nep-des New Economics Papers
on Economic Design
Issue of 2020‒02‒03
eleven papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Incentives and implementation in marriage markets with externalities By Matteo Triossi; María Haydée Fonseca-Mairena
  2. Strategy-proofness and responsiveness imply minimal participation By Müller, Michael; Puppe, Clemens
  3. Restricted Probabilistic Fixed Ballot Rules and Hybrid Domains By Chatterji, Shurojit; Roy, Souvik; Sadhukhan, Soumyarup; Sen, Arunava; Zeng, Huaxia
  4. All Pay Quality-Bids in Score Procurement Auctions By Dan Kovenock; Jingfeng Lu
  5. Procurement design with loss averse bidders By Fugger, Nicolas; Gillen, Philippe; Riehm, Tobias
  6. Quick or cheap? Breaking points in dynamic markets By Panayotis Mertikopoulos; Heinrich H. Nax; Bary S. R. Pradelski
  7. Constrained welfare egalitarianism in surplus-sharing problems By Calleja, Pedro; Llerena, Francesc; Sudhölter, Peter
  8. A characterization of Approval Voting without the approval balloting assumption By Federica Ceron; Stéphane Gonzalez
  9. Comparing School Choice and College Admission Mechanisms By Their Immunity to Strategic Admissions By Somouaoga Bonkoungou; Alexander S. Nesterov
  10. Revealed Preference Analysis of School Choice Models By Nikhil Agarwal; Paulo J. Somaini
  11. School Choice Priorities and School Segregation: Evidence from Madrid By Gortázar, Lucas; Mayor, David; Montalbán, José

  1. By: Matteo Triossi; María Haydée Fonseca-Mairena
    Abstract: We study the implementability of stable correspondences in marriage markets with externalities. We prove that, contrary to what happens in markets without externalities, no stable revelation mechanism makes a dominant strategy for the agents on one side of the market to reveal their preferences. However, the stable correspondence in implementable in Nash equilibrium. JEL Codes:Economic Literature Classification Numbers: C72, C78, D62, D78. Key words: Marriage market with externalities; Incentives; Implementation.
    Date: 2019
  2. By: Müller, Michael; Puppe, Clemens
    Abstract: We study a model in which agents with single-peaked preferences can participate in a costly voting procedure to determine the value of a one-dimensional variable. We show that, for all positive participation cost and all profiles of individual preferences, there exists a (generically) unique equilibrium with (at most) one single participant whenever the voting mechanism is strategy-proof, anonymous, and responsive in the sense that the outcome reacts to a unanimous move of the votes of all agents in the same direction.
    Date: 2020
  3. By: Chatterji, Shurojit (School of Economics, Singapore Management University); Roy, Souvik (Indian Statistical Institute); Sadhukhan, Soumyarup (Indian Statistical Institute); Sen, Arunava (Indian Statistical Institute); Zeng, Huaxia (Shanghai University of Finance and Economics)
    Abstract: We study Random Social Choice Functions (or RSCFs) in a standard ordinal mech-anism design model. We introduce a new preference domain called a hybrid domain which includes as special cases as the complete domain and the single-peaked domain. We characterize the class of unanimous and strategy-proof RSCFs on these domains and refer to them as Restricted Probabilistic Fixed Ballot Rules (or RPFBRs). These RSCFs are not necessarily decomposable, i.e., cannot be written as a convex combina-tion of their deterministic counterparts. We identify a necessary and sufficient condition under which decomposability holds for anonymous RPFBRs. Finally, we provide an axiomatic justification of hybrid domains and show that every connected domain satis-fying some mild conditions is a hybrid domain where the RPFBR characterization still prevails.
