nep-des New Economics Papers
on Economic Design
Issue of 2019‒02‒25
eight papers chosen by
Alex Teytelboym
University of Oxford

  1. Informed-Principal Problem in Mechanisms with Limited Commitment By Suehyun Kwon
  2. Optimal Privacy-Constrained Mechanisms By Eilat, Ran; Eliaz, Kfir; Mu, Xiaosheng
  3. Reassignment-proof rules for land rental problems By Valencia-Toledo, Alfredo; Vidal-Puga, Juan
  4. Sequential Formation of Alliances in Survival Contests By Hideo Konishi; Chen-Yu Pan
  5. Endogenous Alliances in Survival Contests By Hideo Konishi; Chen-Yu Pan
  6. Partial Identification in nonparametric one-to-one matching models By Cristina Gualdani; Shruti Sinha
  7. Storable Votes and Quadratic Voting. An Experiment on Four California Propositions By Casella, Alessandra; sanchez, luis
  8. Matching Refugees to Host Country Locations Based on Preferences and Outcomes By Avidit Acharya; Kirk Bansak; Jens Hainmueller

  1. By: Suehyun Kwon
    Abstract: This paper studies mechanism design with limited commitment where agents have persistent correlated types over the infinite horizon. The mechanism designer now faces the informed-principal problem in addition to usual issues with i.i.d. types. With an infinite horizon and nondurable good, there is always an equilibrium where all types of mechanism designer (private information on the type distribution of agents) pool together, and the ex-ante optimality depends on the cost of agents’ gaming the system. The paper also shows sufficient conditions for ob-taining the full-commitment solution with limited commitment.
    Keywords: mechanism design, limited commitment, informed-principal problem, non-durable good, persistence, correlated types
    Date: 2019
  2. By: Eilat, Ran; Eliaz, Kfir; Mu, Xiaosheng
    Abstract: Modern information technologies make it possible to store, analyze and trade unprecedented amounts of detailed information about individuals. This has led to public discussions on whether individuals' privacy should be better protected by restricting the amount or the precision of information that is collected by commercial institutions on its participants. We contribute to this discussion by proposing a Bayesian approach to measure loss of privacy and applying it to the design of optimal mechanisms. Specifically, we define the loss of privacy associated with a mechanism as the difference between the designer's prior and posterior beliefs about an agent's type, where this difference is calculated using Kullback-Leibler divergence, and where the change in beliefs is triggered by actions taken by the agent in the mechanism. We consider both ex-ante (the expected difference in beliefs over all type realizations cannot exceed some threshold k) and ex-post (for every realized type, the maximal difference in beliefs cannot exceed some threshold k) measures of privacy loss. Using these notions we study the properties of optimal privacy-constrained mechanisms and the relation between welfare/profits and privacy levels.
    Keywords: Mechanism-Design; privacy
    Date: 2019–02
  3. By: Valencia-Toledo, Alfredo; Vidal-Puga, Juan
    Abstract: We consider land rental problems where there are several communities that can act as lessors and a single tenant who does not necessary need all the available land. A rule should determine which communities become lessors, how much land they rent and at which price. We present a complete characterization of the family of rules that satisfy reassignment-proofness by merging and spliting, apart from land monotonicity. We also define two parametric subfamilies. The first one is characterized by adding a property of weighted standard for two-person. The second one is characterized by adding consistency and continuity.
    Keywords: land rental; non-manipulability; reassignment-proofness; land monotonicity; consistency
    JEL: C71
    Date: 2018–08–03
  4. By: Hideo Konishi (Boston College); Chen-Yu Pan (Wuhan University)
    Abstract: We consider a sequential formation of alliances à la Bloch (1996) and Okada (1996) followed by a two-stage contest in which alliances first compete with each other, and then the members in the winning alliance compete again for an indivisible prize. In contrast to Konishi and Pan (2019) which adopted an open-membership game as the alliance formation process, alliances are allowed to limit their memberships (excludable alliances). We show that if members' efforts are strongly complementary to each other, there will be exactly two asymmetric alliances the larger alliance is formed first and then the rest of the players form the smaller one. This result contrasts with the one under open membership, where moderate complementarity is necessary to support a two-alliance structure. It is also in stark contrast with Bloch et al. (2006), where they show that a grand coalition is formed in the same game if the prize is divisible and a binding contract is possible to avoid further conflicts after an alliance wins the prize.
