nep-des New Economics Papers
on Economic Design
Issue of 2018‒02‒19
five papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Number of bidders and the winner’s curse By Ronald Peeters; Anastas P. Tenev
  2. Disclosure and Pricing of Attributes By Smolin, Alex
  3. Dynamic Evaluation Design By Smolin, Alex
  4. GAMES WITH IDENTICAL SHAPLEY VALUES By Sylvain Béal; MIHAI MANEA; Eric Rémila; Phillippe Solal
  5. Tell the truth or not? The Montero mechanism for emissions control at work By Requate, Tilman; Camacho-Cuena, Eva; Ch'ng, Kean Siang; Waichman, Israel

  1. By: Ronald Peeters (Department of Economics, University of Otago, New Zealand); Anastas P. Tenev (Department of Economics, Maastricht University)
    Abstract: Within an affiliated value auction setting, we study the relationship between the number of bidders and the winner’s curse in terms of its occurrence and its expected harm. From a design perspective, we find that both the number of bidders and the level of affiliation are instrumental when choosing an auction format and whether to encourage or discourage bidder participation.
    Keywords: Winner’s curse; number of bidders; affiliated value auctions
    JEL: D44 D82 H57
    Date: 2018–01
  2. By: Smolin, Alex
    Abstract: A monopolist seller owns an object that has several attributes. A buyer is privately informed about his tastes and uncertain about the attributes. The seller can disclose attribute information to the buyer in a form of a statistical experiment. The seller offers a menu of call options varying in upfront payments, experiments, and strike prices. I study revenue-maximizing menus and show that optimal experiments belong to a simple class of linear disclosures. I fully characterize an optimal menu for a class of single-minded buyers. Surprisingly, the menu is nondiscriminatory and can be implemented by a single partial disclosure followed by a posted price.
    Keywords: Attributes, Information Design, Mechanism Design, Private Disclosure, Call Options, Multidimensional Screening, Demand Transformation
    JEL: D42 D82 D83
    Date: 2017–10
  3. By: Smolin, Alex
    Abstract: A principal owns a firm, hires an agent of uncertain productivity, and designs a dynamic policy for evaluating his performance. The agent observes ongoing evaluations and decides when to quit. While not quitting, the agent is paid a wage proportional to his perceived productivity; the principal claims the residual performance. After quitting, the agent secures a fixed safe payoff. I show that equilibrium evaluation policies are Pareto efficient and leave no rents to the agent. In a minimally informative equilibrium, for a broad class of performance technologies, the agent’s wage deterministically grows with tenure.
    Keywords: evaluation, information design, career concerns, bandit experimentation, downward wage rigidity, up-or-out
    JEL: C72 D82 D83 M52
    Date: 2017–10
  4. By: Sylvain Béal (Université de Bourgogne Franche-Comté, CRESE); MIHAI MANEA; Eric Rémila (Université de Saint-Etienne, Gate); Phillippe Solal (Université de Saint-Etienne, Gate)
    Abstract: We discuss several sets of cooperative games in which the Shapley value assigns zero payo s to all players. Each set spans the kernel of the Shapley value and leads to a different characterization of games with identical Shapley values. The special games we identify deliver intuitive axiomatizations of the Shapley value. We explain how each basis of the kernel of the Shapley value can be augmented to construct a basis of the space of all games.
    Keywords: Shapley value, kernel, axiomatization, factious oligarchies, paper tigers
    Date: 2018–02
  5. By: Requate, Tilman; Camacho-Cuena, Eva; Ch'ng, Kean Siang; Waichman, Israel
    Abstract: We experimentally test the truth-telling mechanism proposed by Montero (2008) for eliciting firms' abatement costs. We compare this mechanism with two well-known alternative allocation mechanisms, grandfathering and pure auctioning. We conducted 27 treatments with a total of 623 participants, controlling for the allocation mechanism, the number of firms, and the true maximal emission levels. We find that, in line with the theoretical predictions, firms over-report their maximal emissions under grandfathering and under-report them under pure auctioning, while under Montero's mechanism firms almost always report their maximal emissions truthfully. However, in terms of efficiency, the difference between Montero's mechanism and pure auctioning disappears when there is more than one firm in the market.
    Keywords: mechanism design,environmental policy,permit trading,auctions,experiment
    JEL: C92 D44 L51 Q28
    Date: 2018

This nep-des issue is ©2018 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.
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