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on Economic Design |
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Issue of 2018‒08‒13
thirteen papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Bradley Larsen; Anthony Lee Zhang |
| Abstract: | This paper presents a two-step identification argument for a large class of quasilinear utility trading games, imputing agents' values using revealed preference based on their choices from a convex menu of expected outcomes available in equilibrium. This generalizes many existing two-step approaches in the auctions literature and applies to many cases for which there are no existing tools and where the econometrician may not know the precise rules of the game, such as incomplete-information bargaining settings. We also derive a methodology for settings in which agents' actions are not perfectly observed, bounding menus and agents' utilities based on features of the data that shift agents' imperfectly observed actions. We propose nonparametric value estimation procedures based on our identification results for general trading games. Our procedures can be combined with previously existing tools for handling unobserved heterogeneity and non-independent types. We apply our results to analyze efficiency and surplus division in the complex game played at wholesale used-car auctions, that of a secret reserve price auction followed by sequential bargaining between the seller and high bidder. |
| JEL: | C1 C7 D4 D8 L0 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24837&r=des |
| By: | Gabrielle Fack (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine, PSL - PSL Research University, PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Julien Grenet (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Yinghua He (TSE - Toulouse School of Economics - Toulouse School of Economics, Rice University [Houston]) |
| Abstract: | We propose novel approaches and tests for estimating student preferences with data from centralized matching mechanisms, like the Gale-Shapley Deferred Acceptance, when students are strictly ranked by, e.g., test scores. Without requiring truthtelling to be the unique equilibrium, we show that the matching is (asymptotically) stable, or justified-envy-free, implying that every student is matched with her favorite school/college among those she is qualified for ex post. Having illustrated the approaches in simulations, we apply them to school choice data from Paris and demonstrate evidence supporting stability but not truth-telling. We discuss when each approach is more appropriate in real-life settings. |
| Keywords: | Gale-Shapley Deferred Acceptance Mechanism,School Choice,Stable Matching,Student Preferences,Admission Criteria,College Admissions |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01215998&r=des |
| By: | Antonio Romero-Medina; Matteo Triossi |
| Abstract: | We study a class of sequential non-revelation mechanisms where hospitals make simultaneous take-it-or-leave-it o?ers to doctors that either accept or reject them. We show that the mechanisms in this class are equivalent. They (weakly) implement the set of stable allocations in subgame perfect equilibrium. When all preferences are substitutable, the set of equilibria of the mechanisms in the class forms a lattice. Our results reveal a first-mover advantage absent in the model without contracts. We apply our findings to centralize school admissions problems, and we show obtaining pairwise stable allocations is possible through the immediate acceptance mechanism.Economic Literature Classification Numbers: C78, D78. Key words: Keywords: Many-to-many, contracts, ultimatum games. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:328&r=des |
| By: | Antonio Romero-Medina; Matteo Triossi |
| Abstract: | In this note we prove that group strategy-proofness and strategy-proofness are equivalent requirements on stable mechanisms in priority-based resource allocation problems with multi-unit demand. JEL Classiffication Numbers: C71; C78; D71; D78; J44. Key words: Keywords: Matching; Multi-unit demand; Stability; Strategy-proofness, Group Strategy-proofness; Essential homogeneity. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:333&r=des |
| By: | Ata Atay (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences); Marina Núnez (University of Barcelona, Department of Mathematics for Economics, Finance and Actuarial Sciences) |
| Abstract: | In this paper, we study different notions of stability for three-sided assignment games. Since the core may be empty in this case, we first focus on other notions of stability such as the notions of subsolution and von Neumann-Morgenstern stable sets. The dominant diagonal property is necessary for the core to be a stable set, and also sufficient in the case where each sector of the market has two agents. Furthermore, for any three-sided assignment market, we prove that the union of the extended cores of all µ-compatible subgames, for a given optimal matching µ, is the core with respect to those allocations that are compatible with that matching, and this union is always non-empty. |
| Keywords: | Assignment game; core; subsolution; von Neumann-Morgenstern stable set |
| JEL: | C71 C78 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1806&r=des |
| By: | Giovanni Compiani; Philip Haile; Marcelo Sant'Anna |
