nep-des New Economics Papers
on Economic Design
Issue of 2019‒10‒14
nine papers chosen by
Alex Teytelboym
University of Oxford

  1. Improving Schools through School Choice: An Experimental Study of Deferred Acceptance By Flip Klijn; Joana Pais; Marc Vorsatz
  2. Matching with Externalities By Pycia, Marek; Yenmez, M. Bumin
  3. Representing All Stable Matchings by Walking a Maximal Chain By Linda Cai; Clayton Thomas
  4. Top Trading Cycles, Consistency, and Acyclic Priorities for House Allocation with Existing Tenants By Bettina Klaus; Jan-Christoph Schlegel; Mehmet Karakaya
  5. On Frequent Batch Auctions for Stocks By Ravi Jagannathan
  6. Condorcet efficiency of general weighted scoring rules under IAC: indifference and abstention By Mostapha Diss; Eric Kamwa; Issofa Moyouwou; Hatem Smaoui
  7. On The Existence of Equilibrium In Bayesian Games Without Complementarities By Idione Meneghel; Rabee Tourky
  8. Optimal persuasion with an application to media censorship By Anton Kolotilin; Tymofiy Mylovanov; Andriy Zapechelnyuk
  9. Cooperative games on intersection closed systems and the Shapley value By Sylvain Béal; Issofa Moyouwou; Eric Rémila; Philippe Solal

  1. By: Flip Klijn; Joana Pais; Marc Vorsatz
    Abstract: In the context of school choice, we experimentally study the student-optimal stable mechanism where subjects take the role of students and schools are passive. Specifically, we study if aschool can be better off when it unambiguously improves in the students’true preferences and its (theoretic) student-optimal stable match remains the same or gets worse. Using first-order stochastic dominance to evaluate the schools’ distributions over their actual matches,we find that schools’ welfare almost always changes in the same direction as the change of the student-optimal stable matching, i.e., incentives to improve school quality are nearly idle.
    Keywords: school choice, matching, deferred acceptance, school quality, stability
    JEL: C78 C91 C92 D78 I20
    Date: 2019–09
  2. By: Pycia, Marek; Yenmez, M. Bumin
    Abstract: We incorporate externalities into the stable matching theory of two-sided markets. Extending the classical substitutes condition to allow for externalities, we establish that stable matchings exist when agent choices satisfy substitutability. Furthermore, we show that substitutability is a necessary condition for the existence of a stable matching in a maximal-domain sense and provide a characterization of substitutable choice functions. In addition, we establish novel comparative statics on externalities and show that the standard insights of matching theory, like the existence of side-optimal stable matchings and the deferred acceptance algorithm, remain valid despite the presence of externalities even though the standard fixed-point techniques do not apply.
    JEL: C78 D62
    Date: 2019–09
  3. By: Linda Cai; Clayton Thomas
    Abstract: The seminal book of Gusfield and Irving [GI89] provides a compact and algorithmically useful way to represent the collection of stable matches corresponding to a given set of preferences. In this paper, we reinterpret the main results of [GI89], giving a new proof of the characterization which is able to bypass a lot of the "theory building" of the original works. We also provide a streamlined and efficient way to compute this representation. Our proofs and algorithms emphasize the connection to well-known properties of the deferred acceptance algorithm.
    Date: 2019–10
  4. By: Bettina Klaus; Jan-Christoph Schlegel; Mehmet Karakaya
    Abstract: We study the house allocation with existing tenants model (Abdulkadiroglu and Sonmez, 1999) and consider rules that allocate houses based on priorities. We introduce a new acyclicity requirement and show that for house allocation with existing tenants a top trading cycles (TTC) rule is consistent if and only if its underlying priority structure satisfies our acyclicity condition. Next we give an alternative description of TTC rules based on ownership-adapted acyclic priorities in terms of two specific rules, YRMH-IGYT (you request my house - I get your turn) and efficient priority rules, that are applied in two steps. Moreover, even if no priority structure is a priori given, we show that a rule is a top trading cycles rule based on ownership-adapted acyclic priorities if and only if it satisfies Pareto-optimality, individual-rationality, strategy-proofness, consistency, and either reallocation-proofness or non-bossiness.
    Keywords: consistency, house allocation, matching, strategy-proofness, top trading cycles.
    JEL: C78 D70 D78
    Date: 2019–10
  5. By: Ravi Jagannathan
    Abstract: I show that frequent batch auctions for stocks have the potential to reduce the severity of stock price crashes when they occur. For a given sequence of orders from a continuous electronic limit order book market, matching orders using one second apart batch auctions results in nearly the same trades and prices. Increasing the time interval between auctions to one minute significantly reduces the severity stock price crashes. In spite of this and other advantages pointed out in the literature, frequent batch auctions have not caught on. There is a need for carefully designed market experiments to understand why, and what aspect of reality academic research may be missing.
    JEL: G0 G1 G12 G2
    Date: 2019–10
  6. 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: 2020
  7. By: Idione Meneghel; Rabee Tourky
    Abstract: 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: 2019–09
  8. By: Anton Kolotilin (UNSW Australia); Tymofiy Mylovanov (University of Pittsburgh); Andriy Zapechelnyuk (University of St Andrews)
    Abstract: A sender designs a signal about the state of the world to persuade a receiver. Under standard assumptions, an optimal signal reveals the states below a cutoff and pools the states above the cutoff. This result holds in continuous and discrete environments. The optimal signal is less informative if the sender is more biased and if the receiver is easier to persuade. We apply our results to the problem of media censorship by a government.
    Keywords: Bayesian persuasion, information design, upper censorship, lower censorship, media censorship
    JEL: D82 D83 L82
    Date: 2019–10–03
  9. By: Sylvain Béal (Université de Bourgogne Franche-Comté, CRESE); Issofa Moyouwou (Department of Mathematics, University of Yaounde I - Cameroon); Eric Rémila (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne, France); Philippe Solal (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne, France)
    Abstract: A situation in which a finite set of agents can obtain certain payoffs by cooperation can be described by a cooperative game with transferable utility, or simply a TU-game. In the literature, various models of games with restricted cooperation can be found, in which only certain subsets of the agent set are allowed to form. In this article, we consider such sets of feasible coalitions that are closed under intersection, i.e., for any two feasible coalitions, their intersection is also feasible. Such set systems, called intersection closed systems, are a generalization of the convex geometries. We use the concept of closure operator for intersection closed systems and we define the restricted TU-game taking into account the limited possibilities of cooperation determined by the intersection closed system. Next, we study the properties of this restricted TU-game. Finally, we introduce and axiomatically characterize a family of allocation rules for games TU-games on intersection closed systems, which contains a natural extension of the Shapley value.
    Date: 2019–06

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