nep-des 2018-02-12 papers

on Economic Design

Issue of 2018‒02‒12
two papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

The Myopic Stable Set for Social Environments (RM/17/002-revised) By Demuynck, Thomas; Herings, P. Jean-Jacques; Saulle, Riccardo; Seel, Christian
Order protection through delayed messaging By Aldrich, Eric M.; Friedman, Daniel

The Myopic Stable Set for Social Environments (RM/17/002-revised)

By:	Demuynck, Thomas (universite libre de bruxelles); Herings, P. Jean-Jacques (General Economics 1 (Micro)); Saulle, Riccardo (General Economics 1 (Micro)); Seel, Christian (General Economics 1 (Micro))
Abstract:	We introduce a new solution concept for models of coalition formation, called the myopic stable set (MSS). The MSS is defined for a general class of social environments and allows for an infinite state space. An MSS exists and, under minor continuity assumptions, it is also unique. The MSS generalizes and unifies various results from more specific applications. It coincides with the coalition structure core in coalition function form games when this set is non-empty; with the set of stable matchings in the Gale-Shapley matching model; with the set of Pareto optimal allocations in the Shapley-Scarf housing matching model; with the set of pairwise stable networks and closed cycles in models of network formation; with the set of pure strategy Nash equilibria in pseudo-potential games and finite supermodular games; and with the set of mixed strategy Nash equilibria in several classes of two-player games.
Keywords:	Social environments, group formation, stability, Nash equilibrium
JEL:	C70 C71
Date:	2018–02–01
URL:	http://d.repec.org/n?u=RePEc:unm:umagsb:2018001&r=des

Order protection through delayed messaging

By:	Aldrich, Eric M.; Friedman, Daniel
Abstract:	Several financial exchanges have recently introduced messaging delays (e.g., a 350 microsecond delay at IEX and NYSE American) intended to protect ordinary investors from high-frequency traders who exploit stale orders. We propose an equilibrium model of this exchange design as a modification of the standard continuous double auction market format. The model predicts that a messaging delay will generally improve price efficiency and lower transactions cost but will increase queuing costs. Some of the predictions are testable in the field or in a laboratory environment.
Keywords:	market design,high-frequency trading,continuous double auction,IEX,lab experiments
JEL:	C91 D44 D53 G12 G14
Date:	2017
URL:	http://d.repec.org/n?u=RePEc:zbw:wzbmdn:spii2017502&r=des

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