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John O. Ledyard

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John O. Ledyard
File:JohnLedyard.jpg JohnLedyard.jpg
Born (1940-04-04) April 4, 1940 (age 80)
Detroit, Michigan
🏡 ResidenceU.S.
🏳️ NationalityAmerican
🎓 Alma materPurdue University
MS (Economics), 1965
PhD (Economics) 1967
Wabash College BA 1963
💼 Occupation
Mechanism Design
Game Theory
Market Design
Public Goods and Cooperation
Information Aggregation

he O. Ledyard (born April 4, 1940) is an American economist. He is the Alan and Lenabelle Davis Professor of Economics and Social Sciences at the California Institute of Technology, where he has been teaching since 1986. Previous positions include Northwestern University, where he was the Sydney G. Harris Professor of Social Science, and Carnegie Mellon University. He holds an AB degree in Mathematics from Wabash College and MS and PhD, both in economics, from Purdue University. At Caltech, he was a Sherman Fairchild Distinguished Scholar (1977-78) and later was the Chairman of the Division of the Humanities and Social Sciences (1992-2002).[1]

Early life and education[edit]

Ledyard was born on April 4, 1940 in Detroit, Michigan. He earned a bachelor’s degree in mathematics from Wabash College in 1963, and then masters and doctoral degrees in economics from Purdue University in 1965 and 1967, respectively.[2]

Academic career[edit]

He became an assistant professor of Economics at Carnegie-Mellon University in 1967, and then he moved to the Economics Department at Northwestern University in 1969. He was the Sydney G. Harris Professor of Social Sciences at Northwestern until he moved permanently to the Division of the Humanities and Social Sciences at the California Institute of Technology in 1985. He had previously visited Caltech as the Sherman Fairchild Distinguished Scholar during the 1977–78 academic year. he later served as Chairman of the Division of the Humanities and Social Sciences (1992–2002), and currently holds the Alan and Lenabelle Davis Professor of Economics and Social Sciences.[3]

Research[edit]

Ledyard's primary research is on the theoretical foundations and the applications of mechanism design of organizations. . He has contributed to our understanding of the roles of incentives and information in organizations. His theoretical work has provided insights into what is possible and what is not in the design of incentive compatible organizations and voting systems. His more applied work has included the design and development of computer-assisted markets for trading pollution rights, acquiring logistics contracts, swapping portfolios of thinly traded securities, prediction markets, and advertising time. His current research includes the design of market-based approaches for managing spacecraft and instrument design (approaches designed to reduce cost-over runs and improve the science recovered), and the design of cap and trade systems for the control over-fishing and creating sustainable fisheries.[4]

This section is organized into four distinct parts, as a reflection of the broad range of he’s research contributions: Mechanism Design; Voting and Elections; Public Goods and Cooperation; and Information Aggregatio Much of his research on public goods, for example, has been very influential in the development of mechanism design theory. His work on information aggregation also has substantial overlap with market design, a key subfield of mechanism design. His political science work on voter turnout addresses classic free rider incentive problems of public good provision, but in the context of electoral competition. While he is widely known and admired as a theorist, his impact in experimental economics is nearly as impressive, and so we have included several papers in this issue that present findings from laboratory and field experiments. It is our hope that the contents of this special issue offer a fairly representative collection of papers that complements and extends he’s broad portfolio of published research.[5]

Mechanism Design[edit]

This issue includes seven papers on mechanism design theory, the first of which (Van Essen and Walker) combines mechananism design and general equilibrium theory to devise an ingenious mechanism to implement the Lindahl equilibrium (and the Walrasian equilibrium in pure exchange economies). They compare this with the Groves–Ledyard mechanism (Groves and Ledyard, 1977a) in terms of its out-of-equilibrium properties. To the extent that some kind of dynamic equilibration is required to reach the Lindahl equilibrium this can be an important consideration. The Van Essen–Walker mechanism, which uses price–quantity messages has the advantage that even if messages are out of equilibrium, the outcomes generated by the mechanism are feasible and non-wasteful. De Castro, Liu, and Yannelis contribute a paper on mechanism design with ambiguity aversion in a general equilibrium exchange economy framework, where agents have multiple priors and have maximin preferences with respect to their priors. Thus the paper is related several of Ledyard’s early general papers on incentive compatibility in a Bayesian framework, and also to Ledyard (1986) where he explores the properties of mechanisms that must be incentive compatible for a broad range of priors. The de Castro et al. paper establishes truthful implementability of individually rational and ex ante maximin efficient allocations.

