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on Economic Design |
| By: | In\'acio B\'o; Gian Caspari; Manshu Khanna |
| Abstract: | Priority-based allocation of individuals to positions are pervasive, and elimination of justified envy is often, an absolute requirement. This leaves serial dictatorship (SD) as the only rule that avoids justified envy under standard direct mechanisms. What if SD outcomes are undesirable from a designer's perspective? We propose visible fairness, which demands fairness relative to the (potentially purposefully incomplete) preference information the mechanism elicits. Visibly fair mechanisms generalize SD; we fully characterize them and provide necessary and sufficient conditions for strategy-proofness. We show how to apply these results to design strategy-proof visibly fair rules that satisfy a broad class of distributional objectives. Visible fairness, however, results in a new information-efficiency trade-off: meeting distributional goals leads to the avoidance of eliciation of information about preferences that could prevent inefficiencies. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.19176 |
| By: | Christopher Avery; Geoffrey Kocks; Parag A. Pathak |
| Abstract: | School choice systems increasingly use common applications, where students can apply to multiple schools on a single form, though schools make admission decisions independently. We model three application systems: a common application, a decentralized system with costly separate applications, and a ranked-choice system using a matching algorithm. Our model shows that while a common application may expand access, it increases competition and may produce worse matches than a decentralized system where application costs encourage more selective applications. Ranked-choice systems combine reduced application costs with preference-based matching that reduce mismatches. We examine these predictions by analyzing how Boston's charter school sector was affected when it adopted an online common application. Counterfactual simulations suggest the common application performs no better than alternatives on several metrics and did little to increase access for disadvantaged groups. A ranked system consistently outperforms a common application across various levels of competition and assumptions on preference stability between application and enrollment stages. |
| JEL: | I20 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34207 |
| By: | Kohei Daido (Kwansei Gakuin University); Tomoya Tajika (Nihon University) |
| Abstract: | We study mechanism design under auditable fairness mandates that constrain only the formal rule while allowing off-record private communication between the principal and agents. We model a two-layer environment: a formal rule that maps agents' reports to outcomes and must satisfy the mandate, and private advice in which the principal can provide type-contingent recommendations. We construct a format-preserving randomized encryption (FPRE): the principal randomizes over symmetry-constrained rules and pairs each realization with ''password''-like advice. Under FPRE, any Bayesian incentive-compatible social choice function (SCF) is implementable by symmetric formal rules; if the SCF is dominant-strategy incentive-compatible (DSIC), the resulting mechanism achieves DSIC. In contrast, constraints that embed predictable structures-such as strict monotonicity and continuity-cannot be neutralized. We also present an approximate version: continuity is compatible with it. Our results highlight a regulatory-scope insight: if auditors can verify only the format of the rule, format-type fairness does not bind, whereas structure-revealing mandates (i.e., strict monotonicity and continuity) hinder the ''encryption'' that sustains obedience to private advice. |
| Keywords: | mechanism design, symmetry, fairness, implementation, private communication, randomized encryption, dominant strategies, continuous rules |
| JEL: | C72 D82 D86 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:299 |
| By: | Th\`anh Nguyen; Alexander Teytelboym; Shai Vardi |
| Abstract: | Ensuring efficiency and envy-freeness in allocating indivisible goods without money often requires randomization. However, existing combinatorial assignment mechanisms (for applications such as course allocation, food banks, and refugee resettlement) guarantee these properties either ex ante or ex post, but not both. We propose a new class of mechanisms based on Competitive Equilibrium from Random Incomes (CERI): Agents receive random token budgets and select optimal lotteries at competitive prices that clear markets in expectation. Our main insight is to let the CERI price vector guide all ex-post allocations. We show that all ordinally efficient allocations are CERI allocations, which can be implemented as lotteries over near-feasible Pareto-efficient outcomes. With identical budget distributions, CERI allocations are ordinally envy-free; with budget distributions on small supports, ex-post allocations are envy-free up to one good. Moreover, we design an asymptotically efficient implementation of CERI that satisfies a strong new non-manipulability property in large markets. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.13198 |
