nep-des New Economics Papers
on Economic Design
Issue of 2019‒04‒29
four papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Marketing agencies and collusive bidding in online ad auctions By Francesco Decarolis; Maris Goldmanis; Antonio Penta
  2. Experiment-as-Market: Incorporating Welfare into Randomized Controlled Trials By Yusuke Narita
  3. Breaking Ties: Regression Discontinuity Design Meets Market Design By Atila Abdulkadiroglu; Joshua Angrist; Yusuke Narita; Parag Pathak
  4. A General Derivation of Axiomatizations for Allocation Rules: Duality and Anti-Duality Approach By Takayuki Oishi

  1. By: Francesco Decarolis; Maris Goldmanis; Antonio Penta
    Abstract: The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism (used by Facebook). We find that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and efficiency.
    Keywords: Collusion, digital marketing agencies, facebook, google, GSP, internet auctions, online advertising, VCG
    JEL: C72 D44 L81
    Date: 2019–04
  2. By: Yusuke Narita (Massachusetts Institute of Technology)
    Abstract: Randomized Controlled Trials (RCTs) enroll hundreds of millions of subjects and involve many human lives. To improve subjects’ welfare, I propose a design of RCTs that I call Experiment-as-Market (EXAM). EXAM produces a Pareto efficient allocation of treatment assignment probabilities, is asymptotically incentive compatible for preference elicitation, and unbiasedly estimates any causal effect estimable with standard RCTs. I quantify these properties by applying EXAM to a water cleaning experiment in Kenya (Kremer et al., 2011). In this empirical setting, compared to standard RCTs, EXAM substantially improves subjects’ predicted well-being while reaching similar treatment effect estimates with similar precision.
    Keywords: clinical trial, social experiments, A/B test, market design, competitive equilibrium from equal income, Pareto efficiency, causal inference, development economics
    JEL: C93 O15
    Date: 2019–04
  3. By: Atila Abdulkadiroglu (Duke University); Joshua Angrist (Massachusetts Institute of Technology); Yusuke Narita (Massachusetts Institute of Technology); Parag Pathak (Massachusetts Institute of Technology)
    Abstract: Centralized school assignment algorithms must distinguish between applicants with the same preferences and priorities. This is done with randomly assigned lottery numbers, non-lottery tie-breakers like test scores, or both. The New York City public high school match illustrates the latter, using test scores, grades, and interviews to rank applicants to screened schools, combined with lottery tie-breaking at unscreened schools. We show how to identify causal effects of school attendance in such settings. Our approach generalizes regression discontinuity designs to allow for multiple treatments and multiple running variables, some of which are randomly assigned. Lotteries generate assignment risk at screened as well as unscreened schools. Centralized assignment also identifies screened school effects away from screened school cutoffs. These features of centralized assignment are used to assess the predictive value of New York City’s school report cards. Grade A schools improve SAT math scores and increase the likelihood of graduating, though by less than OLS estimates suggest. Selection bias in OLS estimates is egregious for Grade A screened schools.
    Keywords: causal inference, natural experiment, local propensity score, instrumental variables, unified enrollment, school report card, school value added
    JEL: I21 C78 C13 C18 C21 C26
    Date: 2019–04
  4. By: Takayuki Oishi (Faculty of Economics, Meisei University)
    Abstract: We offer a general derivation of axiomatizations for allocation rules, referred to as "duality" and "anti-duality" approach. We show basic properties of duality and antiduality approach. Using these properties, we can derive axiomatizations of allocation rules by taking (anti-)dual of axioms involved in axiomatizations of their self-(anti-)dual rules. As an illustration, we derive a new axiomatization of the Shapley value for bidding ring problems from using the notion of duality and axioms involved in axiomatizations of the Shapley value for airport problems. As another illustration, we derive a new axiomatization of the nucleolus for bidding ring problems from using the notion of antiduality and axioms involved in axiomatizations of the nucleolus for airport problems.
    Keywords: duality, anti-duality, axiomatization, Shapley value, nucleolus
    JEL: C69 C71
    Date: 2019–03–28

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