The paper by McLean and Postlewaite examines a general mechanism design problem where individuals have interdependent values. They devise an intuitive two-stage mechanism that uses a smaller message space than a direct mechanism to implement outcome efficient allocations in a way that guarantees ex post individual rationality and interim incentive compatibility. The paper builds on an earlier result by the authors that augmented standard VCG transfers, using a direct mechanism approach. The key insight exploited in the present paper is that a first stage of reports can be used to elicit the players’ beliefs about the state of the world that creates interdependence of values. Once this information is elicited, the problem reduces to a private values mechanism design problem which is solved by standard VCG transfers.

Krajbich, Camerer, and Rangel contribute a paper that shows how signals that are informative about private information can be used to construct efficient, incentive compatible, and individually rational social choice functions. This follows an earlier paper that also included he as a coauthor (Krajbich et al., 2009) where physical measurements of the brain were used to augment standard mechanisms for eliciting valuations of public goods. The present paper shows how information contained in neural measurements, if sufficiently informative about private values, could in principle allow one to construct Crémer and McLean (1985) correlated transfer payments to ensure incentive compatibility and individual rationality. They test the theoretical model with two experiments, where the informative signals are drawn by a computer, conditional on a subject’s assigned private value. The Lindahl mechanism augmented by signal-conditional side payments leads to truthful reporting by subjects, on average, while the un-augmented mechanism leads to large inefficiencies, as predicted.

The last three papers on mechanism design address theoretical questions in matching theory. He has a longstanding research interest in the design of mechanisms without side payments, and the relationship between efficiency and equilibrium, depending on whether transfers are feasible. Ledyard et al. (1996, 1997), Groves and Ledyard (1977b, 1977c), and Ledyard and Palfrey (1994, 2002). Echenique and Galichon compare the performance of matching mechanisms with and without side payments, in the context of one-to-one matching problems (e.g., the marriage problem). They focus on questions of efficiency and core stability. A key contribution of the paper is the concept of no-trade stable matches, which are matches that are stable when side payments are permitted, but no actual side payments take place. This provides a useful intuitive bridge between the notions of stability with and without transferable utility. Hatfield and Kominers develop a model of contracting in many-to-many matching problems. In such problems, multiple contracts may be needed between agents on the opposite side of the market. They prove that stable matches with contracts are guaranteed to exist if agents’ preferences over the set of available contracts are separable, but are not guaranteed without separability. They then explore the question of whether or not the available set of contracts should include bundled contracts. An advantage to bundling is that doing so can enhance stability in the matching market, by restoring separability. On the other hand, such contracts are less expressive in a formal language-theoretic sense. An important application of matching theory is the school choice problem. Lien, Zheng and Zhong investigate the ex-ante fairness of the Boston and serial dictator mechanisms with pre- and post-exam preference submission. They find that the Boston mechanism with students submitting their preference ranking before the exam is more likely to match students with higher abilities to better schools (i.e., ex-ante fair) than the serial dictator mechanism, which is ex-poste fair.

Voting and Elections[edit]

There are five papers in the second area, Voting and Elections, all of which address theoretical questions. Four of them develop and analyze Bayesian environments where voters have private types. he’s pioneering work applying Bayesian game theory to voting and candidate competition (Ledyard, 1984) was the start of a major development in formal political theory: the explicit modeling of private information in political games. It is now a mainstream and leading approach in the field.

The first paper, by Acharya and Meirowitz, addresses the age-old question formulated by Condorcet about the information aggregation properties of majority rule voting in large elections. Condorcet proved that, with sincere voting, information would be successfully aggregated and result in the optimal collective decision under some conditions on the distribution of private information about common value preferences. This was recently cast in doubt in a watershed paper by Austen-Smith and Banks (1996), which demonstrated that quite generally the Bayesian Nash equilibrium of the voting game does not coincide with strategic voting, and hence efficient information aggregation is not guaranteed with many voters. Acharya and Meirowitz prove that the Austen-Smith and Banks result is not robust to the presence of some uninformed voters. The presence of even a small fraction of uninformed voters in large elections induces sincere voting by the informed voters in equilibrium, which restores efficient information aggregation. This paper also ties in with he’s published research on information aggregation, which includes a paper on information aggregation in elections (Ledyard, 1984, 1989).