    Keywords: Strategy-proofness; hybrid domain; restricted probabilistic fixed ballot rule; decomposability; connectedness
    JEL: D71 H41
    Date: 2020–01–09
  4. By: Dan Kovenock (Economic Science Institute, Chapman University); Jingfeng Lu (Department of Economics, National University of Singapore)
    Abstract: In this paper, we study score procurement auctions with all-pay quality bids. A supplierís score is the di§erence between his quality and price bids. The supplier with the highest score wins and gets paid his own price bid. The procurerís payo§ is the di§erence between the winnerís quality and the procurerís payments to the suppliers. Equilibrium quality and price bids are solved without Örst obtaining the corresponding equilibrium scores. We Önd that quality bids, the suppliersípayo§s and the procurerís payo§ do not depend on whether price bids are made contingent on quality bids. Compared to a benchmark of winner-pay quality bids, in which the losing suppliersí quality bidding costs are reimbursed by the procurer, all-pay quality bids tend to reduce quality provision and suppliersípayo§s, but they tend to increase the total surplus and the procurerís payo§.
    Keywords: All-pay quality bids, Equilibrium analysis, Score auctions, Score procurements, Winner-pay quality bid
    JEL: C70 D44 D89 L12 O32
    Date: 2020
  5. By: Fugger, Nicolas; Gillen, Philippe; Riehm, Tobias
    Abstract: We show that it is beneficial for a buyer to conduct a multi-stage mechanism if bidders are loss averse. In a first step, we derive a revenue equivalence principle. Fixing the multi-stage structure, the revenue is independent of the chosen payment rule. Secondly, we introduce a simple two-stage mechanism which always leads to a decrease in procurement costs compared to any single-stage auction. Finally we derive the optimal efficient two-stage mechanism.
    Keywords: Auctions,Experiment,Loss aversion,Preferences
    JEL: D44 D47 D90
    Date: 2019
  6. By: Panayotis Mertikopoulos; Heinrich H. Nax; Bary S. R. Pradelski
    Abstract: We examine two-sided markets where players arrive stochastically over time and are drawn from a continuum of types. The cost of matching a client and provider varies, so a social planner is faced with two contending objectives: a) to reduce players' waiting time before getting matched; and b) to form efficient pairs in order to reduce matching costs. We show that such markets are characterized by a quick or cheap dilemma: Under a large class of distributional assumptions, there is no `free lunch', i.e., there exists no clearing schedule that is simultaneously optimal along both objectives. We further identify a unique breaking point signifying a stark reduction in matching cost contrasted by an increase in waiting time. Generalizing this model, we identify two regimes: one, where no free lunch exists; the other, where a window of opportunity opens to achieve a free lunch. Remarkably, greedy scheduling is never optimal in this setting.
    Keywords: Dynamic matching, online markets, market design
    JEL: D47 C78 C60 D80
    Date: 2019–12
  7. By: Calleja, Pedro (Departament de Matemàtica Econòmica); Llerena, Francesc (Departament de Gestió dEmpreses); Sudhölter, Peter (Department of Business and Economics)
    Abstract: We introduce the constrained egalitarian surplus-sharing rule fCE, which distributes an amount of a divisible resource so that the poorer agents’ resulting payoffs become equal but not larger than any remaining agent’s status quo payoff. We show that fCE is characterized by Pareto optimality, nonnegativity, path independence, and less first, a new property requiring that an agent does not gain if her status quo payoff exceeds that of another agent by the surplus. We provide two additional characterizations weakening less first and employing consistency, a classical invariance property with respect to changes of population. We investigate the effects of egalitarian principles in the setting of transferable utility (TU) games. A single-valued solution for TU games is said to support constrained welfare egalitarianism if it distributes any increment of the worth of the grand coalition according to fCE. We show that the set of Pareto optimal single-valued solutions that support fCE is characterized by means of aggregate monotonicity and bounded pairwise fairness, resembling less first.
