
on Economic Design 
Issue of 2019‒09‒23
seven papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford 
By:  Federico Echenique; Antonio Miralles; Jun Zhang 
Abstract:  We propose a market solution to the problem of resource allocation subject to quantitative constraints, such as those imposed by considerations of diversity or geographical distribution. Constraints are "priced," and agents are charged to the extent that their purchases affect the value (at equilibrium prices) of the relevant constraints. The result is a constrainedefficient market equilibrium outcome. The outcome is fair whenever the constraints do not single out individual agents, which happens, for example with geographical distribution constraints. In economies with endowments, moreover, our equilibrium outcomes are constrained efficient and approximately individually rational. 
Date:  2019–09 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1909.05986&r=all 
By:  Alex Gershkov; Benny Moldovanu; Xianwen Shi 
Abstract:  We study issuebyissue voting and robust mechanism design in multidimensional frameworks where privately informed agents have preferences induced by general norms. We uncover the deep connections between dominant strategy incentive compatibility (DIC) on the one hand, and several geometric/functional analytic concepts on the other. Our main results are: 1) Marginal medians are DIC if and only if they are calculated with respect to coordinates defined by a basis such that the norm is orthantmonotonic in the associated coordinate system. 2) Equivalently, marginal medians are DIC if and only if they are computed with respect to a basis such that, for any vector in the basis, any linear combination of the other vectors is BirkhoffJames orthogonal to it. 3) We show how semiinner products and normality provide an analytic method that can be used to find all DIC marginal medians. 4) As an application, we derive all DIC marginal medians for l_{p} spaces of any finite dimension, and show that they do not depend on p (unless p=2). 
Keywords:  Multidimensional Voting, Dominant Strategy, Monotonic Norms, Orthogonality 
JEL:  D72 
Date:  2019–09–09 
URL:  http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa644&r=all 
By:  Dirk Bergemann (Cowles Foundation, Yale University); Tibor Heumann (Dept. of Economics, Yale University); Stephen Morris (Dept. of Economics, Princeton University) 
Abstract:  We consider demand function competition with a ï¬ nite number of agents and private information. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. In particular, regardless of the number of agents and the correlation of payoï¬€ shocks, market power may be arbitrarily close to zero (so we obtain the competitive outcome) or arbitrarily large (so there is no trade in equilibrium). By contrast, price volatility is always less than the variance of the aggregate shock across all information structures. 
Keywords:  Demand Function Competition, Supply Function Competition, Price Impact, Market Power, Incomplete Information, Price Volatility 
JEL:  C72 D43 D44 D83 G12 
Date:  2019–09 
URL:  http://d.repec.org/n?u=RePEc:cwl:cwldpp:2200&r=all 
By:  Choo, Lawrence; Kaplan, Todd R.; Zhou, Xiaoyu 
Abstract:  In this paper, we seek to determine if auctions can be used to select players according to their levelk types. To do so, we embed auctions into the pbeauty contest game. We find that by using different designs, we can get the auction winners to be either the lower levelk types or the higher levelk types. In particular, when the value of winning the auction is increasing in the levelk types of all the players, higher levelk players bid higher. When the value of winning the auction is decreasing in the levelk types of all the players, the lower levelk players bid higher. Taken together, our experiment confirms that we can use auctions to select players by their levelk types. This shows that auctions can allow an economic designer to affect the outcome of a game through the selection of levelk types entering to play the game. 
Keywords:  pbeauty contest game, levelk, auctions, mechanism design. 
JEL:  C72 C90 D44 
Date:  2019–09 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:95987&r=all 
By:  Berliant, Marcus; Thakur, Sounak 
Abstract:  The set of stable marriage matches is different depending on whether allocation within marriage is determined by binding agreements in the marriage market (BAMM) or by bargaining in marriage (BIM). With transferable utility, any stable matching is utilitarian efficient under BAMM, but not under BIM. Is it possible to implement the efficient matching under BIM? We show that if one side of the market is sufficiently sensitive relative to the other, if the more sensitive side can be ranked by sensitivity, and if their preferences are hierarchical, the top trading cycles algorithm results in an efficient matching. 
Keywords:  Twosided matching; Marriage; Bargaining 
JEL:  C78 D1 J12 
Date:  2019–09–11 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:96001&r=all 
By:  Trudeau, Christian; VidalPuga, Juan 
Abstract:  We introduce a new family of cooperative games for which there is coincidence between the nucleolus and the Shapley value. These socalled clique games are such that agents are divided into cliques, with the value created by a coalition linearly increasing with the number of agents belonging to the same clique. Agents can belong to multiple cliques, but for a pair of cliques, at most a single agent belong to their intersection. Finally, if two agents do not belong to the same clique, there is at most one way to link the two agents through a chain of agents, with any two nonadjacent agents in the chain belonging to disjoint sets of cliques. We provide multiple examples for clique games. Graphinduced games, either when the graph indicates cooperation possibilities or impossibilities, provide us with opportunities to confirm existing results or discover new ones. A particular focus are the minimum cost spanning tree problems. Our result allows us to obtain new correspondence results between the nucleolus and the Shapley value, as well as other cost sharing methods for the minimum cost spanning tree problem. 
Keywords:  nucleolus; Shapley value; clique; minimum cost spanning tree 
JEL:  C71 
Date:  2018–10–25 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:95999&r=all 
By:  Mihir Bhattacharya (Department of Economics, Ashoka University); Nicolas Gravel (Centre de Sciences Humaines, 2, Dr APJ Abdul Kalam Road, 11 0011 Delhi, India & AixMarseille Univ., CNRS, EHESS, Centrale Marseille, AMSE) 
Abstract:  Given a profile of preferences on a set of alternatives, a majoritarian relation is a complete binary relation that agrees with the strict preference of a strict majority of these preferences whenever such strict strict majority is observed. We show that a majoritarian relation is, among all conceivable binary relations, the most representative of the profile of preferences from which it emanates. We define "the most representative" to mean "the closest in the aggregate". This requires a definition of what it means for a pair of preferences to be closer to each other then another. We assume that this definition takes the form of a distance function defined over the set of all conceivable preferences. We identify a necessary and sufficient condition for such a distance to be minimized by a majoritarian relation. This condition requires the distance to be additive with respect to a plausible notion of compromise between preferences. The wellknown Kemeny distance between preferences does satisfy this property. We also provide a characterization of the class of distances satisfying this property as numerical representations of a primitive qualitative proximity relation between preferences. 
Keywords:  preferences, majority, dissimilarity, distance, aggregation 
JEL:  D71 D72 
Date:  2019–09 
URL:  http://d.repec.org/n?u=RePEc:aim:wpaimx:1921&r=all 