The second paper, by Bouton, Castanheira, and Llorente-Saguer, examines the effect of private information about private value preferences on the ability for voters to coordinate in 3-candidate elections in order to avoid the election of a Condorcet loser. They consider a standard model where one of the candidates is a Condorcet loser, and a majority of voters are divided in their preferences between the other two (majority) candidates and rank the Condorcet loser last. If there is no aggregate uncertainty, in the sense that voters all know which majority candidate is more popular, then all stable equilibria involve all of the majority voters voting for only one of the two majority candidates – the so-called Duvergerian equilibria, due to the presence of strategic voting by one of the majority voter types. However, they show that if the voters’ private information admits enough aggregate uncertainty about which of the two candidates has more support, then sincere voting equilibria exist, whereby the Condorcet loser wins. They conduct an experiment comparing voting behavior in environments with and without aggregate uncertainty. The results support the qualitative predictions of the theoretical model.

The third paper by Goeree and Zhang overlaps with he’s work in mechanism design, including his work on the asymptotic optimality of lottery drafts and his seminal work on the Groves–Ledyard mechanism. The paper studies quadratic vote auctions, where voters can purchase votes and pay a cost proportional to the square of the number of votes they buy. Such mechanisms are asymptotically optimal, unlike simple majority rule, because the latter does not allow strategies to be correlated with preference intensities. The paper also reports the results of an experiment that provides some empirical validation of the theoretical properties of the Bayes–Nash equilibrium of the vote buying game.

The fourth paper is a hybrid of two of hisz main research areas: voting and mechanism design. Brett and Weymark study voting equilibria in the context of the Mirrlees (1971) model of optimal incentive compatible income taxation. The extend and significantly strengthen a result of Röell (2012) that establishes existence of a majority rule equilibrium if the set of candidate tax schedules is limited to tax schedules that are optimal from the standpoint of some type of voter. Under this restriction every type of voter has singled peaked preferences over the candidate tax schedules, so the median voter theorem applies. They also characterize the qualitative properties of the equilibrium tax schedule.

The fifth voting paper, by Coelho and Barberà combines a game theoretic and mechanism design theoretic approach to study a class of voting rules, v-rules of k names, variations of which are commonly used in practice. Such rules are defined by a two-stage procedure for selecting one of c possible candidates or outcomes. In the first (nomination) stage a set of proposers is required to vote for exactly v of the candidates. This results in a list of k nominees, consisting of those who receive the k most votes in this nomination stage. In the second stage a single chooser then selects his most preferred candidate out of the list of k nominees. Each proposer and the chooser have preferences over the candidates. They study the unique strong Nash equilibrium of this two stage game and show how the balance of power between the chooser and the proposers is affected by parameters, v and k.

Public Goods and Cooperation[edit]

Six articles build upon and take inspirations from his contributions in the area of Public Goods, in both theory and experiments (Groves and Ledyard, 1977a; Ledyard and Palfrey, 1994; Ledyard, 1995).

Of his seminal contributions to the theoretical public goods literature, Groves and Ledyard (1977a) characterize a family of Nash-efficient public goods mechanisms, and in doing so, move the theoretical mechanism design literature from impossibility (using dominant strategy as the solution concept) to positive results, all of which preserve efficiency at the cost of non-manipulability. Healy and Jain generalize the Groves–Ledyard mechanism using an expanded set of budget-balancing preferences. Of this general class, they find that the original mechanism remains the most appealing in terms of both simplicity and stability.

Among public goods mechanisms proposed after Groves and Ledyard (1977a) using Nash or refinements of Nash equilibria as solution concepts, the provision point mechanism (Bagnoli and Lipman, 1989) has been tested in the laboratory many times due to its potential application as a method of funding threshold public goods in the real world. Cason and Zubrickas extend this mechanism with refund bonuses and evaluate this extension in a laboratory experiment. They find that, while participants respond to the incentives induced by refund bonuses as predicted, they also systematically deviate from theoretical predictions, which are consistent with the logit quantal response equilibrium (McKelvey and Palfrey, 1995).