    Keywords: contest, alliance, coalition formation, complementarity
    JEL: D23 D72 D74
    Date: 2019–01–31
  5. By: Hideo Konishi (Boston College); Chen-Yu Pan (Wuhan University)
    Abstract: Esteban and Sakovics (2003) showed in their three-person game that an alliance never appears in a possibly multi-stage contest game for an indivisible prize when allies’ efforts are perfectly substitutable. In this paper, we introduce allies’ effort complementarity by using a CES effort aggregator function. We consider an open-membership alliance formation game followed by two contests: the one played by alliances, and the one within the winning alliance. We show that if allies’ efforts are too substitutable or too complementary, no meaningful alliance appears in equilibrium. However, if allies’ efforts are moderately complementary to each other, then competition between two alliances is a subgame perfect equilibrium, which Pareto-dominates the equilibrium in a noalliance single-stage contest. We also show that if forming more than two alliances is supported in equilibrium, then it Pareto-dominates two alliance equilibrium. Nevertheless, the parameter space for such an allocation to be supported as an equilibrium shrinks when the number of alliances increases.
    Keywords: contest, alliance, coalition formation, complementarity
    JEL: D23 D72 D74
    Date: 2019–02–08
  6. By: Cristina Gualdani; Shruti Sinha
    Abstract: We consider the one-to-one matching models with transfers of Choo and Siow (2006) and Galichon and Salani\'e (2015). When the analyst has data on one large market only, we study identification of the systematic components of the agents' preferences without imposing parametric restrictions on the probability distribution of the latent variables. Specifically, we provide a tractable characterisation of the region of parameter values that exhausts all the implications of the model and data (the sharp identified set), under various classes of nonparametric distributional assumptions on the unobserved terms. We discuss a way to conduct inference on the sharp identified set and conclude with Monte Carlo simulations.
    Date: 2019–02
  7. By: Casella, Alessandra; sanchez, luis
    Abstract: Storable Votes and Quadratic Voting are voting systems designed to account for voters' intensity of preferences. We test their performance in two samples of California residents using data on four initiatives prepared for the 2016 California ballot. We bootstrap the original samples and generate two sets of 10,000 multi-elections simulations. As per design, both systems induce minority victories and result in higher expected welfare relative to majority voting. In our parametrization, quadratic voting induces more minority victories and achieves higher average welfare, but causes more frequent inefficient minority victories. The results are robust to different plausible rules-of-thumb in casting votes.
    Keywords: democracy; majority; voting
    JEL: D70
    Date: 2019–01
  8. By: Avidit Acharya; Kirk Bansak; Jens Hainmueller
    Abstract: Facilitating the integration of refugees has become a major policy challenge in many host countries in the context of the global displacement crisis. One of the first policy decisions host countries make in the resettlement process is the assignment of refugees to locations within the country. We develop a mechanism to match refugees to locations in a way that takes into account their expected integration outcomes and their preferences over where to be settled. Our proposal is based on a priority mechanism that allows the government first to specify a threshold g for the minimum level of expected integration success that should be achieved. Refugees are then matched to locations based on their preferences subject to meeting the government's specified threshold. The mechanism is both strategy-proof and constrained efficient in that it always generates a matching that is not Pareto dominated by any other matching that respects the government's threshold. We demonstrate our approach using simulations and a real-world application to refugee data from the United States.
    Date: 2019–02

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