Algorithmic mechanism design (AMD) lies at the intersection of economic game theory and computer science.
Noam Nisan and Amir Ronen, from the Hebrew University of Jerusalem, first coined "Algorithmic mechanism design" in a research paper published in 1999.
It combines ideas such as utility maximization and mechanism design from economics, rationality and Nash equilibrium from game theory, with such concepts as complexity and algorithm design from discrete mathematics and theoretical computer science. Examples of topics include networking, peering, online auctions and exchanges, online advertising, and search engine's page ranking.
Algorithmic mechanism design differs from classical economic mechanism design in several respects. It typically employs the analytic tools of theoretical computer science, such as worst case analysis and approximation ratios, in contrast to classical mechanism design in economics which often makes distributional assumptions about the agents. It also considers computational constraints to be of central importance: mechanisms that cannot be efficiently implemented in polynomial time are not considered to be viable solutions to a mechanism design problem. This often, for example, rules out the classic economic mechanism, the Vickrey–Clarke–Groves auction.
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