- [[incentive compatible]] # Idea We construct or design mechanisms, institutions to [[promote cooperation]] within an institution. That is, we define the rules of the "game," actions people can take, and payoffs associated with the actions. It's like writing an algorithm/recipe. We use it to make institutions/systems more efficient. We design systems and mechanisms to help us achieve our goals. We use them to induce people to act in different ways. For example, how can employers write contracts that will prevent workers from slacking off? This problem is a **hidden action** problem. There are also **hidden information** problems. We can use mechanism design to decide whether to fund public projects ([[Clarke-Groves-Vickery pivot mechanism]]). # References - https://www.coursera.org/learn/model-thinking/lecture/cpnvu/hidden-action-and-hidden-information