent---that is, share the same game form up to relabeling of actions---and show that agents' understanding of equilibrium transfers once they recognize how the actions in these mechanisms map to one another. We then define strategic analogy, a weaker notion that allows actions and types to be remapped, and show that equilibrium understanding transfers once agents recognize how the actions and types in these mechanisms relate. Applications include single-item auctions, scoring auctions, and nonlinear pricing with capacity constraints.