nep-des New Economics Papers
on Economic Design
Issue of 2020‒02‒24
nine papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Constrained Pseudo-Market Equilibrium By Federico Echenique; Antonio Miralles; Jun Zhang
  2. Cardinal Assignment Mechanisms: Money Matters More than it Should By Caterina Calsamiglia; Francisco Martinez-Mora; Antonio Miralles
  3. Pricing and Fees in Auction Platforms with Two-Sided Entry By Marleen Marra
  4. On Selecting the Right Agent By Salvador Barberà; Geoffroy de Clippel; Alejandro Neme; Kareen Rozen
  5. Efficient Incentives in Social Networks: Gamification and the Coase Theorem By Daske, Thomas
  6. Objective Social Choice: Using Auxiliary Information to Improve Voting Outcomes By Silviu Pitis; Michael R. Zhang
  7. Information disclosure in group contests with endogenous entry By Luke Boosey; Philip Brookins; Dmitry Ryvkin
  8. Nash Smoothing on the Test Bench: Ha-Essential Equilibria By Papatya Duman; Walter Trockel
  9. Bargaining over Contingent Contracts Under Incomplete Information By Geoffroy de Clippel; Jack Fanning; Kareen Rozen

  1. By: Federico Echenique; Antonio Miralles; Jun Zhang
    Abstract: We propose a market solution to the problem of resource allocation subject to quantitative constraints, such as those imposed by considerations of diversity or geographical distribution. Constraints are "priced," and agents are charged to the extent that their purchases a ect the value (at equilibrium prices) of the relevant constraints. The result is a constrained-efficient market equilibrium outcome. The outcome is fair whenever the constraints do not single out individual agents, which happens, for example with geographical distribution constraints. In economies with endowments, moreover, our equilibrium outcomes are constrained efficient and approximately individually rational.
    Keywords: pricing constraints, general equilibrium, random assignments
    JEL: C78 D47 D50
    Date: 2020–01
  2. By: Caterina Calsamiglia; Francisco Martinez-Mora; Antonio Miralles
    Abstract: Most environments where (possibly random) assignment mechanisms are used are such that participants have outside options. For instance private schools and private housing are options that participants in a public choice or public housing assignment problems may have. We postulate that cardinal mechanisms, as opposed to ordinal mechanisms, may be unfair for agents with less access to outside options. Chances inside the assignment process could favor agents with better outside options.
    Keywords: random assignments, ordinal vs. cardinal mechanisms, outside options, unequal access
    JEL: D47 D63
    Date: 2020–01
  3. By: Marleen Marra (Département d'économie)
    Abstract: This paper presents, solves, and estimates the first structural auction model with seller selection. This allows me to quantify network effects arising from endogenous bidder and seller entry into auction platforms, facilitating the estimation of theoretically ambiguous fee impacts by tracing them through the game. Relevant model primitives are identified from variation in second-highest bids and reserve prices. My estimator builds off the discrete choice literature to address the double nested fixed point characterization of the entry equilibrium. Using new wine auction data, I estimate that this platform’s revenues increase up to 60% when introducing a bidder discount and simultaneously increasing seller fees. More bidders enter when the platform is populated with lower-reserve setting sellers, driving up prices. Moreover, I show that meaningful antitrust damages can be estimated in a platform setting despite this two-sidedness.
    Keywords: Auctions with entry; Two-sided markets; Nonparametric identification; Estimation; Nested fixed point
    JEL: D44 C52 C57 L81
    Date: 2019–12
  4. By: Salvador Barberà; Geoffroy de Clippel; Alejandro Neme; Kareen Rozen
    Abstract: Each period, a principal must assign one of two agents to a new task. Profit is stochastically higher when the agent is qualified for the task, but the principal cannot observe qualification. Her only decision is which of the two agents to assign, if any, given the public history of selections and profits, but she cannot commit to any rule. While she maximizes expected discounted profits, each agent maximizes his expected discounted selection probabilities. We fully characterize when the principal’s firstbest payoff is attainable in equilibrium, and identify a simple, belief-free, strategy profile achieving this first-best whenever feasible. Additionally, we provide a partial characterization of the case with many agents and discuss how our analysis extends to other variations of the game.
    Date: 2020
  5. By: Daske, Thomas
    Abstract: This study explores mechanism design for networks of interpersonal relationships. Agents' social (more or less altruistic or spiteful) preferences and private payoffs are all subject to asymmetric information; utility is quasi-linear. Remarkably, the asymmetry of information about agents' social preferences can be operationalized to satisfy agents' participation constraints. The main result is a constructive proof of the Coase theorem, in its typical mechanism-design interpretation, for networks of at least three agents: If endowments are sufficiently large, any such network can resolve any given allocation problem with a budget-balanced mechanism that is Bayesian incentive-compatible, interim individually rational, and ex-post Pareto-efficient. The endogenously derived solution concept is interpreted as gamification: Resolve the agents' allocation problem with an efficient social-preference robust mechanism; attract agents' participation by complementing this mechanism with a budget-balanced game that operates on their social preferences and provides them with a platform to live out their propensities to cooperate or compete.
