
on Economic Design 
Issue of 2019‒11‒04
eleven papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford 
By:  Battal Dogan; Serhat Dogan; Kemal Yildiz 
Abstract:  In several matching markets, in order to achieve diversity, agents' priorities are allowed to vary across an institution's available seats, and the institution is let to choose agents in a lexicographic fashion based on a predetermined ordering of the seats, called a (capacityconstrained) lexicographic choice rule. We provide a characterization of lexicographic choice rules and a characterization of deferred acceptance mechanisms that operate based on a lexicographic choice structure under variable capacity constraints. We discuss some implications for the Boston school choice system and show that our analysis can be helpful in applications to select among plausible choice rules. 
Date:  2019–10 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1910.13237&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 coincidence 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:  2018–11–12 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:96710&r=all 
By:  René van den Brink (Department of Econometrics and Tinbergen Institute, VU University Amsterdam); Dinko Dimitrov (Chair of Economic Theory  Saarland University); Agnieszka Rusinowska (Centre d'Economie de la Sorbonne, PSECNRS, Université Paris 1) 
Abstract:  We study the issue of assigning weights to players that identify winning coalitions in plurality voting democracies. For this, we consider plurality games which are simple games in partition function form such that in every partition there is at least one winning coalition. Such a game is said to be precisely supportive if it possible to assign weights to players in such a way that a coalition being winning in a partition implies that the combined weight of its members is maximal over all coalitions in the partition. A plurality game is decisive if in every partition there is exactly one winning coalition. We show that decisive plurality games with at most four players, majority games with an arbitrary number of players, and almost symmetric decisive plurality games with an arbitrary number of players are precisely supportive. Complete characterizations of a partition's winning coalitions are provided as well 
Keywords:  plurality game; plurality voting; precise support; simple game in partition function form; winning coalition 
JEL:  C71 D62 D72 
Date:  2019–07 
URL:  http://d.repec.org/n?u=RePEc:mse:cesdoc:19018&r=all 
By:  Mihir Bhattacharya (Department of Economics, Ashoka University); Nicolas Gravel (Centre de Sciences Humaines, Delhi & AixMarseille School of Economics) 
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 â€ the most representativeâ€ to mean â€ the closest in the aggregateâ€ . This requires a definition of what it means for a pair of preferences to be closer to each other than 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 preference 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 
Date:  2019–09 
URL:  http://d.repec.org/n?u=RePEc:ash:wpaper:19&r=all 
By:  R. Pablo Arribillaga; Jordi Massó; Alejandro Neme 
Abstract:  We characterize the set of all obviously strategyproof and onto social choice functions on the domain of singlepeaked preferences. Since obvious strategy proofness implies strategyproofness, and the set of strategyproof and onto social choice functions on this domain coincides with the class of generalized median voter schemes, we focus on this class. We identify a condition on generalized median voter schemes for which the following characterization holds. A generalized median voter scheme is obviously strategyproof if and only if it satisfies the increasing intersection property. Our proof is constructive; for each generalized median voter scheme that satisies the increasing intersection property we deine an extensive game form that implements it in obviously dominant strategies. 
Keywords:  Obvious Strategyproofness, Generalized Median Voters, Singlepeakedness. 
JEL:  D71 
Date:  2019–10–25 
URL:  http://d.repec.org/n?u=RePEc:aub:autbar:967.19&r=all 
By:  Albin Erlanson; Andreas Kleiner 
Abstract:  We study how a principal should optimally choose between implementing a new policy and maintaining the status quo when information relevant for the decision is privately held by agents. Agents are strategic in revealing their information and we exclude monetary transfers, but the principal can verify an agent's information at a cost. We characterize the mechanism that maximizes the expected utility of the principal. This mechanism can be implemented as a cardinal voting rule, in which agents can either cast a baseline vote, indicating only whether they are in favor of the new policy, or they make specific claims about their type. The principal gives more weight to specific claims and verifies a claim whenever it is decisive. 
Date:  2019–10 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1910.13979&r=all 
By:  Ilan Nehama 
Abstract:  This work deals with the implementation of social choice rules using dominant strategies for unrestricted preferences. The seminal GibbardSatterthwaite theorem shows that only few unappealing social choice rules can be implemented unless we assume some restrictions on the preferences or allow monetary transfers. When monetary transfers are allowed and quasilinear utilities w.r.t. money are assumed, VickreyClarkeGroves (VCG) mechanisms were shown to implement any affinemaximizer, and by the work of Roberts, only affinemaximizers can be implemented whenever the type sets of the agents are rich enough. In this work, we generalize these results and define a new class of preferences: Preferences which are positiverepresented by a quasilinear utility. That is, agents whose preference on a subspace of the outcomes can be modeled using a quasilinear utility. We show that the characterization of VCG mechanisms as the incentivecompatible mechanisms extends naturally to this domain. Our result follows from a simple reduction to the characterization of VCG mechanisms. Hence, we see our result more as a fuller more correct version of the VCG characterization. This work also highlights a common misconception in the community attributing the VCG result to the usage of transferable utility. Our result shows that the incentivecompatibility of the VCG mechanisms does not rely on money being a common denominator, but rather on the ability of the designer to fine the agents on a continuous (maybe agentspecific) scale. We think these two insights, considering the utility as a representation and not as the preference itself (which is common in the economic community) and considering utilities which represent the preference only for the relevant domain, would turn out to fruitful in other domains as well. 
Date:  2019–10 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1910.12131&r=all 
By:  Julio BackhoffVeraguas; Patrick Beissner; Ulrich Horst 
Abstract:  We consider a general framework of optimal mechanism design under adverse selection and ambiguity about the type distribution of agents. We prove the existence of optimal mechanisms under minimal assumptions on the contract space and prove that centralized contracting implemented via mechanisms is equivalent to delegated contracting implemented via a contract menu under these assumptions. Our abstract existence results are applied to a series of applications that include models of optimal risk sharing and of optimal portfolio delegation. 
Date:  2019–10 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1910.12516&r=all 
By:  Ott, Marion 
JEL:  D44 
Date:  2019 
URL:  http://d.repec.org/n?u=RePEc:zbw:vfsc19:203616&r=all 
By:  IvanovaStenzel, Radosveta; Grebe, Tim; Kröger, Sabine 
JEL:  C72 C91 D44 D82 L1 
Date:  2019 
URL:  http://d.repec.org/n?u=RePEc:zbw:vfsc19:203606&r=all 
By:  Requate, Tilman; CamachoCuena, Eva; Ch'ng, Kean Siang; Waichman, Israel 
Abstract:  We experimentally test the truthtelling mechanism proposed by Montero (2008) for eliciting firms' abatement costs. We compare this mechanism with two wellknown alternative allocation mechanisms, free and costly allocation of permits at the Pigouvian price. Controlling for the number of firms and the firms' maximal emissions, we find that, in line with the theoretical predictions, firms overreport their maximal emissions under free allocation of permits and underreport these under costly allocation of permits. Under Montero's mechanism, by contrast, firms almost always report their maximal emissions truthfully. However, in terms of efficiency, the difference between Montero's mechanism and costly allocation disappears with industries including more than one firm. 
Keywords:  mechanism design,environmental policy,permit trading,auctions,experiment 
JEL:  C92 D44 L51 Q28 
Date:  2019 
URL:  http://d.repec.org/n?u=RePEc:zbw:kcgwps:18&r=all 