nep-des New Economics Papers
on Economic Design
Issue of 2020‒03‒09
sixteen papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Optimal Auctions with Signaling Bidders By Oliver Bos; Martin Pollrich
  2. Simple, Credible, and Approximately-Optimal Auctions By Constantinos Daskalakis; Maxwell Fishelson; Brendan Lucier; Vasilis Syrgkanis; Santhoshini Velusamy
  3. Dynamic Reserve Prices for Repeated Auctions: Learning from Bids By Yash Kanoria; Hamid Nazerzadeh
  4. Convex Combinatorial Auction of Pipeline Network Capacities By D\'avid Csercsik
  5. All-Pay Auctions as Models for Trade Wars and Military Annexation By Benjamin Kang; James Unwin
  6. Lattice Structure For Random Matching Markets By Noelia Juarez; Pablo Neme; Jorge Oviedo
  7. From Matching with Diversity Constraints to Matching with Regional Quotas By Haris Aziz; Serge Gaspers; Zhaohong Sun; Toby Walsh
  8. Strategic Issues in College Admissions with Early Decision By Mumcu, Ayse; Saglam, Ismail
  9. Correlation Neglect in Student-to-School Matching By Alex Rees-Jones; Ran Shorrer; Chloe J. Tergiman
  10. An optimal mechanism charging for priority in a queue By Moshe Haviv; Eyal Winter
  11. Neutral Public Good Mechanisms By Jin Yeub Kim
  12. Sweet Lemons: Mitigating Collusion in Organizations By Colin von Negenborn; Martin Pollrich
  13. Signaling Covertly Acquired Information By Mehmet Ekmekci; Nenad Kos
  14. Fairness and Efficiency in Cake-Cutting with Single-Peaked Preferences By Bhavook Bhardwaj; Rajnish Kumar; Josue Ortega
  15. The Priority Value for Cooperative Games with a Priority Structure By Sylvain Béal; Sylvain Ferrières; Philippe Solal
  16. The structure of two-valued strategy-proof social choice functions with indifference By Achille Basile; Surekha Rao; K. P. S. Bhaskara Rao

  1. By: Oliver Bos; Martin Pollrich
    Abstract: We study optimal auctions in a symmetric private values setting, where bidders’ care about winning the object and a receiver’s inference about their type. We reestablish revenue equivalence when bidders’ signaling concerns are linear, and the auction makes participation observable via an entry fee. With convex signaling concerns, optimal auctions are fully transparent: every standard auction, which reveals all bids yields maximal revenue. With concave signaling concerns there is no general revenue ranking. We highlight a trade-off between maximizing revenue derived from signaling, and extracting information from bidders. Our methodology combines tools from mechanism design with tools from Bayesian persuasion.
    Keywords: optimal auctions, revenue equivalence, Bayesian persuasion, information design
    JEL: D44 D82
    Date: 2020–02
  2. By: Constantinos Daskalakis; Maxwell Fishelson; Brendan Lucier; Vasilis Syrgkanis; Santhoshini Velusamy
    Abstract: We identify the first static credible mechanism for multi-item additive auctions that achieves a constant factor of the optimal revenue. This is one instance of a more general framework for designing two-part tariff auctions, adapting the duality framework of Cai et al [CDW16]. Given a (not necessarily incentive compatible) auction format $A$ satisfying certain technical conditions, our framework augments the auction with a personalized entry fee for each bidder, which must be paid before the auction can be accessed. These entry fees depend only on the prior distribution of bidder types, and in particular are independent of realized bids. Our framework can be used with many common auction formats, such as simultaneous first-price, simultaneous second-price, and simultaneous all-pay auctions. If all-pay auctions are used, we prove that the resulting mechanism is credible in the sense that the auctioneer cannot benefit by deviating from the stated mechanism after observing agent bids. If second-price auctions are used, we obtain a truthful $O(1)$-approximate mechanism with fixed entry fees that are amenable to tuning via online learning techniques. Our results for first price and all-pay are the first revenue guarantees of non-truthful mechanisms in multi-dimensional environments; an open question in the literature [RST17].
    Date: 2020–02
  3. By: Yash Kanoria; Hamid Nazerzadeh
    Abstract: A large fraction of online advertisement is sold via repeated second price auctions. In these auctions, the reserve price is the main tool for the auctioneer to boost revenues. In this work, we investigate the following question: Can changing the reserve prices based on the previous bids improve the revenue of the auction, taking into account the long-term incentives and strategic behavior of the bidders? We show that if the distribution of the valuations is known and satisfies the standard regularity assumptions, then the optimal mechanism has a constant reserve. However, when there is uncertainty in the distribution of the valuations, previous bids can be used to learn the distribution of the valuations and to update the reserve price. We present a simple, approximately incentive-compatible, and asymptotically optimal dynamic reserve mechanism that can significantly improve the revenue over the best static reserve. The paper is from July 2014 (our submission to WINE 2014), posted later here on the arxiv to complement the 1-page abstract in the WINE 2014 proceedings.
