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on Economic Design |
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Issue of 2017‒09‒24
eight papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Aditya Bhave; Eric Budish |
| Abstract: | Economists have long been puzzled by event-ticket underpricing: underpricing both reduces revenue and encourages socially wasteful rent-seeking by ticket brokers. This paper studies the introduction of auctions into this market by Ticketmaster. We first show theoretically that Ticketmaster’s auction design, a novel variant of position auctions, has attractive efficiency, revenue and no-arbitrage properties. Then, by combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that the auctions “worked” in practice: on average, they eliminated the arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions have failed to take off. “It is nevertheless true that gangs of hardened ticket speculators exist and carry on their atrocious trade with perfect shamelessness.” —New York Times Editorial (1876). |
| JEL: | D44 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23770&r=des |
| By: | Manzano, Carolina; Vives, Xavier |
| Abstract: | We analyze a divisible good uniform-price auction that features two groups each with a Önite number of identical bidders. At equilibrium the relative market power (price impact) of a group increases with the precision of its private information and declines with its transaction costs. An increase in transaction costs and/or a decrease in the precision of a bidding groupís information induces a strategic response from the other group, which thereafter attenuates its response to both private information and prices. A "stronger" bidding group -which has more precise private information, faces lower transaction costs, and is more oligopsonistic- has more price impact and so will behave competitively only if it receives a higher per capita subsidy rate. When the strong group values the asset no less than the weak group, the expected deadweight loss increases with the quantity auctioned and also with the degree of payo§ asymmetries. Price impact and the deadweight loss may be negatively associated. The results are consistent with the available empirical evidence. KEYWORDS: demand/supply schedule competition, private information, liquidity auctions, Treasury auctions, electricity auctions, market integration. JEL: D44, D82, G14, E58 |
| Keywords: | Teoria de la informació (Economia), Mercat -- Anàlisi, Bancs centrals, Subhastes, 33 - Economia, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:urv:wpaper:2072/292436&r=des |
| By: | Can, Burak (General Economics 1 (Micro)); Ergin, Emre (General Economics 0 (Onderwijs)); Pourpouneh, Mohsen (sharif university of technology) |
| Abstract: | Moulin (1988) shows that there exists no social choice rule, that satisfies the following two criteria at the same time: the Condorcet criterion and the participation criterion, a.k.a., No Show Paradox. We extend these criteria to social welfare rules, i.e., rules that choose rankings for each preference profile. We show that the impossibility does not hold, and one particular rule, the Kemeny rule satisfies both the Condorcet and the participation criteria. |
| Keywords: | condorcet criterion, participation criterion, social choice rules, social welfare rules |
| JEL: | D71 |
| Date: | 2017–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2017020&r=des |
| By: | Marco Faravelli (School of Economics, University of Queensland, Brisbane, Australia.); Kenan Kalayci (School of Economics, University of Queensland, Brisbane, Australia.); Carlos Pimienta (School of Economics, UNSW Business School, UNSW, Sydney, Australia.) |
| Abstract: | We test the turnout predictions of the standard two-party, private value, costly voting model through a large-scale, real effort experiment. We do this by recruiting 1,200 participants through Amazon's Mechanical Turk and employing a 2 x 2 between subjects design encompassing small (N=30) and large (N=300) elections, as well as close and one-sided elections. We find partial evidence of selfish instrumental voting. Participants with a higher opportunity cost are less likely to vote (cost effect); turnout rate decreases as the electorate size increases (size effect) in one-sided elections and increases the closer the election is (competition effect) in large elections. Contrary to the theoretical predictions, in large one-sided elections the majority turns out to vote at a higher rate than the minority. We propose an alternative theory assuming that voters obtain a small non-monetary utility if they vote and their party wins. |
| Keywords: | Costly Voting, Turnout, Field Experiment, Real Effort, Amazon's Mechanical Turk |
| JEL: | C93 D72 C72 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2017-16&r=des |
| By: | Perez-Richet, Eduardo; Skreta, Vasiliki |
| Abstract: | We derive an optimal test when cheating is possible in the form of type falsification. Optimal design exploits the following trade-off: while cheating may lead to better grades, it devalues their meaning. We show that optimal tests can be derived among cheating- proof ones. Our optimal test has a single 'failing' grade, and a continuum of 'passing' grades. It makes the agent indifferent across all moderate levels of cheating. Good types never fail, but bad types may pass. An optimal test delivers at least half of the full information value. A three-grade optimal test also performs well |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12271&r=des |
| By: | Cerezo Sánchez, David |
| Abstract: | Initial Coin Offerings (ICOs) are raising billions in funding using multiple strategies, none justified from the point of view of mechanism design, resulting in severe underpricing and high volatility. In the present paper, an optimal ICO mechanism is proposed for the first time: a truthful multi-unit Vickrey-Dutch auction of callable tokens (i.e., a new hybrid security of tokens packaged with callable warrants). Truthful bidding is an ex-post Nash equilibrium strategy and the auction terminates with an ex-post efficient allocation; additionally, the callability of the warrants eliminates the winner’s curse of the auction and its underpricing. An implementation demonstrates its practical viability. |
| Keywords: | Optimal ICO, mechanism design, multi-unit auction, callable warrant, cryptoeconomics |
| JEL: | C72 D44 D82 G23 G24 G32 L26 O33 |
| Date: | 2017–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81285&r=des |
| By: | Baran Doda, Simon Quemin, Luca Taschini |
| Abstract: | Linkages between emissions trading systems (ETSs) have an important role to play in the successful, cost-effective implementation of the Paris Agreement. While the theory of bilateral linkages is well established, we know relatively little about the gains from trade in a multilaterally linked system, and less still about how they are shared among jurisdictions participating in the system. We characterize these gains for an arbitrary linkage coalition, show how they can be decomposed into gains in the coalition’s internal bilateral linkages, and prove that linkage is superadditive. Our theoretical results imply the global market may not emerge endogenously and a quantitative exercise shows that this concern may have some validity in practice. |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:lsg:lsgwps:wp275&r=des |
| By: | Pauline Morault (Aix-Marseille Univ. (Aix-Marseille School of Economics), CNRS, EHESS and Centrale Marseille) |
| Abstract: | In many societies, marriage is a decision taken at the familial level. Arranged marriages are documented from Renaissance Europe to contemporary rural Kenya, and are still prevalent in many parts of the developing world. However, this family dimension has essentially been neglected by the existing matching literature on marriages. The objective of this paper is to introduce family considerations into the assignment game. We explore how shifting decision-making to the family level affects matching on the marriage market. We introduce a new concept of familial stability and find that it is weaker than individual stability. The introduction of families into the marriage market generates coordination problems, so the central result of the transferable utility framework no longer holds: a matching can be family-stable even if it does not maximize the sum of total marital surpluses. Interestingly, even when the stable matching is efficient, family decision-making drastically modifies how the surplus is shared-out. These results may have fundamental implications for pre-marital investments. We find that stable matchings depend on the type of family partitioning. Notably, when each family contains one son and one daughter, familial and individual stability are equivalent. |
| Keywords: | marriage, family, matching, transferable utility |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1724&r=des |