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on Economic Design |
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Issue of 2018‒06‒25
nine papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Bergemann, Dirk; Brooks, Benjamin A; Morris, Stephen |
| Abstract: | We revisit the revenue comparison of standard auction formats, including first-price, second-price, and English auctions. We rank auctions according to their revenue guarantees, i.e., the greatest lower bound of revenue across all informational environments, where we hold fixed the distribution of bidders' values. We conclude that if we restrict attention to the symmetric affiliated models of Milgrom and Weber (1982) and monotonic pure-strategy equilibria, first-price, second-price, and English auctions all have the same revenue guarantee, which is equal to that of the first-price auction as characterized by Bergemann, Brooks and Morris (2017). If we consider all equilibria or if we allow more general models of information, then first-price auctions have a greater revenue guarantee than all other auctions considered. |
| Keywords: | affiliated values; common values; English auction; First-price auction; revenue equivalence; Revenue guarantee; revenue ranking; second-price auction |
| JEL: | C72 D44 D82 D83 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12964&r=des |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Juuso Valimaki (Aalto School of Economics) |
| Abstract: | We provide an introduction to the recent developments in dynamic mechanism design, with a primary focus on the quasilinear case. First, we describe socially optimal (or e?icient) dynamic mechanisms. These mechanisms extend the well-known Vickrey-Clark-Groves and D’Aspremont-Gérard-Varet mechanisms to a dynamic environment. Second, we discuss revenue optimal mechanisms. We cover models of sequential screening and revenue maximizing auctions with dynamically changing bidder types. We also discuss models of information management where the mechanism designer can control (at least partially) the stochastic process governing the agents’ types. Third, we consider models with changing populations of agents over time. After discussing related models with risk-averse agents and limited liability, we conclude with a number of open questions and challenges that remain for the theory of dynamic mechanism design. |
| Keywords: | Dynamic Mechanism Design, Sequential Screening, Dynamic Pivot Mechanism, Bandit Auctions, Information Management, Dynamic Pricing |
| JEL: | D44 D82 D83 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2102r&r=des |
| By: | Calsamiglia, Caterina; Fu, Chao; Güell, Maia |
| Abstract: | We model household choice of schools under the Boston mechanism (BM) and develop a new method, applicable to a broad class of mechanisms, to fully solve the choice problem even if it is infeasible via the traditional method. We estimate the joint distribution of household preferences and sophistication types using administrative data from Barcelona. Counterfactual policy analyses show that a change from BM to the Deferred Acceptance mechanism would decrease average welfare by 1,020 euros, while a change to the top trading cycles mechanism would increase average welfare by 460 euros. |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12958&r=des |
| By: | Pablo Amorós (Department of Economics, University of Málaga) |
| Abstract: | The honest opinions of a group of experts must be aggregated to determine the deserving winner of a competition. The aggregation procedure is majoritarian if, whenever a majority of experts honestly believe that a contestant is the best one, then that contestant is considered the deserving winner. The fact that an expert believes that a contestant is the best one does not necessarily imply that she wants this contestant to win as, for example, she might be biased in favor of some other contestant. Then, we have to design a mechanism that implements the deserving winner. We show that, if the aggregation procedure is majoritarian, such a mechanism exists only if the experts are totally impartial. This impossibility result is very strong as it does not depend on the equilibrium concept considered. |
| Keywords: | mechanism design; social choice; aggregation of experts'? opinions; jury |
| JEL: | C72 D71 D78 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:mal:wpaper:2018-3&r=des |
| By: | Stéphane Gonzalez (Univ Lyon, UJM Saint-Etienne, France; GATE L-SE CNRS UMR 5824); Aymeric Lardon (Université Côte d'Azur, France; GREDEG CNRS) |
