nep-des New Economics Papers
on Economic Design
Issue of 2020‒04‒20
ten papers chosen by
Alex Teytelboym
University of Oxford

  1. Strategic Bidding in Product-Mix, Sequential, and Simultaneous Auctions By Simon Finster
  2. Auctions vs. negotiations in vertically related markets By Emanuele Bacchiega; Olivier Bonroy; Emmanuel Petrakis
  3. Reselling Information By S. Nageeb Ali; Ayal Chen-Zion; Erik Lillethun
  4. Computational Complexity of the Hylland-Zeckhauser Scheme for One-Sided Matching Markets By Vijay V. Vazirani; Mihalis Yannakakis
  5. Credible, Truthful, and Bounded-Round Mechanisms via Cryptographic Commitments By Matheus V. X. Ferreira; S. Matthew Weinberg
  6. Applications of the Coase Theorem By Tatyana Deryugina; Frances C. Moore; Richard S.J. Tol
  7. A Simple Model of Competitive Testing By Ginzburg, Boris
  8. Closing Gaps in Asymptotic Fair Division By Pasin Manurangsi; Warut Suksompong
  9. On the Structure of Stable Tournament Solutions By Felix Brandt; Markus Brill; Hans Georg Seedig; Warut Suksompong
  10. The Dynamic Efficiency in Resource Allocation: Evidence from Vehicle License Lotteries in Beijing By Youming Liu; Shanjun Li; Caixia Shen

