The mechanism design theory: Policy and regulatory design for developing countries ( India)

Developing countries like India are faced with the problem of accelerating the rate of development while grappling with resource constraints, structural imbalances and many socio-economic problems like poverty and illiteracy. The current research in Economic Theory has tended to address the specific problems of developing countries. There are conflicting social preferences like equality and parity, ethical behaviour, honesty, motivation for good government which may be in conflict with private goals and self-interest. In such a scenario the planner is faced with conditions of maximising social welfare in face of hidden motive or information. Mechanism theory in conjugation with development in technology, provides a means of finding optimal solutions to such constrained situations. Due to this it has great applicability to countries like India. This article throws light on some aspects of mechanism design and its policy implications providing a basis for its widespread use in current economic situation.