| By: | Christian Basteck |
| Abstract: | We study the problem of assigning indivisible objects to agents where each is to receive at most one. To ensure fairness in the absence of monetary compensation, we consider random assignments. Random Priority, also known as Random Serial Dictatorship, is characterized by equal-treatment-of-equals, ex-post efficiency and probabilistic (Maskin) monotonicity -- whenever preferences change so that a given deterministic assignment is ranked weakly higher by all agents, the probability of that assignment arising should be weakly larger. Probabilistic monotonicity implies strategy-proofness (in a stochastic dominance sense) for random assignment problems and is equivalent to it on the universal domain of strict preferences; for deterministic rules it coincides with Maskin monotonicity. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.17997 |
| By: | Philippe Choné; Laurent Linnemer |
| Abstract: | Sellers face a critical choice: run competitive auctions or strike exclusive deals with preferred buyers. Contrary to conventional wisdom that sellers should rely on open competition, we show that a powerful seller optimally commits to a sequential `flexclusivity' arrangement - a strategic mix of exclusivity and competitive bidding. Under broad conditions, the seller chooses with positive probability to disregard alternative buyers entirely. We demonstrate, in a parsimonious model, that simple option contracts implement flexclusivity efficiently, increasing the expected joint profit of the contracting parties. When a preferred buyer declines the option, this credibly signals his weakness, allowing the seller to extract more rent from stronger buyers in subsequent auctions. The joint gain from such arrangements can represent as much as 75% of what vertical integration would achieve, without requiring commitment beyond the initial contracting stage. |
| Keywords: | selling mechanism, exclusivity, revenue-maximizing auction, option contract, vertical integration |
| JEL: | D44 D82 D86 L22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12134 |
| By: | Pietro Salmanso; Bernardo Moreno; Dolors Berga |
| Abstract: | We consider a society composed of a finite set of agents with preferences over a finite set of alternatives. We focus on collective choice correspondences which are rules assigning to each pair formed by agents' preferences and a subset of alternatives (an agenda), a chosen subset of the agenda. Our analysis centers on three properties: neutrality, strong pairwise justifiability, and strong decisiveness. Neutrality requires that no alternative is intrinsically favored over another. Strong pairwise justifiability demands that if an alternative x is selected in one situation but not in another, there must exist some other alternative z , present in both agendas, whose relative ranking with respect to x has improved for at least one agent. Strong decisiveness is a property that can be viewed as a particular type of resoluteness. Our main result establishes that serial dictatorships are the only collective choice correspondences defined on the universal domain and across all agendas satisfying neutrality, strong pairwise justifiability, and strong decisiveness. |
| Keywords: | collective choice correspondences, neutrality, serial dictators |
| JEL: | D70 D71 D78 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1508 |
| By: | Patrick Lederer |
| Abstract: | In this paper, we study voting rules on the interval domain, where the alternatives are arranged according to an externally given strict total order and voters report intervals of this order to indicate the alternatives they support. For this setting, we introduce and characterize the class of position-threshold rules, which compute a collective position of the voters with respect to every alternative and choose the left-most alternative whose collective position exceeds its threshold value. Our characterization of these rules mainly relies on reinforcement, a well-known population consistency condition, and robustness, a new axiom that restricts how the outcome is allowed to change when a voter removes the left-most or right-most alternative from his interval. Moreover, we characterize a generalization of the median rule to the interval domain, which selects the median of the endpoints of the voters' intervals. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.04874 |
| By: | H\'ector Hermida-Rivera |
| Abstract: | This note shows that under the unrestricted domain, there exists a choice liberal and Nash implementable social choice rule if and only if there are at least three players and the outcome set is at least twice as large as the player set. A social choice rule is choice liberal if and only if for every player, there exists at least one pair of outcomes such that if this player strictly prefers one over the other, the one he prefers is socially desirable and the other one is not. A social choice rule is Nash implementable if and only if there exists a mechanism such that at every preference profile, the set of Nash equilibrium outcomes coincides with the set of socially desirable ones. The proof constructs an intuitive Nash implementing mechanism. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.16059 |