  1. By: Simon Finster (Nuffield College and Department of Economics, University of Oxford)
    Abstract: We study equilibria in Product-Mix, sequential, and simultaneous auctions, which are used to sell differentiated, indivisible goods. A flexible bidder with unit demand, interested in buying any of the goods, competes against several inflexible bidders, each interested in only one specific good. For first-price and second-price payments, we obtain theoretical results on equilibrium bidding, and compare efficiency, revenue, and bidder surplus numerically. Differences in outcomes between Product-Mix and sequential auctions are small for a range of value distributions. The simultaneous auction performs worst in all dimensions, and differences in performance vary substantially with the degree of competition the flexible bidder faces.
    Keywords: multi-unit auctions, asymmetric auctions, market power, menu auctions, sequential auctions, simultaneous auctions
    JEL: C72 D44 D47 D61 D82
    Date: 2020–03–24
  2. By: Emanuele Bacchiega; Olivier Bonroy; Emmanuel Petrakis
    Abstract: In a two-tier industry with bottleneck upstream and two downstream firms producing vertically differentiated goods, we identify conditions under which the upstream supplier chooses exclusive or non-exclusive negotiations, or an English auction to sell its essential input. Auctioning off a two-part tariff contract is optimal for the supplier when its bar- gaining power is low and the final goods are not too differentiated. Otherwise, the supplier enters into exclusive or non-exclusive negotiations with the downstream firm(s). Finally, in contrast to previous findings, an auction is never welfare superior to negotiations.
    JEL: D43 L13 L14
    Date: 2020–04
  3. By: S. Nageeb Ali; Ayal Chen-Zion; Erik Lillethun
    Abstract: Information is replicable in that it can be simultaneously consumed and sold to others. We study how resale affects a decentralized market for information. We show that even if the initial seller is an informational monopolist, she captures non-trivial rents from at most a single buyer: her payoffs converge to 0 as soon as a single buyer has bought information. By contrast, if the seller can also sell valueless tokens, there exists a ``prepay equilibrium'' where payment is extracted from all buyers before the information good is released. By exploiting resale possibilities, this prepay equilibrium gives the seller as high a payoff as she would achieve if resale were prohibited.
    Date: 2020–04
  4. By: Vijay V. Vazirani; Mihalis Yannakakis
    Abstract: In 1979, Hylland and Zeckhauser \cite{hylland} gave a simple and general scheme for implementing a one-sided matching market using the power of a pricing mechanism. Their method has nice properties -- it is incentive compatible in the large and produces an allocation that is Pareto optimal -- and hence it provides an attractive, off-the-shelf method for running an application involving such a market. With matching markets becoming ever more prevalant and impactful, it is imperative to finally settle the computational complexity of this scheme. We present the following partial resolution: 1. A combinatorial, strongly polynomial time algorithm for the special case of $0/1$ utilities. 2. An example that has only irrational equilibria, hence proving that this problem is not in PPAD. Furthermore, its equilibria are disconnected, hence showing that the problem does not admit a convex programming formulation. 3. A proof of membership of the problem in the class FIXP. We leave open the (difficult) question of determining if the problem is FIXP-hard. Settling the status of the special case when utilities are in the set $\{0, {\frac 1 2}, 1 \}$ appears to be even more difficult.
    Date: 2020–04
  5. By: Matheus V. X. Ferreira; S. Matthew Weinberg
    Abstract: We consider the sale of a single item to multiple buyers by a revenue-maximizing seller. Recent work of Akbarpour and Li formalizes credibility as an auction desideratum, and prove that the only optimal, credible, strategyproof auction is the ascending price auction (Akbarpour and Li, 2019). In contrast, when buyers' valuations are MHR, we show that the mild additional assumption of a cryptographically secure commitment scheme suffices for a simple two-round auction which is optimal, credible, and strategyproof. We extend our analysis to the case when buyer valuations are $\alpha$-strongly regular for any $\alpha > 0$, up to arbitrary $\varepsilon$ in credibility. Interestingly, we also prove that this construction cannot be extended to regular distributions, nor can the $\varepsilon$ be removed with multiple bidders.
    Date: 2020–04
  6. By: Tatyana Deryugina (Center for Business and Public Policy, College of Business, University of Illinois at Urbana-Champaign); Frances C. Moore (Environmental Science and Policy, University of California Davis); Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom)
    Abstract: The Coase Theorem has a central place in the theory of environmental economics and regulation. But its applicability for solving real-world externality problems remains debated. In this paper, we first place this seminal contribution in its historical context. We then survey the experimental literature that has tested the importance of the many, often tacit assumptions in the Coase Theorem in the laboratory. We discuss a selection of applications of the Coase Theorem to actual environmental problems, distinguishing between situations in which the polluter or the pollutee pays. While limited in scope, Coasian bargaining over externalities offers a pragmatic solution to problems that are difficult to solve in any other way.
    Keywords: Coase Theorem, externalities, property rights, bargaining
    JEL: C78 H23 Q50
    Date: 2020–04
  7. By: Ginzburg, Boris
    Abstract: A number of candidates are competing for a prize. Each candidate is privately informed about his type. The decision-maker who allocates the prize wants to give it to the candidate with the highest type. Each candidate can take a test that reveals his type at a cost. I show that an increase in competition increases information revelation when the cost is high, and reduces it when the cost is low. Nevertheless, the decision-maker always benefits from greater competition. Candidates can be better off if the cost is higher. Mandatory disclosure is Pareto-dominated by voluntary disclosure unless competition is low. Finally, when the test is noisier, candidates are more likely to take it.
    Keywords: information disclosure, testing, competition
    JEL: D82 D83
    Date: 2019–01–03
  8. By: Pasin Manurangsi; Warut Suksompong
    Abstract: We study a resource allocation setting where $m$ discrete items are to be divided among $n$ agents with additive utilities, and the agents' utilities for individual items are drawn at random from a probability distribution. Since common fairness notions like envy-freeness and proportionality cannot always be satisfied in this setting, an important question is when allocations satisfying these notions exist. In this paper, we close several gaps in the line of work on asymptotic fair division. First, we prove that the classical round-robin algorithm is likely to produce an envy-free allocation provided that $m=\Omega(n\log n/\log\log n)$, matching the lower bound from prior work. We then show that a proportional allocation exists with high probability as long as $m\geq n$, while an allocation satisfying envy-freeness up to any item (EFX) is likely to be present for any relation between $m$ and $n$. Finally, we consider a related setting where each agent is assigned exactly one item and the remaining items are left unassigned, and show that the transition from non-existence to existence with respect to envy-free assignments occurs at $m=en$.
    Date: 2020–04
  9. By: Felix Brandt; Markus Brill; Hans Georg Seedig; Warut Suksompong
    Abstract: A fundamental property of choice functions is stability, which, loosely speaking, prescribes that choice sets are invariant under adding and removing unchosen alternatives. We provide several structural insights that improve our understanding of stable choice functions. In particular, (i) we show that every stable choice function is generated by a unique simple choice function, which never excludes more than one alternative, (ii) we completely characterize which simple choice functions give rise to stable choice functions, and (iii) we prove a strong relationship between stability and a new property of tournament solutions called local reversal symmetry. Based on these findings, we provide the first concrete tournament---consisting of 24 alternatives---in which the tournament equilibrium set fails to be stable. Furthermore, we prove that there is no more discriminating stable tournament solution than the bipartisan set and that the bipartisan set is the unique most discriminating tournament solution which satisfies standard properties proposed in the literature.
    Date: 2020–04
  10. By: Youming Liu; Shanjun Li; Caixia Shen
    Abstract: The efficiency of resource allocation is often analyzed in static frameworks with a focus on the cross-sectional heterogeneity in the willingness to pay among users. When the resource is durable in nature, the temporal heterogeneity could be important in assessing the efficiency properties of different allocation mechanisms. This paper uses a dynamic model to empirically quantify the efficiency outcome of using lotteries to allocate scarce resources among forward-looking consumers. In the context of the lottery policy for vehicle licenses in Beijing, our analysis shows that lotteries significantly affect intertemporal decisions in that households participate in lotteries at least four years earlier on average than they would be in a counterfactual environment of no quantity constraint. The welfare loss due to temporal heterogeneity and resulting changes in participation decisions accounts for over half of the total welfare loss from the lottery policy. The analysis highlights the importance of taking dynamic efficiency into account in designing resource allocation mechanisms.
    JEL: L51 L62 R21
    Date: 2020–03

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