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on Economic Design |
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Issue of 2019‒04‒08
thirteen papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Sareh Vosooghi |
| Abstract: | I examine a setting, where an information sender conducts research into a payoff-relevant state variable, and releases information to agents, who consider joining a coalition. The agents' actions can cause harm by contributing to a public bad. The sender, who has commitment power, by designing an information mechanism (a set of signals and a probability distribution over them), maximises his payoff, which depends on the action taken by the agents, and the state variable. I show that the coalition size, as a function of beliefs of agents, is an endogenous variable, induced by the information sender. The optimal information mechanism from the general set of public information mechanisms, in coalition formation games is derived. I also apply the results to International Environmental Agreements (IEAs), where a central authority, as an information sender, attempts to reduce the global level of greenhouse gases (GHG) by communication of information on social cost of GHG. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:258010&r=all |
| By: | Joosung Lee |
| Abstract: | We study mechanisms for environments in which only some of the agents are directly connected to a mechanism designer and the other agents can participate in a mechanism only through the connected agents' referrals. In such environments, the mechanism designer and agents may have different interest in varying participants so that agents strategically manipulate their preference as well as their network connection to avoid competition or congestion; while the mechanism designer wants to elicit the agents' private information about both preferences and network connections. As a benchmark for an efficient mechanism, we re-define a VCG mechanism. It is incentive compatible and individually rational, but it generically runs a deficit as it requires too much compensation for referrals. Alternatively as a budget-surplus mechanism, we introduce a multilevel mechanism, in which each agent is compensated by the agents who would not be able to participate without her referrals. Under a multilevel mechanism, we show that fully referring one's acquaintances is a dominant strategy and agents have no incentive to under-report their preference if the social welfare is submodular. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:258009&r=all |
| By: | Thomas R. Covert; Richard L. Sweeney |
| Abstract: | This paper compares outcomes from informally negotiated oil and gas leases to those awarded via centralized auction. We use data on all contractual characteristics and production outcomes for a class of state-owned mineral rights overlying newly discovered shale formations in Texas, between 2005 and 2016. On roughly three quarters of this land, the Texas Relinquishment Act of 1919 authorizes private individuals who own surface-only rights to negotiate mineral leases on behalf of the public in exchange for half of the proceeds. The remainder are allocated via centralized auctions. Using variation from this natural experiment, we find that almost a century after leasing mechanisms were assigned, auctioned leases generate 67% larger up-front payments than negotiated leases do. The two mechanisms also allocate mineral rights to different oil and gas companies, and leases allocated by auction are 44% more productive. These results are consistent with theoretical intuitions that centralized, formal mechanisms, like auctions, outperform decentralized and informal mechanisms, in both seller revenues and allocative efficiency. Our findings have important implications for the more than $3 trillion of minerals owned by private individuals in the US, the vast majority of which transact in informal and decentralized settings. |
| JEL: | D44 L13 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25712&r=all |
| By: | Rosa, Benjamin |
| Abstract: | I study affirmative action subcontracting regulations in a model where governments use auctions to repeatedly procure goods and services at the lowest possible price. Through using disadvantaged subcontractors, prime contractors build relationships over time, resulting in lower subcontracting costs in future periods. I find that regulation in the form of a minimum subcontracting requirement expands bidder asymmetries, favoring prime contractors with stronger relationships over those with weaker ones. Simulations show that the manner in which relationships evolve determines not only the utilization of disadvantaged subcontractors but also the procurement costs attained under affirmative action. |
| Keywords: | Dynamic auctions; affirmative action; procurement |
| JEL: | C6 C73 D44 |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:93065&r=all |
| By: | Andreas Hefti; Peiyao Shen; Regina Betz |