| Abstract: | An oil lease auction is the classic example motivating a common values model. However, formal testing for common values has been hindered by unobserved auction-level heterogeneity, which is likely to affect both participation in an auction and bidders’ willingness to pay. We develop and apply an empirical approach for first-price sealed bid auctions with affiliated values, unobserved heterogeneity, and endogenous bidder entry. The approach also accommodates spatial dependence and sample selection. Following Haile, Hong and Shum (2003), we specify a reduced form for bidder entry outcomes and rely on an instrument for entry. However, we relax their control function requirements and demonstrate that our specification is generated by a fully specified game motivated by our application. We show that important features of the model are nonparametrically identified and propose a semiparametric estimation approach designed to scale well to the moderate sample sizes typically encountered in practice. Our empirical results show that common values, affiliated private information, and unobserved heterogeneity—three distinct phenomena with different implications for policy and empirical work—are all present and important in U.S. offshore oil and gas lease auctions. We find that ignoring unobserved heterogeneity in the empirical model obscures the presence of common values. We also examine the interaction between affiliation, the winner’s curse, and the number of bidders in determining the aggressiveness of bidding and seller revenue |
| JEL: | L0 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24795&r=des |
| By: | Bernard Caillaud (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Ariane Lambert-Mogiliansky (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper addresses the issue of favoritism at the design stage of complex procurement auctions. A local community of citizens wants to procure a complex good or project and lacks the ability to translate its preferences into operational technical specifications. This task is delegated to a public officer who may collude with one of the firms at the design stage of the procurement auction in exchange of a bribe. Assuming that it is prohibitively costly to provide a justification for many aspects, we investigate two simple accountability mechanisms that ask the public officer to justify one aspect of the project, with the threat of being punished if he fails: a random challenge mechanism and an alert-based mechanism that requires justifying one aspect on which the rivals of the winning contractor send a red ag. Relying on losing contractors enables the community to deter favoritism significantly more easily than the random challenge procedure as it allows to use information that is shared by potential contractors in the industry. The level of penalty needed to fully deter corruption is lower, independent of the complexity of the project and depends on the degree of differentiation within the industry. Below this threshold, favoritism occurs in some states of nature and we characterize and compare the different equilibrium patterns of corruption under both mechanisms. A more elaborate example suggests that the alert-based mechanism tends to lead to more standard specifications of projects. |
| Keywords: | Procurement auctions,favoritism,accountability mechanism,D73, D82, H57 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01547102&r=des |
| By: | Philippe Jehiel (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Laurent Lamy (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - AgroParisTech - EHESS - École des hautes études en sciences sociales - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement) |
| Abstract: | Set-asides programs consist in forbidding access to specific participants, and they are commonly used in procurement auctions. We show that when the set of potential participants is composed of an incumbent (who bids for sure if allowed to) and of entrants who show up endogenously (in such a way that their expected rents are fixed by outside options), then it is always beneficial for revenues to exclude the incumbent in the second-price auction. This exclusion principle is generalized to auction formats that favor the incumbent in the sense that he would always gets the good when he values it most. By contrast, set-asides need not be desirable if the incumbent's payoff is included into the seller's objective or in environments with multiple incumbents. Various applications are discussed. |
| Keywords: | set-asides, entry restrictions, auctions with endogenous entry,entry deterrence, asymmetric buyers, incumbents, government procurement,procurement competition policy |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01557657&r=des |
| By: | Philippe Jehiel (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Laurent Lamy (CIRED - Centre International de Recherche sur l'Environnement et le Développement - CNRS - Centre National de la Recherche Scientifique - ENPC - École des Ponts ParisTech - AgroParisTech - EHESS - École des hautes études en sciences sociales - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement) |
