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on Economic Design |
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Issue of 2017‒07‒16
six papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | P. Jean-Jacques Herings (Department of Economics, Maastricht University); Ana Mauleon (CEREC, Saint-Louis University and CORE, University of Louvain); Vincent Vannetelbosch (CORE, University of Louvain and CEREC, Saint-Louis University) |
| Abstract: | We study stable sets for marriage problems under the assumption that players can be both myopic and farsighted. We introduce the new notion of the myopic-farsighted stable set. For the special cases where all players are myopic and where all players are farsighted, our concept predicts the set of matchings in the core. When all men are myopic and the top choice of each man is a farsighted woman, we show that the singleton consisting of the woman-optimal stable matching is a myopic-farsighted stable set. The same result holds when all women are farsighted. |
| Keywords: | Marriage Problems, Stable Sets, Myopic and Farsighted Players |
| JEL: | C70 C78 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2017.34&r=des |
| By: | Francis Bloch (Université Paris 1 and Paris School of Economics); Anne van den Nouweland (Department of Economics, University of Oregon) |
| Abstract: | This paper analyzes farsighted stable sets when agents have heterogeneous expectations over the dominance paths. We consider expectation functions satisfying two properties of path-persistence and consistency. We show that farsighted stable sets with heterogeneous expectations always exist and that any singleton farsighted stable set with common expectations is a farsighted stable set with heterogeneous expectations. We characterize singleton farsighted stable sets with heterogeneous expectations in one-to-one matching models and voting models, and show that the relaxation of the hypothesis of common expectations greatly expands the set of states that can be supported as singleton farsighted stable sets. |
| Keywords: | Farsighted Stable Sets, Heterogeneous Expectations, One-to-one Matching, Voting, Effectivity Functions |
| JEL: | C71 D72 D74 |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2017.31&r=des |
| By: | André Schmelzer (Max Planck Institute for Research on Collective Goods) |
| Abstract: | This paper compares two prominent stochastic assignment mechanisms in the laboratory: Random serial dictatorship (RSD) and top trading cycles with random endowments (TTC). In standard theory, both mechanisms are strategy-proof and Pareto-effcient for the house allocation problem without endowments. In the experiment, RSD outperforms TTC. This can be attributed to more dominant strategy play under RSD. The behavioral theory of obvious strategy-proofness can partly explain this difference in dominant strategy play. Generally, subjects with extremely high and low levels of contingent reasoning play their dominant strategies. These results suggest that one strategy-proof mechanism may outperform another one if individuals are boundedly rational. |
| Keywords: | market design, mechanism design, randomization |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2017_13&r=des |
| By: | Rey, Patrick; Salant, David |
| Abstract: | We study the design of auctions for the allocation of essential inputs, such as spectrum rights, transmission capacity or airport landing slots, to firms using these inputs to compete in a downstream market. When welfare matters in addition to auction revenues, there is a trade-off: provisions aimed at fostering post-auction competition in the downstream market typically result in lower prices for consumers, but also in lower auction proceeds. We first characterize the optimal auction design from the standpoints of consumer and total welfare. We then examine how various regulatory instruments can be used to implement the desired allocation. |
| Keywords: | Auctions; Market design; Essential inputs; Regulation; Antitrust. |
| JEL: | D43 D44 D47 D61 L13 L42 L43 L51 |
| Date: | 2017–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:31784&r=des |
| By: | Miguel Vazquez; Michelle Hallack |
| Abstract: | In Brazil, a scoring auction decides which firm has the right to explore oil and gas in a region. One of its dimensions is the amount of local content that firms are willing to implement. However, local content programs are subject to significant uncertainty and complexity so mal-adaptation costs are relevant. We characterize players’ bidding behavior when they have information on local content implementation and when they do not. We test those predictions using historical bids. Our tests suggest that the mechanism would be more efficient if the definition of local content programs was left out of the auction. |
| Keywords: | Local content; Scoring auctions; Adaptation costs; Oil and gas industry. |
| JEL: | D23 D82 H57 L14 L22 L74 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:bcu:iefewp:iefewp94&r=des |
| By: | Olivier Bos; Francisco Gomez-Martinez; Sander Onderstal; Tom Truyts |
| Abstract: | We study the relative performance of the first-price sealed-bid auction and the second-price sealed-bid auction in a laboratory experiment where bidders can signal information through their bidding behavior to an outside observer. We consider two different information settings: the auctioneer reveals either the identity of the winning bidder only, or she also reveals the winner’s payment to an outside observer. We find that the first-price sealed-bid auction in which the winner’s payment is revealed outperforms the other mechanisms in terms of revenue and efficiency. Our findings may have implications for the design of charity auctions, art auctions, and spectrum auctions. |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:585499&r=des |