General Robustness Evaluation of Incentive Mechanism against Bounded Rationality Using Continuum-Armed Bandits

Abstract

Incentive mechanisms that assume agents to be fully rational, may fail due to the bounded rationality of agents in practice. It is thus crucial to evaluate to what extent mechanisms can resist agents’ bounded rationality, termed robustness. In this paper, we propose a general empirical framework for robustness evaluation. One novelty of our framework is to develop a robustness formulation that is generally applicable to different types of incentive mechanisms and bounded rationality models. This formulation considers not only the incentives to agents but also the performance of mechanisms. The other novelty lies in converting the empirical robustness computation into a continuum-armed bandit problem, and then developing an efficient solver that has theoretically guaranteed error rate upper bound. We also conduct extensive experiments using various mechanisms to verify the advantages and practicability of our robustness evaluation framework.