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on Economic Design |
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Issue of 2017‒11‒05
seven papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Gharad Bryan; Jonathan de Quidt; Tom Wilkening; Nitin Yadav |
| Abstract: | Small farms and fragmented plots are hallmarks of agriculture in less-developed countries, and there is evidence of high returns to land consolidation and reallocation. Complementarities, holdout and asymmetric information mean that private trade will be slow to reallocate land, and imply that market design has the potential to contribute to the development process. Complexity concerns are, however, paramount. We present results from a framed field experiment with Kenyan farmers, comparing the performance of several continuous-time land exchanges. Farmers are able to achieve high degrees of efficiency, and to comprehend and gain from a relatively complicated package exchange. |
| Keywords: | market design, field experiments, economic development, land trade |
| JEL: | C93 O13 Q15 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6557&r=des |
| By: | Christoph March; Marco Sahm |
| Abstract: | We investigate how individual risk preferences affect the likelihood of selecting the more able contestant within a two-player Tullock contest. Our theoretical model yields two main predictions: First, an increase in the risk aversion of a player worsens her odds unless she already has a sufficiently large advantage. Second, if the prize money is sufficiently large, a less able but less risk averse contestant can achieve an equal or even higher probability of winning than a more able but more risk averse opponent. In a laboratory experiment we confirm both, the non-monotonic impact and the compensating effect of risk aversion on winning probabilities. Our results suggest a novel explanation for the gender gap and the optimality of limited monetary incentives in selection contests. |
| Keywords: | selection contest, risk aversion, competitive balance, gender gap |
| JEL: | C72 D72 J31 K41 M51 M52 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6587&r=des |
| By: | Christoph Laica; Arne Lauber; Marco Sahm |
| Abstract: | We examine the fairness and intensity of sequential round-robin tournaments with multiple prizes. With three symmetric players and two prizes, the tournament is completely fair if and only if the second prize is valued half of the first prize, regardless of whether matches are organized as Tullock contests or as allpay auctions. For second prizes different from half of the first prize, three-player tournaments with matches organized as Tullock contests are usually fairer than tournaments with matches organized as all-pay auctions. However, unless the second prize is very small, they are less intense in the sense that players exert less ex-ante expected aggregate effort per unit of prize money. Moreover, we specify how the relative size of the second prize influences the extent and the direction of discrimination as well as the intensity of three-player tournaments. Finally, we show that there is no prize structure for which sequential round-robin tournaments with four symmetric players are completely fair in general. |
| Keywords: | round-robin tournament, multiple prizes, fairness, intensity, Tullock contest, all-pay auction |
| JEL: | C72 D72 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6685&r=des |
| By: | Sahm, Marco |
| Abstract: | I examine sequential round-robin tournaments with three and four symmetric players which are matched once with each other. If the matches are organized as Tullock contests (all-pay auctions), the tournament is almost fair (highly discriminatory): Subject to the position of their matches in the sequence of the tournament, the differences in players’ ex ante winning probabilities and expected payoffs are small (large). Discrepancy results from a higher discriminating power of the all-pay auction. |
| JEL: | C72 D72 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168113&r=des |
| By: | Sela, Aner |
| Abstract: | We study an elimination tournament with four contestants, each of whom has either a high value of winning (a strong player) or a low value of winning (a weak player) and these values are common-knowledge. Each pair-wise match is modelled as an all-pay auction. The winners of the first stage (semifinal) compete in the second stage (final) for the first prize, while the losers of the first stage compete for the third prize. We examine whether or not the game for the third prize is profitable for the designer who wishes to maximize the total effort of the players. We demonstrate that if there are at least two strong players, there is always a seeding of the players such that the third place game is not profitable. On the other hand, if there are at least two weak players, then there is always a seeding of the players such that the third place game becomes profitable. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12348&r=des |
| By: | Gretschko, Vitali; Wambach, Achim |
| Abstract: | We consider the problem of a principal who wishes to contract with a privately informed agent and is not able to commit to not renegotiating any outcome of any mechanism. We provide a general characterization of renegotiation-proof outcomes. We apply the solution to a setting with a continuous type space, private values and non-linear contracts. We find that the optimal renegotiation-proof outcomes for the principal are pooling outcomes and satisfy a “no-distortion-at-the-bottom” property. |
| JEL: | C72 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168269&r=des |
| By: | Puppe, Clemens |
| Abstract: | It is proved that, among all restricted preference domains that guarantee consistency (i.e. transitivity) of pairwise majority voting, the single-peaked domain is the only minimally rich and connected domain that contains two completely reversed strict preference orders.This result has a number of corollaries, among other things it implies that a single-crossing (‘order-restricted’) domain can be minimally rich only if it is a subdomain of a single-peaked domain. |
| JEL: | D71 C72 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168068&r=des |