nep-des New Economics Papers
on Economic Design
Issue of 2019‒08‒12
nine papers chosen by
Alex Teytelboym
University of Oxford

  1. How to Avoid Black Markets for Appointments with Online Booking Systems By Hakimov, Rustamdjan; Heller, Christian-Philipp; Kübler, Dorothea; Kurino, Morimitsu
  2. Choice and Consequence: Assessing Mismatch at Chicago Exam Schools By Joshua D. Angrist; Parag A. Pathak; Román Andrés Zárate
  3. Matching in the Kolm Triangle: Interiority and Participation Constraints of Matching Equilibria By Wolfgang Buchholz; Richard Cornes; Dirk Rübbelke
  4. Contract Enforcement and Productive Efficiency: Evidence from the Bidding and Renegotiation of Power Contracts in India By Nicholas Ryan
  5. Optimal auctions for networked markets with externalities By Benjamin Heymann; Alejandro Jofr\'e
  6. Competition with Indivisibilities and Few Traders By Cesar Martinelli; Jianxin Wang; Weiwei Zheng
  7. Condorcet efficiency of general weighted scoring rules under IAC: indifference and abstention By Mostapha Diss; Eric Kamwa; Issofa Moyouwou; Hatem Smaoui
  8. Robust Information Aggregation Through Voting By Rune Midjord; Tomás Rodríguez Barraquer; Justin Mattias Valasek
  9. "Information Design in Blockchain: A Role of Trusted Intermediaries" By Hitoshi Matsushima

