A benevolent government may decide to subsidize an unprofitable monopoly whose profits do not capture all the social surplus from its production. Anticipating this, the firm may underinvest in order to become unprofitable and extract state subsidies. The resulting welfare loss may exceed by many...

Mechanism design is a subfield of game theory that aims to design games whose equilibria have desired properties such as achieving high efficiency or high revenue. Algorithmic mechanism design is a subfield that lies on the border of mechanism design and computer science and deals with mechanism...