In addition to mechanism design under complete information, he has made fundamental contributions to Bayesian games (Ledyard, 1986) and Bayesian mechanism design (Ledyard and Palfrey, 1994, 2007). Using this Bayesian mechanism design approach, Palfrey, Rosenthal and Roy investigate the effects of communication in a threshold public goods game, where individuals can each make a discrete contribution. They experimentally implement three different communication structures prior to the decision move and obtain theoretical bounds on the efficiency gains that are obtainable under these different communication structures. In the experiment, significant efficiency gains are obtained only with unrestricted text chatting, where the efficiency bounds implied by theory are achieved.

More than three decades before the modern development of the social preference literature in behavioral economics, he analyzed resource allocation in unselfish environments (Ledyard, 1968, 1971). Continuing this tradition, Dufwenberg and Patel examine whether reciprocity can resolve the coordination problem in the private provision of public goods. They find that the interaction of reciprocity with cost-sharing has the potential to solve the problem, whereas neither mechanism by itself can solve the problem. Expanding the set of behavioral mechanisms, Kopányi-Peuker, Offerman and Sloof consider the possibility that cooperation in a prisoner’s dilemma is fostered by people’s voluntary enhancement of their own vulnerability, which determines the effectiveness of possible punishment by the other player. In an experiment, they find that subjects only learn to cooperate when the choice of vulnerability is allowed. In comparison, Keser, Markstadter and Schmidt impose various minimum contribution requirements in a public good experiment and find that minimum contributions serve as a norm for giving and lead to an increase in average group contributions. This effect is especially strong for the progressive schedule.

Using insights from the theoretical public goods literature and social identity theory (Tajfel and Turner, 1986; Akerlof and Kranton, 2000), Chen, Chen, Liu, and Mei investigate the effects of team competition on pro-social peer-to- peer lending activity on a microlending website. Using naturally occurring field data, they find that lenders who join teams contribute significantly more loans than those who do not. To further explore factors that differentiate successful teams from dormant ones, they run a large-scale randomized field experiment by posting messages on team forums. Compared to the control, they find that lenders make significantly more loans when exposed to a goal-setting and coordination message, whereas goal-setting alone significantly increases lending activities of previously inactive teams. These findings suggest that goal-setting and coordination are effective mechanisms to increase pro-social behavior in teams in the field.

Information Aggregation[edit]

Finally, this issue includes two papers on Information Aggregation, an area of he’s applied mechanism design work. He is among the first to implement prediction markets to help corporations and government improve decisions (Hanson et al., 2003).

In the first paper, Linardi shows that a well-known posterior revision process does not always produce public statistics that are closer to the full information posterior than the common prior. She studies this process of back-and-forth communication between two individuals with private signals by introducing white noise into payoff computations, defining the evolution of common knowledge, and developing a computational method to rank information structures on their tolerance to noise. She finds that subjects’ behavior in a laboratory experiment is consistent with the model’s prediction: though the posterior revision process does move reports towards each other and towards the full information posterior, noise persists and aggregation is incomplete.

The second paper investigates behavioral factors which might explain the high forecasting accuracy of prediction markets. Page and Siemroth study information acquisition in an experimental asset market, in particular, what aspects of the trading environment and trader characteristics determine individual information acquisition in experimental as- set markets. They find that traders with larger endowments, existing inconclusive information, lower risk aversion, and less experience in financial markets tend to acquire more information. Overall, they find that traders over-acquire in- formation, which results in negative profits. Furthermore, this over-acquisition does not diminish over time. Consequently, more acquired information in the market leads to smaller differences between fundamental asset values and prices.

Honors[edit]

Professor Ledyard’s list of honorary distinctions and service includes an Honorary Degree from Purdue University and being a Fellow of the Econometric Society, a Fellow of the American Academy of Arts and Sciences, a Fellow of the Public Choice Society and a Fellow of the Society for the Advancement of Economic Theory. He has served on several editorial boards of economics and public choice journals, on advisory committees to the National Science Foundation and other organizations, and as the President of the Public Choice Society.[6]

His research has received numerous recognitions including election as a Fellow of the Econometric Society (1977), a Fellow of the American Academy of Arts and Sciences (1999), a Fellow of the Public Choice Society (2004) and a Fellow of the Society for the Advancement of Economic Theory (2011).[7]

