nep-des New Economics Papers
on Economic Design
Issue of 2019‒05‒20
six papers chosen by
Alex Teytelboym
University of Oxford

  1. Empirical bias and efficiency of alpha-auctions: experimental evidence By Alexander L. Brown; Rodrigo A. Velez
  2. Selling Data By Carlos Segura-Rodriguez
  3. Test Design Under Falsification By Eduardo Perez; Vasiliki Skreta
  4. Approval voting and Shapley ranking. By Pierre Dehez; Victor Ginsburgh
  5. Referenda Under Oath By Nicolas Jacquemet; Alexander James; Stéphane Luchini; Jason Shogren
  6. Feasible best-response correspondences and quadratic scoring rules By Norde, Henk; Voorneveld, Mark

  1. By: Alexander L. Brown; Rodrigo A. Velez
    Abstract: We experimentally evaluate the comparative performance of the winner-bid, average-bid, and loser-bid auctions for the dissolution of a partnership. The recently introduced empirical equilibrium analysis of Velez and Brown (2019) reveals that as long as behavior satisfies weak payoff monotonicity, winner-bid and loser-bid auctions necessarily exhibit a form of bias when empirical distributions of play approximate best responses. We find support for both weak payoff monotonicity and the form of bias predicted by the theory for these two auctions. Consistently with the theory, the average-bid auction does not exhibit this form of bias. It has lower efficiency that the winner-bid auction, however.
    Date: 2019–05
  2. By: Carlos Segura-Rodriguez (Department of Economics, University of Pennsylvania)
    Abstract: I study how a monopolist data broker (seller), who wants to maximize profits, should present and sell consumer data to a firm (buyer). The buyer has an interest in forecasting a particular consumer characteristic, but the seller is uncertain about which characteristic the buyer wants to forecast and how much the buyer values information. I assume that the joint distribution of both the unknown characteristics and the data is elliptical. This information environment reduces to a multidimensional, multi-product mechanism design problem in which the buyer’s payoffs are nonlinear. Hence, I cannot use the common differential approach to solve for the optimal mechanism. I obtain two main results. First, I show that the seller should optimally offer statistics that are linear combinations of the data and independent noise. Second, by using a direct approach, I show that in the optimal mechanism the seller might want to offer a continuum of different statistics, and these statistics, without containing independent noise, are less correlated than they would be if the seller could perfectly price discriminate. Thus this distortion affects the mimicking type more than the mimicked type.
    Keywords: Information Design, Mechanism Design, Multidimensional Screening,Product Design, Elliptical Distribution
    JEL: D42 D82 D83 D86
    Date: 2019–04–21
  3. By: Eduardo Perez (Département d'économie); Vasiliki Skreta (University of Texas at Austin)
    Abstract: We characterize a receiver-optimal test when manipulations are possible in the form of type falsification. Optimal design exploits the following manipulator trade-off: while falsification may lead to better grades, it devalues their meaning. We show that optimal tests can be derived among falsification-proof ones. Our optimal test has a single ‘failing’ grade, and a continuum of ‘passing’ grades. It makes the manipulator indifferent across all moderate levels of falsification. Good types never fail, but bad types may pass. An optimal test delivers at least half of the full-information value to the receiver. A three-grade optimal test also performs well.
    Keywords: Information Design; Falsification; Tests; Manipulation; Cheating; Persuasion
    JEL: C72 D82
    Date: 2018–05
  4. By: Pierre Dehez; Victor Ginsburgh
    Abstract: Approval voting allows electors to list any number of candidates and their scores are obtained by summing the votes cast in their favor. Equal-and-even cumulative voting instead follows the One-person-one-vote principle by endowing electors with a single vote that they may evenly distribute among several candidates. It corresponds to satisfaction approval voting introduced by Brams and Kilgour (2014) as an extension of approval voting to a multiwinner election. It also corresponds to the concept of Shapley ranking introduced by Ginsburgh and Zang (2012) as the Shapley value of a cooperative game with transferable utility. In the present paper, we provide an axiomatic foundation of Shapley ranking and analyze the properties of the resulting social welfare function.
    Keywords: Search and matching models, Collective bargaining, Experience rating, Employment protection.
    JEL: D71 C71
    Date: 2019
  5. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Alexander James (University of Oxford [Oxford]); Stéphane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Jason Shogren (Departement of Economics and Finance, University of Wyoming - UW - University of Wyoming)
    Abstract: Herein we explore whether a solemn oath can eliminate hypothetical bias in a voting referenda, a popular elicitation mechanism promoted in non-market valuation exercises for its incentive compatibility properties. First, we reject the null hypothesis that a hypothetical bias does not exist. Second, we observe that people who sign an oath are significantly less likely to vote for the public good in a hypothetical referenda. We complement this evidence with a self-reported measure of honesty which confirms that the oath increases truthfulness in answers. This result opens interesting avenues for improving the elicitation of preferences in the lab and beyond.
    Keywords: Hypothetical bias,Oath,Dichotomous Choice Mechanism,Preference revelation
    Date: 2017–07
  6. By: Norde, Henk (CentER and Department of Econometrics and Operations Research, Tilburg University); Voorneveld, Mark (Dept. of Economics)
    Abstract: The rational choice paradigm in game theory and other fields of economics has agents best-responding to beliefs about factors that are outside their control. And making certain options a best response is a common problem in mechanism design and information elicitation. But not every correspondence can be made into a best-response correspondence. So what characterizes a feasible best-response correspondence? And once we know that, can we find some or even all utility functions that give rise to this best-response correspondence? We answer these three questions for an expected-utility maximizing agent with finitely many actions and probabilistic beliefs over finitely many states or opponents' strategies. We apply our results to information elicitation problems where contracts (scoring rules) are designed to financially reward an expected-payoff maximizing agent to truthfully reveal a property of her belief by sending a report from some finite set of messages. This leads to a number of new insights: firstly, we characterize exactly which properties can be elicited using scoring rules; secondly, we show that in this class of problems quadratic scoring rules are both necessary and sufficient methods of doing so.
    Keywords: best-response correspondence; best-response equivalence; information elicitation; scoring rule
    JEL: C72 D82 D83
    Date: 2019–04–25

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