| Abstract: | We revisit the Tiebout hypothesis in a world in which agents may learn extra information as to how they value the various local public goods once located, and jurisdictions are free to commit to whatever mechanism to attract citizens. It is shown in quasi-linear environments that efficiency can be achieved as a competitive equilibrium when jurisdictions seek to maximize local revenues but not necessarily when they seek to maximize local welfare. Interpretations and limitations of the result are discussed. |
| Keywords: | mechanism design,competing mechanisms,endogenous entry,Tiebout hypothesis,local public goods |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01557585&r=des |
| By: | Takaaki Abe (Graduate School of Economics, Waseda University); Satoshi Nakada (Department of Business Economics, Tokyo University of Science) |
| Abstract: | Our objective is to analyze the relationship between the Shapley value and the core from the perspective of the potential of a game. To this end, we introduce a new concept, generalized HM-potential, which is a generalization of the potential function defined by Hart and Mas-colell (1989). We show that the Shapley value lies in the core if and only if the maximum of the generalized HM-potential of a game is less than a cutoff value. Moreover, we show that this is equivalent to the minimum of the generalized HM-potential of a game being greater than another, different cutoff value. We also provide a geometric characterization of the class of games in which the Shapley value lies in the core, which also shows the relationship with convex games and average convex games as a corollary. Our results suggest a new approach to utilizing the potential function in cooperative game theory. |
| Keywords: | Shapley value; Core; Potential; Cooperative game |
| JEL: | C71 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2018-19&r=des |
| By: | Dmytro Bogatov |
| Abstract: | I present a dynamic, voluntary contribution mechanism, public good game and derive its potential outcomes. In each period, players endogenously determine contribution productivity by engaging in costly investment. The level of contribution productivity carries from period to period, creating a dynamic link between periods. The investment mimics investing in the stock of technology for producing public goods such as national defense or a clean environment. After investing, players decide how much of their remaining money to contribute to provision of the public good, as in traditional public good games. I analyze three kinds of outcomes of the game: the lowest payoff outcome, the Nash Equilibria, and socially optimal behavior. In the lowest payoff outcome, all players receive payoffs of zero. Nash Equilibrium occurs when players invest any amount and contribute all or nothing depending on the contribution productivity. Therefore, there are infinitely many Nash Equilibria strategies. Finally, the socially optimal result occurs when players invest everything in early periods, then at some point switch to contributing everything. My goal is to discover and explain this point. I use mathematical analysis and computer simulation to derive the results. |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1807.04621&r=des |
| By: | Tremewan, James; Vanberg, Christoph |
| Abstract: | Experiments can be used to relax technical assumptions that are made by necessity in theoretical analysis, and further test the robustness of theoretical predictions. To illustrate this point we conduct a three-person bargaining experiment examining the effect of different decision rules (unanimity and majority rule). Our experiment implements the substantive assumptions of the Baron-Ferejohn model but imposes no structure on the timing of proposals and votes. We compare our results to those obtained from an earlier experiment which implemented the specific procedural assumptions of the model. Our results are in many ways very similar to those from the more structured experiment: we find that most games end with the formation of a minimum winning coalition, and unanimity rule is associated with greater delay. However, the earlier finding of "proposer power" is reversed. While some important patterns are robust to the less stringent implementation of procedural assumptions, our less structured experiment provides new insights into how multilateral bargaining may play out in real world environments with no strict procedural rules on timing of offers and agreements. |
| Date: | 2018–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0651&r=des |
| By: | Semyon Malamud (Ecole Polytechnique Federale de Lausanne, Centre for Economic Policy Research (CEPR), and Swiss Finance Institute); Marzena J. Rostek (University of Wisconsin) |
| Abstract: | Most assets are traded in multiple interconnected trading venues. This paper develops an equilibrium model of decentralized markets that accommodates general market structures with coexisting exchanges. Decentralized markets can allocate risk among traders with different risk preferences more efficiently, thus realizing gains from trade that cannot be reproduced in centralized markets. Market decentralization always increases price impact. Yet, markets in which assets are traded in multiple exchanges, whether they are disjoint or intermediated, can give higher welfare than the centralized market with the same traders and assets. In decentralized markets, demand substitutability across assets is endogenous and heterogeneous among traders. |
| JEL: | D43 D44 D85 G11 G12 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1825&r=des |