    Date: 2020–02
  4. By: D\'avid Csercsik
    Abstract: In this paper we propose a mechanism for the allocation of pipeline capacities, assuming that the participants bidding for capacities do have subjective evaluation of various network routes. The proposed mechanism is based on the concept of bidding for route-quantity pairs. Each participant defines a limited number of routes and places multiple bids, corresponding to various quantities, on each of these routes. The proposed mechanism assigns a convex combination of the submitted bids to each participant, thus its called convex combinatorial auction. The capacity payments in the proposed model are determined according to the Vickrey-Clarke-Groves principle. We compare the efficiency of the proposed algorithm with a simplified model of the method currently used for pipeline capacity allocation in the EU (simultaneous ascending clock auction of pipeline capacities) via simulation, according to various measures, such as resulting utility of players, utilization of network capacities, total income of the auctioneer and fairness.
    Date: 2020–02
  5. By: Benjamin Kang; James Unwin
    Abstract: We explore an application of all-pay auctions to model trade wars and territorial annexation. Specifically, in the model we consider the expected resource, production, and aggressive (military/tariff) power are public information, but actual resource levels are private knowledge. We consider the resource transfer at the end of such a competition which deprives the weaker country of some fraction of its original resources. In particular, we derive the quasi-equilibria strategies for two country conflicts under different scenarios. This work is relevant for the ongoing US-China trade war, and the recent Russian capture of Crimea, as well as historical and future conflicts.
    Date: 2020–02
  6. By: Noelia Juarez; Pablo Neme; Jorge Oviedo
    Abstract: For any matching market where the set of stable matchings has a lattice structure, if the binary operations (\textit{l.u.b.} and \textit{g.l.b.}) are computed via a "pointing function", then the set of random matchings (lotteries of stable matchings) has a lattice structure.
    Date: 2020–02
  7. By: Haris Aziz; Serge Gaspers; Zhaohong Sun; Toby Walsh
    Abstract: In the past few years, several new matching models have been proposed and studied that take into account complex distributional constraints. Relevant lines of work include (1) school choice with diversity constraints where students have (possibly overlapping) types and (2) hospital-doctor matching where various regional quotas are imposed. In this paper, we present a polynomial-time reduction to transform an instance of (1) to an instance of (2) and we show how the feasibility and stability of corresponding matchings are preserved under the reduction. Our reduction provides a formal connection between two important strands of work on matching with distributional constraints. We then apply the reduction in two ways. Firstly, we show that it is NP-complete to check whether a feasible and stable outcome for (1) exists. Due to our reduction, these NP-completeness results carry over to setting (2). In view of this, we help unify some of the results that have been presented in the literature. Secondly, if we have positive results for (2), then we have corresponding results for (1). One key conclusion of our results is that further developments on axiomatic and algorithmic aspects of hospital-doctor matching with regional quotas will result in corresponding results for school choice with diversity constraints.
    Date: 2020–02
  8. By: Mumcu, Ayse; Saglam, Ismail
    Abstract: In this paper, we consider college admissions with early decision using a many-to-one matching model with two periods. As in reality, each student commits to only one college in the early decision period and agrees to enroll if admitted. Under responsive and consistent preferences for both colleges and students, we show that there exists no stable matching system, consisting of early and regular decision matching rules, which is nonmanipulable via early decision quotas by colleges or early decision preferences by colleges or students.
    Keywords: College admissions; early decision; manipulability; many-to-one matching.
    JEL: C71 C78
    Date: 2020–02–11
  9. By: Alex Rees-Jones; Ran Shorrer; Chloe J. Tergiman
    Abstract: A growing body of evidence suggests that decision-makers fail to account for correlation in signals that they receive. We study the relevance of this mistake in students' interactions with school-choice matching mechanisms. In a lab experiment presenting simple and incentivized school-choice scenarios, we find that subjects tend to follow optimal application strategies when schools' admissions decisions are determined independently. However, when schools rely on a common priority—inducing correlation in admissions—decision making suffers: application strategies become substantially more aggressive and fail to include attractive “safety” options. We document that this pattern holds even within-subject, with significant fractions of participants applying to different programs when correlation is varied but all payoff-relevant elements are held constant. We provide a battery of tests suggesting that this phenomenon is at least partially driven by correlation neglect, and we discuss implications that arise for the design and deployment of student-to-school matching mechanisms.