| Abstract: | We study the effects of different information structures (full information, supply uncertainty and demand uncertainty) on equilibrium prices, allocative efficiency and bidding behavior in a (supply-side) uniform-price multi-unit auction, using supply function competition and a novel experimental design. Our setup integrates different types of market power and a varying level of competition. We empirically find that average prices tend to be higher under full information compared to the cases where bidders either have limited information about about the demand level or rivals’ technologies or; the latter even leading to strictly lower average prices as the exertion of market power and bid shading is strongly reduced. We explain this finding with a behavioral equilibrium concept, where bidders behave as if competing against the average market situation. Further, we address the problem of multiplicity of equilibria by exploiting the equilibrium conditions to obtain an empirical selection of the average equilibrium supply function. The respective predictions of the average prices exceed those by standard OLS in all information treatments. |
| Keywords: | Multi-unit auctions, limited information, market power, supply function competition, supply uncertainty, demand uncertainty, restricted least squares |
| JEL: | C92 D43 D44 D82 L11 L94 Q41 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:320&r=all |
| By: | Herings, P. Jean-Jacques (General Economics 1 (Micro)); Zhou, Yu (osaka university) |
| Abstract: | We consider the one-to-one two-sided matching with contracts model in which buyers face financial constraints. In this model there is a stable outcome, but not necessarily a competitive equilibrium as defined in the standard way. We propose a new equilibrium notion, quantity-constrained competitive equilibrium (QCCE) that allows buyers to form rational expectations on the lack of supply when their financial constraints are binding. We show the existence of QCCEs and establish the equivalence among QCCE outcomes, stable outcomes, and core outcomes. We also analyze the existence of QCCEs with uniform prices, the lattice property of QCCEs, and the rural hospital theorem of QCCEs. We finally examine the relation between models with financial constraints and models with price controls. |
| Keywords: | financial constraints, matching with contracts, stable outcome, quantity-constrained competitive equilibrium, equivalence result, lattice property, core outcome, rural hospital theorem |
| JEL: | C71 C78 D45 D52 |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2019007&r=all |
| By: | Herings, P. Jean-Jacques; Mauleon; Ana; Vincent Vannetelbosch, Vincent |
| Abstract: | We study stable sets for marriage problems under the assumption that players can be both myopic and farsighted. We introduce the new notion of the myopic-farsighted stable set. For the special cases where all players are myopic and where all players are farsighted, our concept predicts the set of matchings in the core. When all men are myopic and the top choice of each man is a farsighted woman, we show that the singleton consisting of the woman-optimal stable matching is a myopic-farsighted stable set. The same result holds when all women are farsighted. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:259484&r=all |
| By: | Francis Bloch; Anne van den Nouweland |
| Abstract: | This paper analyzes farsighted stable sets when agents have heterogeneous expectations over the dominance paths. We consider expectation functions satisfying two properties of path-persistence and consistency. We show that farsighted stable sets with heterogeneous expectations always exist and that any singleton farsighted stable set with common expectations is a farsighted stable set with heterogeneous expectations. We characterize singleton farsighted stable sets with heterogeneous expectations in one-to-one matching models and voting models, and show that the relaxation of the hypothesis of common expectations greatly expands the set of states that can be supported as singleton farsighted stable sets. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:259479&r=all |
| By: | Thomas Demuynck; P. Jean-Jacques Herings; Riccardo D. Saulle; Christian Seel |
| Abstract: | We introduce a new solution concept for models of coalition formation, called the myopic stable set. The myopic stable set is defined for a very general class of social environments and allows for an infinite state space. We show that the myopic stable set exists and is non-empty. Under minor continuity conditions, we also demonstrate uniqueness. Furthermore, the myopic stable set is a superset of the core and of the set of pure strategy Nash equilibria in noncooperative games. Additionally, the myopic stable set generalizes and unifies various results from more specific environments. In particular, the myopic stable set coincides with the coalition structure core in coalition function form games if the coalition structure core is non-empty; with the set of stable matchings in the standard one-to-one matching model; with the set of pairwise stable networks and closed cycles in models of network formation; and with the set of pure strategy Nash equilibria in finite supermodular games, finite potential games, and aggregative games. We illustrate the versatility of our concept by characterizing the myopic stable set in a model of Bertrand competition with asymmetric costs, for which the literature so far has not been able to fully characterize the set of all (mixed) Nash equilibria. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:258008&r=all |