| Abstract: | We provide an axiomatic characterization of the core of games in effectiveness form. We point out that the core, whenever it applies to appropriate classes of these games, coincides with a wide variety of prominent stability concepts in social choice and game theory, such as the Condorcet winner, the Nash equilibrium, the pairwise stability, and the stable matchings, among others. Our characterization of the core invokes the axioms of non-emptiness, coalitional unanimity, and Maskin monotonicity together with a principle of independence of irrelevant states, and uses in its proof a holdover property echoing the conventional ancestor property. Taking special cases of this general characterization of the core, we derive new characterizations of the previously mentioned stability concepts. |
| Keywords: | Effectiveness function, core, axiomatization, holdover property, consistency principle |
| JEL: | C70 C71 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2018-15&r=des |
| By: | Romanyuk, Gleb; Smolin, Alexey |
| Abstract: | Short-lived buyers arrive to a platform over time and randomly match with sellers. The sellers stay at the platform and sequentially decide whether to accept incoming requests. The platform designs what buyer information the sellers observe before deciding to form a match. We show full information disclosure leads to a market failure because of excessive rejections by the sellers. If sellers are homogeneous, then coarse information policies are able to restore efficiency. If sellers are heterogeneous, then simple censorship policies are often constrained efficient as shown by a novel method of calculus of variations. |
| Keywords: | cream skimming, matching markets, market failure, information design, calculus of variations |
| JEL: | C73 C78 D82 D83 |
| Date: | 2018–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:86713&r=des |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Francisco Castro (Graduate School of Business, Columbia University); Gabriel Weintraub (Graduate School of Business, Stanford University) |
| Abstract: | We study the classic sequential screening problem in the presence of buyers’ ex-post participation constraints. A leading example is the online display advertising market, in which publishers frequently do not use up-front fees and instead use transaction-contingent fees. We establish conditions under which the optimal selling mechanism is static and buyers are not screened with respect to their interim type, or sequential and the buyers are screened with respect to their interim type. In particular, we provide an intuitive necessary and su?icient condition under which the static contract is optimal for general distributions of ex-post values. Further, we completely characterize the optimal sequential contract with binary interim types and continuum of ex-post values when this condition fails. Importantly, the latter contract randomizes the allocation of the low type buyer while giving a deterministic allocation to the high type. We also provide partial results for the case of multiple interim types. |
| Keywords: | Sequential screening, Ex-post participation constraints, Static contract, Sequential contract |
| JEL: | C72 D82 D83 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2078r2&r=des |
| By: | Maria Gabriella Graziano (Università di Napoli Federico II and CSEF); Claudia Meo (Università di Napoli Federico II); Nicholas C. Yannelis (University of Iowa) |
| Abstract: | We analyze housing market models à la Shapley and Scarf with externalities in consumption; that is, agents care about others and their preferences are defined over allocations rather than over single indivisible goods. After collecting some negative results about the existence of several cooperative solutions, we focus on stable allocations and search for special domains of preferences that can guarantee that they both exist and form a stable set à la von Neumann and Morgenstern. |
| Keywords: | Indivisible goods; other-regarding preferences; core; stable allocations; stable sets. |
| JEL: | C70 C78 D51 D62 D64 |
| Date: | 2018–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:500&r=des |
| By: | Milgrom, Paul R. (Stanford University); Weyl, E. Glen (Microsoft Research); Zhang, Anthony Lee (Stanford University) |
| Abstract: | Commercial radio spectrum use rights in the US are traditionally assigned using licenses over large geographic areas with 10- or 15-year terms, to encourage infrastructure investment. However, such long-term licenses are difficult to reassign as more valuable uses for spectrum arise. Licenses with shorter term limits over smaller areas expedite reassignment of spectrum to innovative entrants, but provide lower incentives for long-term investment. Recent economic theory suggests that this trade-off between protecting long-term investments and enabling valuable, innovative entry can be muted by a new, more efficient "depreciating" license. A promising application is to priority access in the 3.5GHz band, where thousands of licenses are about to be auctioned. Alternatively, carefully redesigning auction rules may offer similar benefits. |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:repec:ecl:stabus:3587&r=des |