nep-des New Economics Papers
on Economic Design
Issue of 2019‒01‒07
five papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Interdistrict School Choice: A Theory of Student Assignment By Isa Hafalir; Fohita Kojima; M. Bumin Yenmez
  2. Multi-unit multiple bid auctions in balancing markets: an agent-based Q-learning approach By Viehmann, Johannes; Lorenczik, Stefan; Malischek, Raimund
  3. Does the choice of auction format affect prices in spectrum auctions? By Ihle, Hans-Martin; Marsden, Richard; Traber, Peter
  4. Manipulated Electorates and Information Aggregation By Mehmet Ekmekci; Stephan Lauermann
  5. Fair and Efficient Division among Families By Sophie Bade; Erel Segal-Halevi

  1. By: Isa Hafalir (University of Technology Sydney); Fohita Kojima (Stanford University); M. Bumin Yenmez (Boston College)
    Abstract: Interdistrict school choice programs—where a student can be assigned to a school outside of her district—are widespread in the US, yet the market-design literature has not considered such programs. We introduce a model of interdistrict school choice and present two mechanisms that produce stable or efficient assignments. We consider three cate- gories of policy goals on assignments and identify when the mechanisms can achieve them. By introducing a novel framework of interdistrict school choice, we provide a new avenue of research in market design.
    Keywords: Interdistrict school choice, student assignment, stability, efficiency.
    Date: 2018–12–28
  2. By: Viehmann, Johannes (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Lorenczik, Stefan (IEA); Malischek, Raimund (IEA)
    Abstract: There is an ongoing debate on the appropriate auction design for competitive electricity balancing markets. Uniform (UPA)and discriminatory price auctions (DPA), the prevalent designs in use today, are assumed to have different properties with regard to prices and effciencies. These properties cannot be thoroughly described using analytical methods due to the complex strategy space in repeated multi-unit multiple bid auctions. Therefore, using an agent-based Q-learning model, we simulate the strategic bidding behaviour in these auctions under a variety of market conditions. We find that UPAs lead to higher prices in all analysed market settings. This is mainly due to the fact that players engage in bid shading more aggressively. Moreover, small players in UPAs learn to free ride on the price setting of large players and learn higher profits per unit of capacity owned, while they are disadvantaged in DPAs. UPAs also generally feature higher effciencies, but there are exceptions to this observation. If demand is varying and players are provided with additional information about scarcity in the market, market prices increase only in case asymmetric players are present.
    Keywords: Agent-based computational economics; Auction design; Electricity markets
    JEL: C63 D43 D44 L94
    Date: 2018–12–18
  3. By: Ihle, Hans-Martin; Marsden, Richard; Traber, Peter
    Abstract: Auctions are now the standard approach for allocating spectrum licences for mobile use worldwide. The types of auction format used to award spectrum vary widely, including both sealed bids and open formats, such as the Simultaneous Multiple Round Auction (SMRA), clock auction (clock) and combinatorial clock auction (CCA). To a significant extent, spectrum awards have become a laboratory for testing new auction designs for simultaneous award of related products, with academic analysis of these formats lagging practice. Recent research into these formats has highlighted differences in the incentives they create for bidding behaviour by participants which may in turn lead to different pricing outcomes. This paper investigates whether there is empirical evidence to support theoretical arguments that the choice of auction format affects price outcomes. The scope for such analysis has historically been constrained by the limited number of observations, with outcomes of individual spectrum auctions being highly sensitive to local factors. However, with the growth in the number of countries using auctions to allocate spectrum (often repeatedly and using different formats), it is now possible to identify reasonably robust sample sizes. We find statistical evidence that open formats produce higher revenues than sealed bid formats. This is consistent with the theory that, in common-value settings, open formats allow for price discovery, which in turn encourages bidders to be confident in their willingness to express their valuations through bids, leading to more efficient (and higher-priced) auction outcomes. It is widely recognised that bidders for mobile spectrum typically have a high degree of common value in their valuations, given that they are typically competitors with closely related business cases. We also find evidence that the CCA produces higher prices than other open formats. Interestingly, this effect is much more pronounced for low-band (sub-1 GHz) spectrum, which is scarcer than other types of mobile spectrum, and where the stakes for mobile operators are highest. This result is consistent with recent research which suggests that prices in CCAs may be distorted upwards by incentives for bidders to bid strategically to drive up rivals' prices.
    Date: 2018
  4. By: Mehmet Ekmekci; Stephan Lauermann
    Abstract: We study the aggregation of dispersed information in elections in which turnout may depend on the state. State-dependent turnout may arise from the actions of a biased and informed "election organizer." Voters are symmetric ex ante and prefer policy a in state α and policy b in state β, but the organizer prefers policy a regardless of the state. Each recruited voter observes a private signal about the unknown state but does not learn the turnout. First, we characterize how the outcomes of large elections depend on the turnout pattern across states. In contrast to existing results for large elections, there are equilibria in which information aggregation fails whenever there is an asymmetry in turnout; information aggregation is only guaranteed in all equilibria if turnout is state independent. Second, when the turnout is the result of costly voter recruitment by a biased organizer, the organizer can ensure that its favorite policy a is implemented with high probability independent of the state as the voter recruitment cost vanishes. Moreover, information aggregation will fail in all equilibria. The critical observation is that a vote is more likely to be pivotal for the decision if turnout is smaller, leading to a systematic bias of the decision toward the low-turnout state.
    Keywords: Voting, Information Aggregation
    JEL: C70 D80
    Date: 2019–01
  5. By: Sophie Bade; Erel Segal-Halevi
    Abstract: Fair division theory mostly involves individual consumption. But resources are often allocated to groups, such as families or countries, whose members consume the same bundle but have different preferences. Do fair and efficient allocations exist in such an "economy of families"? We adapt three common notions of fairness: fair-share, no-envy and egalitarian-equivalence, to an economy of families. The stronger adaptation --- individual fairness --- requires that each individual in each family perceives the division as fair; the weaker one --- family fairness --- requires that the family as a whole, treated as a single agent with (typically) incomplete preferences, perceives the division as fair. Individual-fair-share, family-no-envy and family-egalitarian-equivalence are compatible with efficiency under broad conditions. The same holds for individual-no-envy when there are only two families. In contrast, individual-no-envy with three or more families and individual-egalitarian-equivalence with two or more families are typically incompatible with efficiency, unlike the situation in an economy of individuals. The common market equilibrium approach to fairness is of limited use in economies with families. In contrast, the leximin approach is broadly applicable: it yields an efficient, individual-fair-share, and family-egalitarian-equivalent allocation.
    Date: 2018–11

This nep-des issue is ©2019 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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