nep-des New Economics Papers
on Economic Design
Issue of 2019‒09‒09
four papers chosen by
Alex Teytelboym
University of Oxford

  1. Learning Management through Matching: A Field Experiment Using Mechanism Design By Abebe, Girum; Fafchamps, Marcel; Koelle, Michael; Quinn, Simon
  2. Sequential procurement with limited commitment By Fugger, Nicolas; Gretschko, Vitali; Pollrich, Martin
  3. On the Existence of Equilibrium in Bayesian Games Without Complementarities By Idione Meneghel; Rabee Tourky
  4. Endowment effect and the gap between WTP and WTA By Qin, Botao

  1. By: Abebe, Girum (Policy Studies Institute); Fafchamps, Marcel (Stanford University); Koelle, Michael (University of Oxford); Quinn, Simon (University of Oxford)
    Abstract: We place young professionals into established firms to shadow middle managers. Using random assignment into program participation, we find positive average effects on wage employment, but no average effect on the likelihood of self-employment. We match individuals to firms using a deferred-acceptance algorithm, and show how this allows us to identify heterogeneous treatment effects by firm and intern characteristics. We find striking heterogeneity in self-employment effects, and show that some assignment mechanisms can substantially outperform random matching in generating employment and income effects. These results demonstrate the potential for matching algorithms to improve the design of field experiments.
    Keywords: propensity score, field experiments, management practices, self-employment, causal inference
    JEL: J24 J64
    Date: 2019–08
  2. By: Fugger, Nicolas; Gretschko, Vitali; Pollrich, Martin
    Abstract: We analyze the problem of a buyer who chooses a supplier for a long-term relationship via an auction. The buyer lacks commitment to not renegotiate the terms of the contract in the long run. Thus, suppliers are cautious about the information revealed during the auction. We show theoretically and experimentally that first-price auctions perform poorly in terms of efficiency and buyer surplus. Suppliers may pool on a high bid to conceal information. Second-price auctions retain their efficient equilibrium and generate substantial surplus for the buyer. We demonstrate that optimal mechanisms require concealing the winning bid with a strictly positive probability.
    Date: 2019
  3. By: Idione Meneghel (Australian National University College of Business and Economics); Rabee Tourky (Australian National University College of Business and Economics)
    Abstract: In a recent paper, Reny (2011) generalized the results of Athey (2001) and McAdams (2003) on the existence of monotone strategy equilibrium in Bayesian games. Though the generalization is subtle, Reny introduces far-reaching new techniques applying the fixed point theorem of Eilenberg and Montgomery (1946, Theorem 5). This is done by showing that with atomless type spaces the set of monotone functions is an absolute retract and when the values of the best response correspondence are non-empty sub-semilattices of monotone functions, they too are absolute retracts. In this paper, we provide an extensive generalization of Reny (2011), McAdams (2003), and Athey (2001). We study the problem of existence of Bayesian equilibrium in pure strategies for a given partially ordered compact subset of strategies. The ordering need not be a semilattice and these strategies need not be monotone. The main innovation is the interplay between the homotopy structures of the order complexes that are the subject of the celebrated work of Quillen (1978), and the hulling of partially ordered sets, an innovation that extends the properties of Reny’s semilattices to the non-lattice setting. We then describe some auctions that illustrate how this framework can be applied to generalize the existing results and extend the class of models for which we can establish existence of equilibrium. As with Reny (2011), our proof utilizes the fixed point theorem in Eilenberg and Montgomery (1946).
    Keywords: Bayesian games, Monotone strategies, Pure-strategy equilibrium, Auctions
    Date: 2019–08
  4. By: Qin, Botao
    Abstract: I used an auction experiment in China and confirmed that there is a WTP-WTA gap. I used the solemn oath commitment device and found that it reduces the gap in the long possession treatment. However, the gap still exists in the short possession treatment. The evidence suggests that taking an oath to tell the truth with an incentive-compatible mechanism could mitigate the WTP-WTA gap.
    Keywords: Endowment effect; WTP-WTA gap; Oath
    JEL: C91 D46
    Date: 2019–08

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