Beyond his many research and teaching contributions, he has served on several editorial boards of economics and public choice journals, on advisory committees to the National Science Foundation and other organizations, and as the President of the Public Choice Society. In particular, he is one of the founding members of the Game Theory Society and has served as a Special Issue Editor for Games and Economic Behavior.[8]

Business[edit]

Publications (selected)[edit]

  • Groves, Theodore, Ledyard, he O., 1977a. Optimal allocation of public goods: a solution to the ‘free-rider’ problem. Econometrica 45 (4), 783–809.
  • Groves, Theodore, Ledyard, he O., 1977b. Some limitations of demand-revealing processes. Public Choice 29 (2), 107–124.
  • Groves, Theodore, Ledyard, he O., 1977c. Some limitations of demand-revealing processes. Reply, Public Choice 29 (2), 139–143.
  • Hanson, Robin, Polk, Charles, Ledyard, he O., Ishikida, Takashi, 2003. The policy analysis market: an electronic commerce application of a combinatorial information market. In: Proceedings of the ACM Conference on Electronic Commerce, pp. 272–273.
  • Krajbich, Ian, Camerer, Colin, Ledyard, he O., Rangel, Antonio, 2009. Using neural measures of economic value to solve the public goods free-rider problem. Science 326, 596–599.
  • Ledyard, he O., 1968. Resource allocation in unselfish environments. Amer. Econ. Rev. 58 (2), 227–237.
  • Ledyard, he O., 1971. A convergent pareto-satisfactory non-tatonnement adjustment process for a class of unselfish exchange environments. Econometrica 39 (3), 467–499.
  • Ledyard, he O., 1984. The pure theory of large two candidate elections. Public Choice 44, 7–41.
  • Ledyard, he O., 1986. The scope of the hypothesis of Bayesian equilibrium. J. Econ. Theory 39, 59–82.
  • Ledyard, he O., 1989. Information aggregation in two-candidate elections. In: Ordeshook, Peter (Ed.), Contemporary Contributions to Political Theory. University of Michigan Press.
  • Ledyard, he O., 1995. Public goods: a survey of experimental research. In: Kagel, J., Roth, A. (Eds.), Handbook of Experimental Economics. Princeton University Press.
  • Ledyard, he O., Noussair, Charles, Porter, David, 1996. The allocation of a shared resource within an organization. Econ. Design 2 (2), 163–192.
  • Ledyard, he O., Palfrey, Thomas, 1994. Voting and lottery drafts as efficient public goods mechanisms. Rev. Econ. Stud. 61, 327–355.
  • Ledyard, he O., Palfrey, Thomas, 2002. The approximation of efficient public good mechanisms by simple voting schemes. J. Public Econ. 83 (2), 153–171.
  • Ledyard, he O., Palfrey, Thomas, 2007. A general characterization of interim efficient mechanisms for independent linear environments. J. Econ. Theory 133, 441–466.
  • Ledyard, he O., Porter, David, Rangel, Antonio, 1997. Experiments testing multiobject allocation mechanisms. J. Econ. Manage. Strategy 6 (3), 639–675.

References[edit]

  1. John O. Ledyard
  2. Chen, Y., & Palfrey, T. R. (2017). Introduction to the Special Issue of Games and Economic Behavior in honor of John O. Ledyard. Games and Economic Behavior, 100(101), 1-5.
  3. Chen, Y., & Palfrey, T. R. (2017). Introduction to the Special Issue of Games and Economic Behavior in honor of John O. Ledyard. Games and Economic Behavior, 100(101), 1-5.
  4. Chen, Y., & Palfrey, T. R. (2017). Introduction to the Special Issue of Games and Economic Behavior in honor of John O. Ledyard. Games and Economic Behavior, 100(101), 1-5.
  5. Chen, Y., & Palfrey, T. R. (2017). Introduction to the Special Issue of Games and Economic Behavior in honor of John O. Ledyard. Games and Economic Behavior, 100(101), 1-5.
  6. John O. Ledyard
  7. Chen, Y., & Palfrey, T. R. (2017). Introduction to the Special Issue of Games and Economic Behavior in honor of John O. Ledyard. Games and Economic Behavior, 100(101), 1-5.
  8. Chen, Y., & Palfrey, T. R. (2017). Introduction to the Special Issue of Games and Economic Behavior in honor of John O. Ledyard. Games and Economic Behavior, 100(101), 1-5.


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