nep-des New Economics Papers
on Economic Design
Issue of 2020‒02‒10
eight papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. "Auction Performance, Strategic Supply Management, and Bidder Behavior in Treasury Bill Auctions: Evidence from the Philippines " By Eduardo Anthony G. Mariño III; Daniel Marszalec
  2. Incentive-Compatible Diffusion Auctions By Bin Li; Dong Hao; Dengji Zhao
  3. How the auction design influences procurement prices: An experiment By Ehrhart, Karl-Martin; Ott, Marion
  4. Comparing School Choice And College Admission Mechanisms By Their Immunity To Strategic Admissions By Somouaoga Bonkoungou; Alexander Nesterov
  5. Essential stability in large square economies By Sebastián Cea-Echenique; Matías Fuentes
  6. Commitment in first-price auctions By Gillen, Philippe
  7. Long Information Design By Frédéric Koessler; Marie Laclau; Jérôme Renault; Tristan Tomala
  8. "Morning-Fresh: Declining Prices and the Right-to-Choose in a Faroese Fish Market Morning-Fresh" By Sanna Laksá; Daniel Marszalec

  1. By: Eduardo Anthony G. Mariño III; Daniel Marszalec (Faculty of Economics, The University of Tokyo)
    Abstract: We examine the Treasury bond auction system in the Philippines by using bid data from around 500 Treasury auctions from January 2010 to October 2017. The Philippines features a strategic auctioneer who uses both discriminatory and uniform price auctions, and adopts an active quantity management policy through frequent use of supply restrictions and full rejections. In this environment, the discriminatory auction generates superior outcomes in terms of lower borrowing costs, but at the expense of concentrating awards among fewer bidders. We also nd that he govern- ment's decision to restrict auction supply is driven by cost and strength of demand. In response to higher volatility, and a higher number of competitors, bidders adjust for winner's curse by submitting bids with higher yield spreads. Though we conrm that bidder heterogeneity exists, average auction prots do not signicantly dier across bidder types.Length: 39 pages
  2. By: Bin Li; Dong Hao; Dengji Zhao
    Abstract: Diffusion auction is a new model in auction design. It can incentivize the buyers who have already joined in the auction to further diffuse the sale information to others via social relations, whereby both the seller's revenue and the social welfare can be improved. Diffusion auctions are essentially non-typical multidimensional mechanism design problems and agents' social relations are complicatedly involved with their bids. In such auctions, incentive-compatibility (IC) means it is best for every agent to honestly report her valuation and fully diffuse the sale information to all her neighbors. Existing work identified some specific mechanisms for diffusion auctions, while a general theory characterizing all incentive-compatible diffusion auctions is still missing. In this work, we identify a sufficient and necessary condition for all dominant-strategy incentive-compatible (DSIC) diffusion auctions. We formulate the monotonic allocation policies in such multidimensional problems and show that any monotonic allocation policy can be implemented in a DSIC diffusion auction mechanism. Moreover, given any monotonic allocation policy, we obtain the optimal payment policy to maximize the seller's revenue.
    Date: 2020–01
  3. By: Ehrhart, Karl-Martin; Ott, Marion
    Abstract: The targeted design of auctions has to take behavioral regularities into account. This paper explores whether procurement auction formats can take advantage of bidders' willingness-to-pay-willingness-to-accept disparity. In a laboratory experiment, we compare four different second-price auction formats for procuring a good. The four formats are a sealed-bid auction and three di erent descending-clock auctions. We assume that a bidder's willingness-to-accept exceeds his willingness-to-pay and that, depending on the auction format, a bidder's reference-state shifts such that the bidder's perspective moves from a willingness-to-accept perspective towards a willingness-to-pay perspective, thus inducing aggressive bids. In line with the prediction, auction prices decline across the four formats. In particular, we observe the lowest prices in those two clock auction formats that, at every auction stage, select a bidder as the current leading bidder. We conclude that mechanisms influence the reference state and that auctions that foster reference-state shifts lead to lower payments for the buyer. These results support and generalize findings on sales auctions. However, not all of our findings on procurement auctions mirror findings on sales auctions. Bidders overbid in sealed-bid procurement auctions, which does not mirror the commonly observed overbidding in sealed-bid sales auctions.
