nep-des New Economics Papers
on Economic Design
Issue of 2017‒12‒18
seven papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Refugee Matching as a Market Design Application By Andersson, Tommy
  2. On Monotone Strategy Equilibria in Simultaneous Auctions for Complementary Goods By Gentry, Matthew; Komarova, Tatiana; Schiraldi, Pasquale; Shin, Wiroy
  3. "Testing the Validity of Non-Parametric Value Estimates in Treasury Bill Auctions Using Top-Up Auction Data" This note uses data from top-up auctions to test the validity of value functions I derive using the Hortacsu and McAdams (2010) methodology in my paper on Polish Treasury Bills (Marszalec, 2017). The testing procedure assumes that bidders have the same value function across both auctions; in this setting, since the top-up phase price is fixed, a presence of the top-up bid can be used to pin down the position where the value function ought to lie. The test I propose rejects in over 70% of the bidding data when a top-up bid is observed, indicating that a bias may occur in the estimation method that does not model top-up auctions explicitly. The current note doesn't find a bound on the magnitude of the bias - but finding such a bound for both the non-parametric models of Hortacsu and McAdams (2010) as well as the semi-parametric model of Fevrier et al. (2004)is now work in progress. By Daniel Marszalec
  4. On the Optimal Majority Rule By Compte, Olivier; Jehiel, Philippe
  5. Robust Voting under Uncertainty By NAKADA, Satoshi; NITZAN, Shmuel; UI, Takashi
  6. Prize allocation and incentives in team contests By Crutzen, Benoît SY; Flamand, Sabine; Sahuguet, Nicolas
  7. Instability in the Voluntary Contribution Mechanism with a Quasi-linear Payoff Function: An Experimental Analysis By Jun Feng; Tatsuyoshi Saijo; Junyi Shen; Xiangdong Qin

  1. By: Andersson, Tommy (Department of Economics, Lund University)
    Abstract: This note contains a few brief remarks on the similarities and differences between some standard market design applications (e.g., kidney exchange and school choice) and the refugee assignment problem. The main conclusion is that the refugee assignment problem is more complex in some dimensions than many of the standard market design applications. Consequently, classical mechanisms cannot be used to solve the problem and more research is needed to, e.g., understand how to model preferences, and how to define relevant axioms and multidimensional constraints.
    Keywords: forced migration; asylum seekers; refugee assignment; matching; market design
    JEL: C78 F22
    Date: 2017–08–12
  2. By: Gentry, Matthew; Komarova, Tatiana; Schiraldi, Pasquale; Shin, Wiroy
    Abstract: We explore existence and properties of equilibrium when N>1 bidders compete for L>1 objects via simultaneous but separate auctions. Bidders have private combinatorial valuations over all sets of objects they could win, and objects are complements in the sense that these valuations are supermodular in the set of objects won. We provide a novel partial order on types under which best replies are monotone, and demonstrate that Bayesian Nash equilibria which are monotone with respect to this partial order exist on any finite bid lattice. We apply this result to show existence of monotone Bayesian Nash equilibria in continuous bid spaces when a single global bidder competes for L objects against many local bidders who bid for single objects only, highlighting the step in this extension which fails with multiple global bidders. We therefore instead consider an alternative equilibrium with endogenous tie-breaking building on Jackson, Simon, Swinkels and Zame (2002), and demonstrate that this exists in general. Finally, we explore efficiency in simultaneous auctions with symmetric bidders, establishing novel sufficient conditions under which inefficiency in expectation approaches zero as the number of bidders increases.
    Keywords: simultaneous auctions; complementarities; synergies; equilibria existence; efficiency; multi-object auctions; monotone strategies
    JEL: C72 D44
    Date: 2017–12
  3. By: Daniel Marszalec (Faculty of Economics, The University of Tokyo)
    Date: 2017–12
  4. By: Compte, Olivier; Jehiel, Philippe
    Abstract: We develop a simple model that rationalizes why less stringent majority rules are preferable to unanimity in large committees. Proposals are randomly generated and the running proposal is adopted whenever it is approved by a sufficiently large share of voters. Unanimity induces excessive delays while too weak majority requirements induce the adoption of suboptimal proposals. The optimal majority rule balances these two inefficiencies: it requires the approval by a share equal to the probability (assumed to be constant across proposals) that a given member gets more than the average welfare associated with the running proposal. Various extensions are considered.
    Date: 2017–12
  5. By: NAKADA, Satoshi; NITZAN, Shmuel; UI, Takashi
    Abstract: This paper proposes normative consequentialist criteria for voting rules under Knightian uncertainty about individual preferences to characterize a weighted majority rule (WMR). The criteria stress the significance of responsiveness, i.e., the probability that the social outcome coincides with the realized individual preferences. A voting rule is said to be robust if, for any probability distribution of preferences, responsiveness of at least one individual is greater than one-half. Our main result establishes that a voting rule is robust if and only if it is a WMR without ties. This characterization of a WMR avoiding the worst possible outcomes complements the well-known characterization of a WMR achieving the optimal outcomes, i.e., efficiency regarding responsiveness.
    Keywords: majority rule, weighted majority rule, responsiveness, Knightian uncertainty
    JEL: D71 D81
    Date: 2017–12
  6. By: Crutzen, Benoît SY; Flamand, Sabine; Sahuguet, Nicolas
    Abstract: We study a contest between teams that compete for multiple indivisible prizes. Team output is a CES function of all the team members' efforts. We use a generalized Tullock contest success function to allocate prizes between teams. We study how different intra-team prize allocation rules impact team output. We consider an egalitarian rule that gives all members the same chance of receiving a prize, and a list rule that sets ex-ante the order in which members receive a prize. The convexity of the cost of effort function and the complementarity of individual efforts determine which rule maximizes team output and success. Our results speak to many real world situations, such as elections, contests for the allocation of local public goods and the internal organization of firms.
    Date: 2017–12
  7. By: Jun Feng; Tatsuyoshi Saijo (Research Institute for Humanity and Nature); Junyi Shen (Research Institute for Economics and Business Administration, Kobe University); Xiangdong Qin (Antai College of Economics and Management,Shanghai Jiaotong University)
    Abstract: We conduct experiments to investigate the convergence of contributions in the voluntary contribution mechanism (VCM) with two quasi-linear payoff functions. One is linear with respect to private goods and nonlinear with respect to public goods; we call it “QL1.†The other is linear with respect to public goods and nonlinear with respect to private goods; we call it “QL2.†The system with QL1, built on the assumption of self-interested players and myopic Cournot best response dynamics, is not stable, but the system with QL2 has a dominant Nash equilibrium. This theoretical result predicts a “pulsing†of contributions in the VCM with QL1. Our experimental observations demonstrate that individual contributions are certainly converging to the dominant Nash equilibrium in the experiment with QL2. In the experiments with QL1, however, the dispersion of individual contributions increases progressively with repeated trials, and the contributions are still volatile in the experiments’ last periods, although we do not find a clearly unstable pulsing in the group’s total contribution.
    Keywords: Instability, public goods game, lab experiment, voluntary contribution mechanism, conditional cooperator
    JEL: H41
    Date: 2017–12

This nep-des issue is ©2017 by Guillaume Haeringer and Alex Teytelboym. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.