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on Economic Design |
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Issue of 2019‒11‒18
eight papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Takehito Masuda; Toyotaka Sakai; Shigehiro Serizawa; Takuma Wakayama |
| Abstract: | We conduct laboratory experiments for the multi-unit Vickrey auction with and without providing advice to subjects on strategy-proofness. Although the rate of truth-telling among the subjects stays at 20% without advice, the rate increases to 47% with advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that our results are not due to so-called experimenter demand effects. Moreover, advice improves efficiency in the Vickrey auction, particularly in early periods in which subjects are less experienced. It is well known that subjects tend to overbid in several Vickrey auction experiments. Our results indicate the possibility that simple advice decreases such overbidding by promoting better understanding of the strategy-proofness property in the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to find the benefit of truth-telling, but our observations show that introducing advice on the property of strategy-proofness helps them to behave “correctly.†|
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1048r&r=all |
| By: | Mariann Ollar; Antonio Penta |
| Abstract: | We consider mechanism design environments in which agents commonly know that types are identically distributed across agents, but without assuming that the actual distribution is common knowledge, nor that it is known to the designer (common knowledge of identicality). Under these assumptions, we explore problems of partial and full implementation, as well as robustness. First, we characterize the transfers which are incentive compatible under the assumption of common knowledge of identicality, and provide necessary and sufficient conditions for partial implementation. Second, we characterize the conditions under which full implementation is possible via direct mechanisms, as well as the transfer schemes which achieve full implementation whenever it is possible. Finally, we study the robustness properties of the implementing transfers with respect to misspecifications of agents’ preferences and with respect to lower orders beliefs in rationality. |
| Keywords: | moment conditions, robust full implementation, Rationalizability, interdependent values, identical but unknown distributions, uniqueness, strategic externalities, canonical transfers, loading transfers, equal-externality transfers |
| JEL: | D62 D82 D83 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1126&r=all |
| By: | Idione Meneghel (Australian National University College of Business and Economics); Rabee Tourky (Australian National University College of Business and Economics) |
| Abstract: | This paper presents new results on the existence of pure-strategy Bayesian equilibria in specified functional forms. These results broaden the scope of methods developed by Reny (2011) well beyond monotone pure strategies. Applications include natural models of first-price and all-pay auctions not covered by previous existence results. To illustrate the scope of our results, we provide an analysis of three auctions: (i) a first-price auction of objects that are heterogeneous and imperfect substitutes; (ii) a first-price auction in which bidders’ payoffs have a very general interdependence structure; and (iii) an all-pay auction with non-monotone equilibrium. |
| Keywords: | Bayesian games, Monotone strategies, Pure-strategy equilibrium, Auctions |
| JEL: | C72 D44 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2190r&r=all |
| By: | Chen, Yi-Chun (Department of Economics and Risk Management Institute, National University of Singapore); Kunimoto, Takashi (School of Economics, Singapore Management University); Sun, Yifei (School of International Trade and Economics, University of International Business and Economics) |
| Abstract: | The robust mechanism design literature investigates the global robustness of op-timal mechanisms to large changes in the environment. Acknowledging the global robustness as an overly demanding requirement, we propose continuous implementa-tion as a local robustness of optimal mechanisms to small changes in the environment. We say that a social choice function is continuously implementable “with small trans-fers” if there exists a mechanism which yields the outcome close to the desired one for all types close to the designer’s initial model. We show that when a generic cor-relation condition is imposed on the class of interdependent values environments, any incentive compatible social choice function is continuously implementable with small transfers. This exhibits a stark contrast with Bergemann and Morris (2005) who show that their global robustness amounts to ex post incentive compatibility as well as Oury and Tercieux (2012) who show that continuous implementation generates a substantial restriction, tightly connected to full implementation in rationalizable strategies. |
| Keywords: | Continuous implementation; full implementation; incentive compatibility; robustness; transfers |
| JEL: | C72 D78 D82 |
| Date: | 2019–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:ris:smuesw:2019_019&r=all |
| By: | ATAY Ata, (Hungarian Academy of Sciences); MAULEON Ana, (Université Saint-Louis, Bruxelles); VANNETELBOSCH Vincent, (Université catholique de Louvain, CORE, Belgium) |
| Abstract: | Since stable matchings may not exist, we adopt a weaker notion of stability for solving the roommate problem: The bargaining set. Klijn and Masso (2003) show that the bargaining set coincides with the set of weakly stable and weakly efficient matchings in the marriage problem. First, we show that a weakly stable matching always exists in the roommate problem. However, weak stability is not sufficient for a matching to be in the bargaining set. Second, we prove that the bargaining set is always non-empty. Finally, as Klijn and Masso (2003) get for the marriage problem, we show that the bargaining set coincides with the set of weakly stable and weakly efficient matchings in the roommate problem. |
| Keywords: | roommate problem, matching, (weak) stability, bargaining set |
| JEL: | C71 C78 |
| Date: | 2019–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2019012&r=all |
| By: | Kasy, Maximilian; Frankel, Alexander |
| Abstract: | Given a scarcity of journal space, what is the socially optimal rule for whether an empirical finding should be published? Suppose that the goal of publication is to inform the public about a policy-relevant state. Then journals should publish extreme results, meaning ones that move beliefs sufficiently. For specific objectives, the optimal rule can take the form of a one- or a two-sided test comparing a point estimate to the prior mean, with critical values deter- mined by a cost-benefit analysis. An explicit consideration of future studies may additionally justify the publication of precise null results. If one insists that standard inference remain valid, however, publication must not select on the study’s findings (but may select on the study’s design). |
| Date: | 2018–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:osf:metaar:mbvz3&r=all |
| By: | Konstantinos Ioannidis (University of Amsterdam); Theo Offerman (University of Amsterdam); Randolph Sloof (University of Amsterdam) |
| Abstract: | We test whether markets are needed to mitigate the effects of anchoring on peoples' preferences. We anchor subjects by asking them if they are willing to sell a bottle of wine for a transparently uninformative random price. We elicit subjects' Willingness-To-Accept for the bottle before and after the market. Subjects either participate in a small or a large double auction market. The variance in subjects' Willingness-To-Accept shrinks within trading groups. Our evidence supports the idea that markets have the potential to mitigate a bias. However, the market is not needed: our anchoring manipulation failed in a large sample. |
| Keywords: | anchoring, market, experiment |
| JEL: | C91 D01 D91 |
| Date: | 2019–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190074&r=all |
| By: | Aubry, Mathieu; Kräussl, Roman; Manso, Gustavo; Spaenjers, Christophe |
| Abstract: | We study the accuracy and usefulness of automated (i.e., machine-generated) valuations for illiquid and heterogeneous real assets. We assemble a database of 1.1 million paintings auctioned between 2008 and 2015. We use a popular machine-learning technique - neural networks - to develop a pricing algorithm based on both non-visual and visual artwork characteristics. Our out-of-sample valuations predict auction prices dramatically better than valuations based on a standard hedonic pricing model. Moreover, they help explaining price levels and sale probabilities even after conditioning on auctioneers' pre-sale estimates. Machine learning is particularly helpful for assets that are associated with high price uncertainty. It can also correct human experts' systematic biases in expectations formation - and identify ex ante situations in which such biases are likely to arise. |
| Keywords: | asset valuation,auctions,experts,big data,machine learning,computer vision,art |
| JEL: | C50 D44 G12 Z11 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:635&r=all |