    Keywords: Surplus-sharing problem; egalitarianism; Lorenz domination; TU game
    JEL: C71
    Date: 2020–01–27
  8. By: Federica Ceron (UP1 UFR02 - Université Panthéon-Sorbonne - UFR d'Économie - UP1 - Université Panthéon-Sorbonne); Stéphane Gonzalez (UJM - Université Jean Monnet [Saint-Étienne], 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)
    Abstract: We provide an axiomatic characterization of Approval Voting without the approval balloting assumption. The dichotomous structure of the informational basis of Approval voting as well as its aggregative rationale are jointly derived from a set of normative conditions on the voting procedure. The first one is the well-known social-theoretic principle of consistency; the second one, ballot richness, requires voters to be able to express a sufficiently rich set of opinions; the last one, dubbed no single-voter overrides, demands that the addition of a voter to an electorate cannot radically change the outcome of the election. Such result is promising insofar it suggests that the informational basis of voting may have a normative relevance that deserves formal treatment.
    Keywords: Approval voting,balloting procedure,Informational basis,Evaluative voting
    Date: 2019
  9. By: Somouaoga Bonkoungou; Alexander S. Nesterov
    Abstract: Recently dozens of school districts and college admissions systems around the world have reformed their admission rules. As a main motivation for these reforms the policymakers cited strategic flaws of the rules: students had strong incentives to game the system, which caused dramatic consequences for non-strategic students. However, almost none of the new rules were strategy-proof. We explain this puzzle. We show that after the reforms the rules became more immune to strategic admissions: each student received a smaller set of schools that he can get in using a strategy, weakening incentives to manipulate. Simultaneously, the admission to each school became strategy-proof to a larger set of students, making the schools more available for non-strategic students. We also show that the existing explanation of the puzzle due to Pathak and S\"onmez (2013) is incomplete.
    Date: 2020–01
  10. By: Nikhil Agarwal; Paulo J. Somaini
    Abstract: Preferences for schools are important determinants of equitable access to high-quality education, effects of expanded choice on school improvement and school choice mechanism design. Standard methods for estimating consumer preferences are not applicable in education markets because students do not always get their first choice school. This review describes recently developed methods for using rich data from a school choice mechanism to estimate student preferences. Our objectives are to present a unifying framework for these methods and to help applied researchers decide which techniques to use. After laying out methodological issues, we provide an overview of empirical results obtained using these models and discuss some open questions.
    JEL: D47 I21
    Date: 2019–12
  11. By: Gortázar, Lucas (The World Bank Group); Mayor, David (Compass Lexecon); Montalbán, José (Swedish Institute for Social Research, Stockholm University)
    Abstract: We test how government-determined school choice priorities affect families’ choices and pupil sorting across schools in the context of the Boston Mechanism. We use two large-scale school choice reforms in the school choice priority structure undertaken in the region of Madrid (Spain) in 2012 and 2013 as a source of variation. In 2012, low-income priorities to the top- ranked school were reduced, and points to alumni family members of the top-ranked school were granted. In 2013, an inter-district school choice reform widely expanded families’ choice set of schools. We combine an event study first difference across cohorts and a Difference- in-Difference design to identify the impact of the reforms, using unique administrative data on parents’ applications to schools. We show that reducing low-income priorities to the top-ranked school and granting points to alumni family members of the top-ranked school increases school segregation by parental education and immigrant status on 3 and 13 percent, respectively. Families reacted to the 2013’s inter-district reform exerting higher interdistrict choice and applying to schools located further away from home than before the reform. We find heterogeneous effects, showing potential information gaps and dynamic learning process across immigrant status groups throughout time. Moreover, the inter-district school choice reform marginally reduced school segregation by parental education and largely increased school segregation by immigrant status, but both effects fade out when controlling for residential stratification. Results suggest that priority structures need to be carefully designed to achieve diversity objectives and that abolishing school choice proximity points does not seem an effective public policy for reducing school segregation under the Boston Mechanism.
    Keywords: Education and Inequality; Education Policy; School Choice; School Segregation
    JEL: I24 I28
    Date: 2020–01–27

This nep-des issue is ©2020 by Guillaume Haeringer and Alex Teytelboym. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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