nep-des New Economics Papers
on Economic Design
Issue of 2018‒07‒23
seven papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Optimal Dynamic Matching By Baccara, Mariagiovanna; Lee, SangMok; Yariv, Leeat
  2. Random Paths to Popularity in Two-Sided Matching By Aleksei Yu. Kondratev; Alexander S. Nesterov
  3. Voting as a War of Attrition By Kwiek, Maksymilian; Marreiros, Helia; Vlassopoulos, Michael
  4. Measuring Majority Tyranny: Axiomatic Approach By Aleksei Yu. Kondratev; Alexander S. Nesterov
  5. Herd Behavior in FDA Committees: A Structural Approach By Melissa Newham; Rune Midjord
  6. Information design in multi-stage games By Miltiadis Makris; Ludovic Renou
  7. UK Electricity Market Reform and the Energy Transition: Emerging Lessons By Grubb, M.; Newbery, D.

  1. By: Baccara, Mariagiovanna; Lee, SangMok; Yariv, Leeat
    Abstract: We study a dynamic matching environment where individuals arrive sequentially. There is a tradeoff between waiting for a thicker market, allowing for higher quality matches, and minimizing agents' waiting costs. The optimal mechanism cumulates a stock of incongruent pairs up to a threshold and matches all others in an assortative fashion instantaneously. In discretionary settings, a similar protocol ensues in equilibrium, but expected queues are inefficiently long. We quantify the welfare gain from centralization, which can be substantial, even for low waiting costs. We also evaluate welfare improvements generated by transfer schemes, and alternative priority protocols.
    Keywords: Dynamic Matching; market design; mechanism design; Organ Donation
    Date: 2018–06
  2. By: Aleksei Yu. Kondratev (National Research University Higher School of Economics); Alexander S. Nesterov (National Research University Higher School of Economics)
    Abstract: We study practically relevant aspects of popularity in two-sided matching where only one side has preferences. A matching is called popular if there does not exist another matching that is preferred by a simple majority. We show that for a matching to be popular it is necessary and sucient that no coalition of size up to 3 decides to exchange their houses by simple majority.We then constructively show that a market where such coalitions meet at random converges to a popular matching whenever it exists.
    Keywords: two-sided matching, popular matching, random paths, house allocation, assignment problem
    JEL: Z
    Date: 2018
  3. By: Kwiek, Maksymilian (University of Southampton); Marreiros, Helia (Universidade Catolica Portuguesa, Porto); Vlassopoulos, Michael (University of Southampton)
    Abstract: We study communication in committees selecting one of two alternatives when consensus is required and agents have private information about their preferences. Delaying the decision is costly, so a form of multiplayer war of attrition emerges. Waiting allows voters to express the intensity of their preferences and may help to select the alternative correctly more often than simple majority. In a series of laboratory experiments, we investigate how various rules affect the outcome reached. We vary the amount of feedback and the communication protocol available to voters: complete secrecy about the pattern of support; feedback about this support; public communication; and within-group communication. The feedback no-communication mechanism is worse than no feedback benchmark in all measures of welfare - the efficient alternative is chosen less often, waiting cost is higher, and thus net welfare is lower. Our headline result is that adding communication restores net efficiency, but in different ways. Public communication does poorly in terms of selecting the correct alternative, but limits the cost of delay, while group communication improves allocative efficiency, but has at best a moderate effect on delay.
    Keywords: voting, intensity of preferences, supermajority, conclave, war of attrition, communication
    JEL: C78 C92 D72 D74
    Date: 2018–06
  4. By: Aleksei Yu. Kondratev (National Research University Higher School of Economics); Alexander S. Nesterov (National Research University Higher School of Economics)
    Abstract: We study voting rules with respect to how they allow or limit a majority to dominate minorities. For this purpose we propose a novel quantitative criterion for voting rules: the quali ed mutual majority criterion (q; k)-MM. For a xed total number of m candidates, a voting rule satis es (q; k)-MM if whenever some k candidates receive top k ranks in an arbitrary order from a majority that consists of more than q 2 (0; 1) of voters, the voting rule selects one of these k candidates. The standard majority criterion is equivalent to (1=2; 1)-MM. The standard mutual majority criterion (MM) is equivalent to (1=2; k)-MM, where k is arbitrary. We nd the bounds on the size of the majority q for several important voting rules, including the plurality rule, the plurality with runo rule, Black's rule, Condorcet least reversal rule, Dodgson's rule, Simpson's rule, Young's rule and monotonic scoring rules; for most of these rules we show that the bound is tight.
    Keywords: Majority tyranny, single winner elections, plurality voting rule, plurality with runo , instant runo voting, mutual majority criterion, voting rules
    JEL: Z
    Date: 2018
  5. By: Melissa Newham; Rune Midjord
    Abstract: Many important decisions within public and private organizations are based on recommendations from expert committees and advisory boards. A notable example is the U.S. Food and Drug Administration's advisory committees, which make recommendations on new drug applications. Previously the voting procedure for these committees was sequential, however, due to concerns of herding and momentum effects the procedure was changed to simultaneous voting. Exploiting a novel dataset of more than ten thousand votes cast by experts in the FDA committees under both sequential and simultaneous voting, we estimate a structural model that allows us to measure the magnitude and importance of informational herding. We show that experts, voting on important scientific questions, are susceptible to herd behavior; on average 46% of the members take into consideration the sequence of previous votes when casting their vote, 17% of these voters actually herd i.e. change their vote from what they would have voted if ignoring the preceding votes.
    Keywords: Herd behavior, expert committees, structural estimation, FDA, pharmaceuticals
    JEL: D72 D82 D83 D91 I10 I18
    Date: 2018
  6. By: Miltiadis Makris (Department of Economics, University of Southampton); Ludovic Renou (Queen Mary University of London)
    Abstract: We consider multi-stage games, where at each stage, players receive private signals about past and current states, past actions and past signals, and choose actions. We fully characterize the distributions over actions, states, and signals that obtain in any (sequential) communication equilibrium of any expansion of multi-stage games, i.e., when players can receive additional signals about past and current states, past actions, and past and current signals (including the additional past signals). We interpret our results as revelation principles for information design problems. We apply our characterization to bilateral bargaining problems.
    Keywords: multi-stage games, information design, communication equilibrium, sequential communication equilibrium, information structures, Bayes correlated equilibrium, revelation principle
    JEL: C73 D82
    Date: 2018–06–25
  7. By: Grubb, M.; Newbery, D.
    Abstract: The 2013 Electricity Market Reform (EMR) was a response to problems of delivering reliability with a growing share of renewables in its energy only market. Four EMR instruments combined to revolutionise the sector; stimulating unprecedented technological and structural change. Competitive auctions for both firm capacity and renewable energy have seen prices far lower than predicted and the entry of unexpected new technologies. A carbon price floor displaced coal, whose share fell from 46% in 1995 to 7% in 2017, halving CO2. Renewables grew from under 4% in 2008 to 22% by 2017, projected at 30+% by 2020 despite a political ban on onshore wind. Neither the technological nor regulatory transitions are complete, and the results to date highlight other challenges, notably to transmission pricing and locational signals. EMR is a step forwards, not backwards; but it is not the end of the story.
    Keywords: Electricity market design, capacity auctions, renewables support
    JEL: L94 D44
    Date: 2018–06–19

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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