nep-des New Economics Papers
on Economic Design
Issue of 2017‒07‒30
five papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. "Mechanism Design in Hidden Action and Hidden Information: Richness and Pure-VCG" By Hitoshi Matsushima; Shunya Noda
  2. "Dynamic Implementation, Verification, and Detection" By Hitoshi Matsushima
  3. Combinatorial Discrete Choice By Fabian Eckert; Costas Arkolakis
  4. Clique games: a family of games with coincidence between the nucleolus and the Shapley value By Christian Trudeau; Juan Vidal-Puga
  5. A `solidarity' approach to the problem of sharing a network cost By Giménez Gómez, José M. (José Manuel); Subiza, Begoña

  1. By: Hitoshi Matsushima (Faculty of Economics, The University of Tokyo); Shunya Noda (Department of Economics, Stanford University)
    Abstract: We investigate general mechanism design problems in which agents can take hidden actions that influence state distribution. Their action choices exert significant externality effects on their valuation functions through this influence. We characterize all mechanisms that resolve the hidden action problem (i.e., that induce a targeted action profile). A variety of action choices shrinks the set of mechanisms that induce the targeted action profile, leading to the equivalence properties in the ex-post term with respect to payoffs, payments, and revenues. When the agents can take unilateral deviations to change the state distribution in various directions (i.e., when the action profile satisfies richness ), pure-VCG mechanisms —the simplest form of canonical VCG mechanism, which is implemented via open-bid descending procedures that determine the losers' compensation—are the only mechanisms that induce an efficient action profile. Contrariwise, the popular pivot mechanism, implemented by ascending auctions that determine the winner's payment, generally fails to induce any efficient action profile.
    Date: 2017–07
  2. By: Hitoshi Matsushima (Faculty of Economics, The University of Tokyo)
    Abstract: We investigate implementation of social choice functions, where we impose severe restrictions on mechanisms, such as boundedness, permitting only tiny transfers, and uniqueness of an iteratively undominated strategy profile in the ex-post term. We assume that there exists some partial information about the state that is verifiable. We consider the dynamic aspect of information acquisition, where players share information, but the timing of receiving information is different across players. By using this aspect, the central planner designs a dynamic, not a static, mechanism, in which each player announces what he (or she) knows about the state at multiple stages with sufficient intervals. By demonstrating a sufficient condition on the state and on the dynamic aspect, namely full detection, we show that a wide variety of social choice functions are uniquely implementable even if the range of players’ lies that the verified information can directly detect is quite narrow. With full detection, we can detect all possible lies, not by the verified information alone, but by processing a chain of detection triggered by this information. This paper does not assume either expected utility or quasi-linearity.
    Date: 2017–07
  3. By: Fabian Eckert (Yale University); Costas Arkolakis (Yale University)
    Abstract: Combinatorial problems are prevalent in economics but the large dimensionality of potential solutions substantially limits the scope of their applications. We define and characterize a general class that we term combinatorial discrete choice problems and show that it incorporates existing problems in economics and engineering. We prove that intuitive sufficient conditions guarantee the existence of simple recursive procedures that can be used to identify the global maximum. We propose such an algorithm and show how it can be used to revisit problems whose computation was deemed infeasible before. We finally discuss results for a class of games characterized by these sufficient conditions.
    Date: 2017
  4. By: Christian Trudeau (Department of Economics, University of Windsor); Juan Vidal-Puga (Research Group of Economic Analysis and Departamento de Estatistica e IO, Universidade de Vigo)
    Abstract: We introduce a new family of cooperative games for which there is coincidence between the nucleolus and the Shapley value. These so-called clique games are such that players are divided into cliques, with the value created by a coalition linearly increasing with the number of agents belonging to the same clique. Agents can belong to multiple cliques, but for a pair of cliques, at most a single agent belong to their intersection. Finally, if two players do not belong to the same clique, there is at most one way to link the two players through a chain of players, with any two adjacent players in the chain belonging to a common clique. We provide multiple examples for clique games, chief among them minimum cost spanning tree problems. This allows us to obtain new correspondence results between the nucleolus and the Shapley value, as well as other cost sharing methods for the minimum cost spanning tree problem.
    Keywords: nucleolus; Shapley value; clique; minimum cost spanning tree.
    JEL: C71 D63
    Date: 2017–07
  5. By: Giménez Gómez, José M. (José Manuel); Subiza, Begoña
    Abstract: A minimum cost spanning tree problem analyzes the way to efficiently connect individuals to a source when they are located at different places. Several rules have been defined to solve this problem. Our objective here is to propose a new approach that differentiates some costs that may deserve compensations (involuntary costs) from some other connection costs that may be considered voluntary. We therefore define a solidarity egalitarian solution, through which, the total cost is allocated by considering pay-backs to equalize the involuntary costs, thus fulfilling the weak stability condition of individual rationality. Keywords: Minimum cost spanning tree, Solidarity, Cost sharing, Egalitarian JEL classification: C71, D63, D71.
    Keywords: Jocs cooperatius, 33 - Economia,
    Date: 2016

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