    Keywords: procurement auction,experiment,WTP-WTA disparity,reference-dependence
    JEL: D44 H57 D91 C92
    Date: 2019
  4. By: Somouaoga Bonkoungou (National Research University Higher School of Economics); Alexander Nesterov (National Research University Higher School of Economics)
    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
    Keywords: matching market design, school choice, college admission, manipulability
    JEL: C78 D47 D78 D82
    Date: 2020
  5. By: Sebastián Cea-Echenique; Matías Fuentes (UNSAM - Universidad Nacional de San Martin)
    Abstract: Exchange economies are defined by a mapping between an atomless space of agents and a space of characteristics where the commodity space is a separable Banach space. We characterize equilibrium stability of economies relaying on the continuity of the equilibrium correspondence. We provide a positive answer to an open question about the continuity of the Walras correspondence in infinite dimensional spaces. In addition, we do not assume neither differentiability nor a fixed set of agents for the different economies, like it is usually assumed in the stability literature.
    Keywords: Essential Stability,Walras Correspondence,Infinitely Many Commodities,Large Economies,Nowhere Equivalence
    Date: 2020–01–07
  6. By: Gillen, Philippe
    Abstract: We study the role of commitment in a first-price auction environment. We devise a simple two-stage model in which bidders first submit an initial offer that the auctioneer can observe and then make a counteroffer. There is no commitment on the auctioneer's side to accept an offer as is or even to choose the lowest bidder. We compare this setting to a standard first-price auction both theoretically and experimentally. While theory suggests that the offers and the auctioneer's revenue should be higher in a standard first-price auction compared to the first-price auction with renegotiation, we cannot confirm these hypotheses in the experiment.
    Keywords: Auctions,Experiment
    JEL: D44 D47
    Date: 2019
  7. By: Frédéric Koessler (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Marie Laclau (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Jérôme Renault (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique); Tristan Tomala (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, HEC Paris - Ecole des Hautes Etudes Commerciales)
    Abstract: We analyze strictly competitive information design games between two designers and an agent. Before the agent takes a decision, designers disclose public information at multiple stages about persistent state parameters. We consider environments with arbitrary constraints on feasible in- formation disclosure policies. Our main results characterize equilibrium payoffs and strategies for various timings of the game: simultaneous or alternating disclosures, with or without deadline. With- out constraints on policies, information is disclosed in a single stage, but there may be no bound on the number stages used to disclose information when policies are constrained. As an application, we study competition in product demonstration and show that more information is revealed when there is a deadline. The format that provides the buyer with the most information is the sequential game with deadline in which the ex-ante strongest seller is the last mover.
    Keywords: Bayesian persuasion,concavification,convexification,information design,Mertens Zamir solution,product demonstration,splitting games,statistical experiments,stochastic games
    Date: 2019–12
  8. By: Sanna Laksá (Varðin P/F); Daniel Marszalec (Faculty of Economics, The University of Tokyo)
    Abstract: Classical auction models predict that when homogeneous goods are sold sequen- tially, the sale prices should exhibit no trend over time. This hypothesis was rst empirically tested by Ashenfelter (1989), who noticed that prices in wine auctions tended to decline throughout the day - hence the term "the afternoon effect." We use transaction-level data from wholesale sh auctions in the Faroe Islands to test for declining prices using two different estimation methods. Both methods show that the price trends in Faroese sh market auctions are declining - furthermore, the pattern persists both on aggregate, and within individual sh species. We attribute this price decline to two main factors: the declining number of bidders, and the possibly declining quality of sh, throughout the day. Though the dataset logs each unit of the same species as identical, early auction winners have the "right to choose" their preferred box before the rest is re-auctioned. This is likely to contribute to a decline in perceived sh quality in later auctions that is unobservable in the data, but important in motivating bidder behaviour.

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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