| By: | Jorgen Kratz |
| Abstract: | This paper studies a kidney exchange problem in which a planner sorts patients into "priority groups" based on, e.g., the severity of their conditions. The planner may choose to allow cyclic exchanges, chains, altruistically unbalanced exchanges and desensitization. It presents a computational method for finding a new class of matchings that give priority to patients in higher priority groups, called "priority group matchings". These matchings are always Pareto efficient no matter how patients are sorted into priority groups or how the kidney exchange program is designed by the planner. Priority group matchings generalize several classes of matchings, where different classes correspond to different ways of prioritizing patients. This includes maximum matchings and (half-compatibility) priority matchings. |
| Keywords: | Kidney exchange, triage, priority matching, priority group, threshold matching, desensitization. |
| JEL: | C78 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:19/04&r=all |
| By: | Gustavo Bergantiños (ECOSOT, Universidade de Vigo); Juan D. Moreno-Ternero (Department of Economics, Universidad Pablo de Olavide;) |
| Abstract: | We consider the problem of sharing the revenues from broadcasting sport league events, introduced by Bergantiños and Moreno-Ternero (2019). We characterize a family of rules compromising between two focal and somewhat polar rules: the equal-split rule and concede-and-divide}. The characterization only makes use of three basic axioms: equal treatment of equals}, additivity and maximum aspirations}}. We also show further interesting features of the family: (i) if we allow teams to vote for any rule within the family, then a majority voting equilibrium exists; (ii) the rules within the family yield outcomes that are fully ranked according to the Lorenz dominance criterion; (iii) the family provides rationale for existing schemes in real-life situations. |
| Keywords: | resource allocation, broadcasting, sport events, concede-and-divide, Shapley value |
| JEL: | D63 C71 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:19.07&r=all |
| By: | Nasimeh Heydaribeni; Achilleas Anastasopoulos |
| Abstract: | In the standard Mechanism Design framework, agents' messages are gathered at a central point and allocation/tax functions are calculated in a centralized manner, i.e., as functions of all network agents' messages. This requirement may cause communication and computation overhead and necessitates the design of mechanisms that alleviate this bottleneck. We consider a scenario where message transmission can only be performed locally so that the mechanism allocation/tax functions can be calculated in a decentralized manner. Each agent transmits messages to her local neighborhood, as defined by a given message-exchange network, and her allocation/tax functions are only functions of the available neighborhood messages. This scenario gives rise to a novel research problem that we call "Distributed Mechanism Design". In this paper, we propose two distributed mechanisms for network utility maximization problems that involve private and public goods with competition and cooperation between agents. As a concrete example, we use the problems of rate allocation in networks with either unicast or multirate multicast transmission protocols. The proposed mechanism for each of the protocols fully implements the optimal allocation in Nash equilibria and its message space dimensionality scales linearly with respect to the number of agents in the network. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.01222&r=all |
| By: | Emeric Henry (Département d'économie); Charles Louis-Sidois |
| Abstract: | Members of groups and organizations often have to decide on rules that regulate their contributions to common tasks. They typically differ in their propensity to contribute and often care about the image they project: in particular, they want to be perceived by other group members as being high contributors. In such environments we study, from both a positive and normative perspective, the interaction between the way members vote on rules and their subsequent contribution decisions. We show how endogenous norms can emerge. We study in particular the role played by the visibility of individual actions, votes or contributions. While making votes visible always increases welfare in our setting, making contributions public can be welfare decreasing as it makes some rules more likely to be rejected. |
| Keywords: | Image concern; Voting; Public good |
| JEL: | D71 D72 H41 D23 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpecon:info:hdl:2441/4g5hemr5o18g7os4h53mulpcam&r=all |