| By: | Kathryn Graddy; Jianping Mei; Michael Moses |
| Abstract: | This paper shows that buyers pay a substantial premium during evening auctions at major auction houses. For Post-War paintings, evening estimate premiums exceed 70%, and buyers pay over 5% above these estimates. While higher estimates reduce the likelihood of sale, inclusion inan evening auction increases it. We also examine the interaction of evening sales and lot ordering, finding that for high-valued paintings, sellers may fare better earlier in a day auction than later in an evening sale. These results highlight how auction timing and pricing strategies affect both sale probabilities and final prices in the art market. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:brd:wpaper:138 |
| By: | Philipp Strack; Kai Hao Yang |
| Abstract: | A monopolist offers personalized prices to consumers with unit demand, heterogeneous values, and idiosyncratic costs, who differ in a protected characteristic, such as race or gender. The seller is subject to a non-discrimination constraint: consumers with the same cost, but different characteristics must face identical prices. Such constraints arise in regulated markets like credit or insurance. The setting reduces to an optimal transport, and we characterize the optimal pricing rule. Under this rule, consumers may retain surplus, and either group may benefit. Strengthening the constraint to cover transaction prices redistributes surplus, harming the low-value group and benefiting the high-value group. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.20925 |
| By: | Noga Klein Elmalem; Rica Gonen; Erel Segal-Halevi |
| Abstract: | When allocating indivisible items, there are various ways to use monetary transfers for eliminating envy. Particularly, one can apply a balanced vector of transfer payments, or charge each agent a positive amount, or -- contrarily -- give each agent a positive amount as a ``subsidy''. In each model, one can aim to minimize the amount of payments used; this aim translates into different optimization objectives in each setting. This note compares the various models, and the relations between upper and lower bounds for these objectives. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.18794 |
| By: | Elkerbout, Milan (Resources for the Future); Kopp, Raymond J. (Resources for the Future); Rennert, Kevin (Resources for the Future) |
| Abstract: | In a two recent publications, Carbon Border Adjustments: Design Elements, Options, and Policy Decisions and Foreign Pollution Fee Act: Design Elements, Options, and Policy Decisions, we provided an overview and comparison of current border adjustment mechanisms (BAMs). In the first publication we focused on the European Union’s Carbon Border Adjustment Mechanism (EU CBAM); the Fair, Affordable, Innovative, and Resilient Transition and Competition Act (FAIR Act), sponsored by Senator Chris Coons (D-DE); and the Clean Competition Act (CCA), by Senator Sheldon Whitehouse (D-RI). In the second publication we reviewed a new piece of proposed US Senate legislation, the Foreign Pollution Fee Act (FPFA), introduced by Senator Bill Cassidy (R-LA), Senator Lindsey Graham (R-SC), and Senator Roger Wicker (R-MS). In this report we provide more detail on the EU CBAM and compare it to the FPFA and the CCA, which was reintroduced on December 6, 2023. A great deal of the FPFA description used in this report is reproduced from our publication Foreign Pollution Fee Act: Design Elements, Options, and Policy Decisions. This report uses the design elements introduced in the previous publications to describe the policies reflected in each BAM. We have made every effort to be concise with respect to our descriptions of the design elements, but that has required us to abstract from a great deal of detail in each BAM. We hope this report will provide a roadmap that informs understanding of these mechanisms, but it should not be interpreted as a complete and comprehensive description and review. |
| Date: | 2023–12–06 |
| URL: | https://d.repec.org/n?u=RePEc:rff:report:rp-23-18 |
| By: | Jacopo Bizzotto; Nathan Hancart |
| Abstract: | We study cheap talk with simple language, where the sender communicates using a score that aggregates a multidimensional state. Both the sender and the receiver share the same payoffs, given by a quadratic loss function. We show that the restriction to scores introduces strategic considerations. First, equilibrium payoffs can be strictly lower than those achievable under commitment to a scoring rule. Second, we prove that any equilibrium score must be either linear or discrete. Finally, assuming normally distributed states, we fully characterize the set of equilibrium linear scores, which includes both the ex-ante best and the worst linear scores. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.09621 |