    Keywords: mechanism design,social preferences,gamification,Coase theorem
    JEL: C72 C78 D62 D82
    Date: 2020
  6. By: Silviu Pitis; Michael R. Zhang
    Abstract: How should one combine noisy information from diverse sources to make an inference about an objective ground truth? This frequently recurring, normative question lies at the core of statistics, machine learning, policy-making, and everyday life. It has been called "combining forecasts", "meta-analysis", "ensembling", and the "MLE approach to voting", among other names. Past studies typically assume that noisy votes are identically and independently distributed (i.i.d.), but this assumption is often unrealistic. Instead, we assume that votes are independent but not necessarily identically distributed and that our ensembling algorithm has access to certain auxiliary information related to the underlying model governing the noise in each vote. In our present work, we: (1) define our problem and argue that it reflects common and socially relevant real world scenarios, (2) propose a multi-arm bandit noise model and count-based auxiliary information set, (3) derive maximum likelihood aggregation rules for ranked and cardinal votes under our noise model, (4) propose, alternatively, to learn an aggregation rule using an order-invariant neural network, and (5) empirically compare our rules to common voting rules and naive experience-weighted modifications. We find that our rules successfully use auxiliary information to outperform the naive baselines.
    Date: 2020–01
  7. By: Luke Boosey (Department of Economics, Florida State University); Philip Brookins (Department of Economics, University of South Carolina); Dmitry Ryvkin (Department of Economics, Florida State University)
    Abstract: We study contests among groups of individuals where each player endogenously decides whether or not to participate in competition as a member of their group. Within-group aggregation of effort is best-shot, i.e., each group's performance is determined by the highest investment among its members. We consider a generalized all-pay auction setting, in which the group with the highest performance wins the contest with certainty. Players' values for winning are private information at the entry stage, but may be disclosed at the competition stage. We compare three disclosure policies: (i) no disclosure, when the number of entrants remains unknown and their values private; (ii) within-group disclosure, when this information is disclosed within each group but not across groups; and (iii) full disclosure, when the information about entrants is disclosed across groups. For the benchmark case of contests between individuals, we show that information disclosure always leads to a reduction in aggregate investment. However, this is no longer true in group contests: Within-group disclosure unambiguously raises aggregate investment, while the effect of full disclosure is ambiguous.
    Keywords: group contest, best shot, endogenous entry, information disclosure
    JEL: C72 D82
    Date: 2020–02
  8. By: Papatya Duman (Paderborn University); Walter Trockel (Bielefeld University)
    Abstract: We extend the analysis of van Damme (1987, Section 7.5) of the famous smoothing demand in Nash (1953) as an argument for the singular stability of the symmetric Nash bargaining solution among all Pareto ecient equilibria of the Nash demand game. Van Damme's analysis provides a clean mathematical framework where he substantiates Nash's conjecture by two fundamental theorems in which he proves that the Nash solution is among all Nash equilibria of the Nash demand game the only one that is H{essential. We show by generalizing this analysis that for any asymmetric Nash bargaining solution a similar stability property can be established that we call H {essentiality. A special case of our result for a = 1=2 is H1/2-essentiality that coincides with van Damme's H{essentiality. Our analysis deprives the symmetric Nash solution equilibrium of Nash's demand game of its exposed position and fortifies our conviction that, in contrast to the predominant view in the related literature, the only structural di erence between the asymmetric Nash solutions and the symmetric one is that the latter one is symmetric.
    Keywords: 2-person bargaining games, {symmetric Nash solution, Nash demand game, Nash smoothing of games, H {essential Nash equilibrium
    JEL: B16 C71 C72 C78 D5
    Date: 2020–02
  9. By: Geoffroy de Clippel; Jack Fanning; Kareen Rozen
    Abstract: We study bargaining over contingent contracts in problems where private information becomes public or verifiable when the time comes to implement the agreement. We suggest a simple, two-stage game that incorporates important aspects of bargaining. We characterize equilibria in which parties always reach agreement, and study their limits as bargaining frictions vanish. We show that under mild regularity conditions, all interim-efficient limits belong to Myerson (1984)’s axiomatic solution. Furthermore, all limits must be interim-efficient if equilibria are required to be sequential. Results extend to other bargaining protocols.
    Date: 2020

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