  1. By: Hakimov, Rustamdjan (University of Lausanne); Heller, Christian-Philipp (NERA Consulting); Kübler, Dorothea (WZB Berlin); Kurino, Morimitsu (Keio University Tokyo)
    Abstract: Allocating appointment slots is presented as a new application for market design. We consider online booking systems that are commonly used by public authorities to allocate appointments for driver\'s licenses, visa interviews, passport renewals, etc. We document that black markets for appointments have developed in many parts of the world. Scalpers book the appointments that are offered for free and sell the slots to appointment seekers. We model the existing first-come-first-served booking system and propose an alternative system. The alternative system collects applications for slots for a certain time period and then randomly allocates slots to applicants. We investigate the two systems under conditions of low and high demand for slots. The theory predicts and lab experiments confirm that scalpers profitably book and sell slots under the current system with high demand, but that they are not active in the proposed new system under both demand conditions.
    Keywords: market design; online booking system; first come first served; scalping;
    JEL: C92
    Date: 2019–08–07
  2. By: Joshua D. Angrist; Parag A. Pathak; Román Andrés Zárate
    Abstract: The educational mismatch hypothesis asserts that students are hurt by affirmative action policies that place them in selective schools for which they wouldn't otherwise qualify. We evaluate mismatch in Chicago's selective public exam schools, which admit students using neighborhood-based diversity criteria as well as test scores. Regression discontinuity estimates for applicants favored by affirmative action indeed show no gains in reading and negative effects of exam school attendance on math scores. But these results are similar for more- and less-selective schools and for applicants unlikely to benefit from affirmative-action, a pattern inconsistent with mismatch. We show that Chicago exam school effects are explained by the schools attended by applicants who are not offered an exam school seat. Specifically, mismatch arises because exam school admission diverts many applicants from high-performing Noble Network charter schools, where they would have done well. Consistent with these findings, exam schools reduce Math scores for applicants applying from charter schools in another large urban district. Exam school applicants' previous achievement, race, and other characteristics that are sometimes said to mediate student-school matching play no role in this story.
    JEL: I21
    Date: 2019–08
  3. By: Wolfgang Buchholz (University of Regensburg and CESifo Munich); Richard Cornes (Australian National University); Dirk Rübbelke (Technische Universität Bergakademie Freiberg)
    Abstract: In this paper we show how the Kolm triangle method, which is a standard tool for visualizing allocations in a public good economy, can also be used to provide a diagrammatical exposition of matching mechanisms and their effects on public good supply and welfare. In particular, we describe, on the one hand, for which income distributions interior matching equilibria result and, on the other hand, for which income distributions the agents voluntarily participate in a matching mechanism. As a novel result, we especially show that the “participation zone” is larger than the “interiority zone”.
    Keywords: Public Goods, Matching, Pareto Optimality, Kolm Triangle, Aggregative Games
    JEL: C78 H41
    Date: 2019–07
  4. By: Nicholas Ryan (Cowles Foundation, Yale University)
    Abstract: Weak contract enforcement may reduce the efficiency of production in developing countries. I study how contract enforcement affects efficiency in procurement auctions for the largest power projects in India. I gather data on bidding and ex post contract renegotiation and find that the renegotiation of contracts in response to cost shocks is widespread, despite that bidders are allowed to index their bids to future costs like the price of coal. Connected firms choose to index less of the value of their bids to coal prices and, through this strategy, expose themselves to cost shocks to induce renegotiation. I use a structural model of bidding in a scoring auction to characterize equilibrium bidding when bidders are heterogeneous both in cost and in the payments they expect after renegotiation. The model estimates show that bidders offer power below cost due to the expected value of later renegotiation. The model is used to simulate bidding and efficiency with strict contract enforcement. Contract enforcement is found to be pro-competitive. With no renegotiation, equilibrium bids would rise to cover cost, but markups relative to total contract value fall sharply. Production costs decline, due to projects being allocated to lower-cost bidders over those who expect larger payments in renegotiation.
    Keywords: Contracting, Procurement, Commitment
    JEL: O25 L94 L14 D44
    Date: 2019–02
  5. By: Benjamin Heymann; Alejandro Jofr\'e
    Abstract: Motivated by the problem of market power in electricity markets, we introduced in previous works a mechanism for simplified markets of two agents with linear cost. In standard procurement auctions, the market power resulting from the quadratic transmission losses allows the producers to bid above their true values, which are their production cost. The mechanism proposed in the previous paper optimally reduces the producers' margin to the society's benefit. In this paper, we extend those results to a more general market made of a finite number of agents with piecewise linear cost functions, which makes the problem more difficult, but simultaneously more realistic. We show that the methodology works for a large class of externalities. We also provide an algorithm to solve the principal allocation problem. Our contribution provides a benchmark to assess the sub-optimality of the mechanisms used in practice.
    Date: 2019–07
  6. By: Cesar Martinelli (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Jianxin Wang (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Weiwei Zheng (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University)
    Abstract: We study minimal conditions for competitive behavior with few agents. We adapt the strategic market game of Dubey (1982), Simon (1984) and Benassy (1986) to an indivisible good environment. We show that all Nash equilibrium outcomes with active trading are competitive if and only if there are at least two intramarginal traders in each side of the market. Unlike previous formulations, this condition can be verified directly by checking the set of competitive equilibria. In laboratory experiments, the condition we provide turns out to be enough to induce competitive results. Moreover, the performance of a sealed-bid auction following the rules of the strategic market game approaches that of its dynamic counterpart, the double auction, over time.
    Date: 2019–07
  7. By: Mostapha Diss (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Eric Kamwa (LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles); Issofa Moyouwou (MASS - Université de Yaoundé I [Yaoundé]); Hatem Smaoui (CEMOI - Centre d'Économie et de Management de l'Océan Indien - UR - Université de La Réunion)
    Abstract: In an election, individuals may sometimes abstain or report preferences that include ties among candidates. How abstention or ties within individual preferences impact the performances of voting rules is a natural question addressed in the literature. We reconsider this question with respect to one of the main characteristics of a voting rule: its Condorcet efficiency; that is the conditional probability that the rule selects a Condorcet winner assuming that one exists. We explore the impact of both ties and abstention on the Condorcet efficiency of the whole class of weighted scoring rules in three-candidate elections under the Impartial Anonymous Culture assumption. It appears in general that the possibility of indifference or abstention increases or decreases the Condorcet efficiency of weighted scoring rules depending of the rule in consideration or the probability distribution on the set of observable voting situations.
    Date: 2019–07–28
  8. By: Rune Midjord; Tomás Rodríguez Barraquer; Justin Mattias Valasek
    Abstract: Numerous theoretical studies have shown that information aggregation through voting is fragile. We consider a model of information aggregation with vote-contingent payoffs and generically characterize voting behavior in large committees. We use this characterization to identify the set of vote-contingent payoffs that lead to a unique outcome that robustly aggregates information. Generally, it is not sufficient to simply reward agents for matching their vote to the true state of the world. Instead, robust and unique information aggregation can be achieved with vote-contingent payoffs whose size varies depending on which option the committee chooses, and whether the committee decision is correct.
    Keywords: information aggregation, voting, vote-contingent payoffs
    JEL: D71 D72
    Date: 2019
  9. By: Hitoshi Matsushima (Faculty of Economics, The University of Tokyo)
    Abstract: This study clarifies that blockchain cannot replace the strategic value of trusted intermediaries, despite sufficient technological advancement for its implementation. Given the progress expected in the future, this study assumes that blockchain can implement various commitment devices for communication explored in the information design literature, without disclosing their details to anonymous record keepers. By considering revelation incentives explicitly, we show that substituting the verification task of players’ pre-owned private signals with a trusted intermediary can reduce transaction costs in liability, which cannot be achieved non-judicially by blockchain. Hence, trusted intermediaries play a significant role in executing information design through blockchain.
    Date: 2019–07

This nep-des issue is ©2019 by 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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