    JEL: C91 D01 D03 M21
    Date: 2020–02
  10. By: Moshe Haviv; Eyal Winter
    Abstract: We derive a revenue-maximizing scheme that charges customers who are homogeneous with respect to their waiting cost parameter for a random fee in order to become premium customers. This scheme incentivizes all customers to purchase priority, each at his/her drawn price. We also design a revenue-maximizing scheme for the case where customers are heterogeneous with respect to their waiting cost parameter. Now lower cost parameter customers are encouraged to join the premium class at a low price: Given that, those with high cost parameter would be willing to pay even more for this privilege.
    Date: 2020–02
  11. By: Jin Yeub Kim (Yonsei Univ)
    Abstract: In this paper, I characterize neutral mechanisms for the provision of a public good. I show that neutral mechanisms form a reasonable set of predictions for mechanism selection in public goods problems: Such predictions are sufficiently sharp, robust to a perturbation of the information structure at the time of selection, and invulnerable to the possibility of information leakage during the selection process. I also illustrate that neutral mechanisms have the desirable properties of both efficiency and equity, and can be conveniently computed by the tractable set of conditions. These results are shown to have interesting implications for the analysis of ex ante and interim incentive efficient mechanisms for public goods problems.
    Keywords: Public goods; Mechanism design; Neutral optimum; Interim efficiency; Ex ante efficiency; Almost ex ante stage
    JEL: C71 C78 D74 D82 H41
    Date: 2019–12
  12. By: Colin von Negenborn; Martin Pollrich
    Abstract: We show that mechanisms which generate endogenous asymmetric information fully mitigate collusion. In our model, an agent has private information and a supervisor observes a signal that is correlated with the agent’s type. Agent and supervisor can form collusive side agreements. We study the implementation of social choice functions that condition on the agent’s type and the supervisory signal. Our main result establishes that any social choice function that is implementable if the signal is public can also be implemented when the signal is private information and collusion is possible. Despite collusion, the signal is obtained for free, i.e., the supervisor does not receive an information rent. Our mechanism breaks collusion via endogenous creation of asymmetric information between agent and supervisor. The associated bargaining frictions prevent formation of collusive agreements, similar to the trade failure in the classical lemons market.
    Keywords: Mechanism Design, Collusion, Correlation, Asymmetric Information, Random Incentives
    JEL: D82 D83 L51
    Date: 2020–02
  13. By: Mehmet Ekmekci; Nenad Kos
    Abstract: We study the interplay between information acquisition and signaling. A sender decides whether to learn his type at a cost prior to taking a signaling action. A receiver responds after observing the signaling action. In the benchmark model where the sender’s information acquisition decision is observed the sender does not acquire information and, therefore, does not signal. A rationale for signaling is provided by the model in which information acquisition is covert. There, in the unique equilibrium outcome surviving a form of never weak best response refinement the sender does acquire information and signals when the information is cheap.Keywords: Signaling, information acquisition, refinements. JEL Classification Numbers: D82, G34.
    Date: 2020
  14. By: Bhavook Bhardwaj; Rajnish Kumar; Josue Ortega
    Abstract: We study the cake-cutting problem when agents have single-peaked preferences over the cake. We show that a recently proposed mechanism by Wang-Wu (2019) to obtain envy-free allocations can yield large welfare losses. Using a simplifying assumption, we characterize all Pareto optimal allocations, which have a simple structure: are peak-preserving and non-wasteful. Finally, we provide simple alternative mechanisms that Pareto dominate that of Wang-Wu, and which achieve envy-freeness or Pareto optimality.
    Date: 2020–02
  15. By: Sylvain Béal (CRESE, Université de Franche-comté); Sylvain Ferrières (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne); Philippe Solal (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne)
    Abstract: We study cooperative games with a priority structure modeled by a poset on the agent set. We introduce the Priority value, which splits the Harsanyi dividend of each coalition among the set of its priority agents, i.e. the members of the coalition over which no other coalition member has priority. This allocation shares many desirable properties with the classical Shapley value: it is efficient, additive and satisfies the null agent axiom, which assigns a null payoff to any agent with null contributions to coalitions. We provide two axiomatic characterizations of the Priority value which invoke both classical axioms and new axioms describing various effects that the priority structure can impose on the payoff allocation. Applications to queueing and bankruptcy problems are discussed.
    Keywords: Priority structure, Shapley value, Priority value, necessary agent, Harsanyi solution, queueing problems, bankruptcy problems.
    Date: 2020–03
  16. By: Achille Basile (University Federico II of Naples); Surekha Rao (Indiana University Northwest); K. P. S. Bhaskara Rao (Indiana University Northwest)
    Abstract: We give a structure theorem for all coalitionally strategy-proof social choice functions whose range is a subset of cardinality two of a given larger set of alternatives. We provide this in the case where the voters/agents are allowed to express indifference and the domain consists of profiles of preferences over a society of arbitrary cardinality. The theorem, that takes the form of a representation formula, can be used to construct all functions under consideration.
    Date: 2020–02

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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