nep-des New Economics Papers
on Economic Design
Issue of 2020‒01‒13
six papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Estimation of Auction Models with Shape Restrictions By Joris Pinkse; Karl Schurter
  2. Preference Evolution in Different Marriage Markets By Zhang, Hanzhe; Wu, Jiabin
  3. Agency Theory Meets Matching Theory By Inés Macho-Stadler; David Pérez-Castrillo
  4. Fixing feedback revision rules in online markets By Bolton, Gary; Breuer, Kevin; Greiner, Ben; Ockenfels, Axel
  5. Gainers and Losers from Market Integration By Hans Gersbach; Hans Haller
  6. General Game Playing B-to-B Price Negotiations By Michael, Friedrich; Ignatov, Dmitry I.

  1. By: Joris Pinkse; Karl Schurter
    Abstract: We introduce several new estimation methods that leverage shape constraints in auction models to estimate various objects of interest, including the distribution of a bidder's valuations, the bidder's ex ante expected surplus, and the seller's counterfactual revenue. The basic approach applies broadly in that (unlike most of the literature) it works for a wide range of auction formats and allows for asymmetric bidders. Though our approach is not restrictive, we focus our analysis on first--price, sealed--bid auctions with independent private valuations. We highlight two nonparametric estimation strategies, one based on a least squares criterion and the other on a maximum likelihood criterion. We also provide the first direct estimator of the strategy function. We establish several theoretical properties of our methods to guide empirical analysis and inference. In addition to providing the asymptotic distributions of our estimators, we identify ways in which methodological choices should be tailored to the objects of their interest. For objects like the bidders' ex ante surplus and the seller's counterfactual expected revenue with an additional symmetric bidder, we show that our input--parameter--free estimators achieve the semiparametric efficiency bound. For objects like the bidders' inverse strategy function, we provide an easily implementable boundary--corrected kernel smoothing and transformation method in order to ensure the squared error is integrable over the entire support of the valuations. An extensive simulation study illustrates our analytical results and demonstrates the respective advantages of our least--squares and maximum likelihood estimators in finite samples. Compared to estimation strategies based on kernel density estimation, the simulations indicate that the smoothed versions of our estimators enjoy a large degree of robustness to the choice of an input parameter.
    Date: 2019–12
  2. By: Zhang, Hanzhe (Michigan State University, Department of Economics); Wu, Jiabin (Department of Economics, University of Oregon)
    Abstract: We examine the evolution of preferences under different arrangements of the marriage market, when preferences are influenced by own choices and parents’ preferences. Multiple stable equilibria arise under random matching, but a unique equilibrium exists under assortative matching. Differences in evolutionary trajectories after transitory and permanent shocks by marriage markets allow us to discuss in a unified way the evolution of (i) female labor force participation in developed countries, (ii) gender norms in developing countries, (iii) the capitalistic spirit in preindustrial England, and (iv) cultural norms in the long run.
    Keywords: preference evolution; marriage market; intergenerational transmission; evolutionary games
    JEL: C73 C78 Z13
    Date: 2020–01–02
  3. By: Inés Macho-Stadler; David Pérez-Castrillo
    Abstract: The theory of incentives and matching theory can complement each other. In particular, matching theory can be a tool for analyzing optimal incentive contracts within a general equilibrium framework. We propose several models that study the endogenous payoffs of principals and agents as a function of the characteristics of all the market participants, as well as the joint attributes of the principal-agent pairs that partner in equilibrium. Moreover, considering each principal-agent relationship as part of a market may strongly influence our assessment of how the characteristics of the principal and the agent affect the optimal incentive contract. Finally, we discuss the effect of the existence of moral hazard on the nature of the matching between principals and agents that we may observe at equilibrium, compared to the matching that would happen if incentive concerns were absent.
    Keywords: Incentives, contracts, matching, moral hazard
    JEL: D86 D03 C78
    Date: 2020–01
  4. By: Bolton, Gary; Breuer, Kevin; Greiner, Ben; Ockenfels, Axel
    Abstract: Feedback withdrawal mechanisms in online markets aim to facilitate the resolution of conflicts during transactions. Yet, frequently used online feedback withdrawal rules are flawed and may backfire by inviting strategic transaction and feedback behavior. Our laboratory experiment shows how a small change in the design of feedback withdrawal rules, allowing unilateral rather than mutual withdrawal, can both reduce incentives for strategic gaming and improve coordination of expectations. This leads to less trading risk, more cooperation, and higher market efficiency.
    Keywords: dispute resolution system, market design, reputation, trust
    Date: 2020–01
  5. By: Hans Gersbach; Hans Haller
    Abstract: We compare integration of economic, matching and networking markets. There can be losers from integration in all three cases, but their relative numbers depend on the type of market. There can be many losers from integration of pure exchange economies. There are relatively few losers from integration of networking markets. In the matching case, the relative numbers tend to lie between those of the other two cases.
    Keywords: competitive exchange, matching theory, networks, market integration
    JEL: C78 D02 D85
    Date: 2019
  6. By: Michael, Friedrich; Ignatov, Dmitry I.
    Abstract: This papers discusses the scientific and practical perspectives of using general game playing in business-to-business price negotiations as a part of Procurement 4.0 revolution. The status quo of digital price negotiations software,which emerged from intuitive solutions to business goals and refereed to as electronic auctions in industry, is summarized in scientific context. Description of such aspects as auctioneers’ interventions, asymmetry among players and time-depended features reveals the nature of nowadays electronic auctions to be rather termed as price games. This paper strongly suggests general game playing as the crucial technology for automation of human rule setting in those games. Game theory, genetic programming, experimental economics and AI human player simulation are also discussed as satellite topics. SIDL-type game descriptions languages and their formal game theoretic foundations are presented.
    Keywords: Procurement 4.0; Artificial Intelligence; General Game Playing; Game Theory; Mechanism Design; Experimental Economics; Behavioral Eco-nomics; z-Tree; Cognitive Modeling; e-Auctions; barter double auction; B-to-B Price Negotiations; English Auction; Dutch auction; Sealed-Bid Auction; Industry 4.0
    JEL: C63 C72 C90 D04 D44
    Date: 2019–09–23

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