nep-des New Economics Papers
on Economic Design
Issue of 2020‒04‒27
six papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Triage Protocol Design for Ventilator Rationing in a Pandemic: Integrating Multiple Ethical Values through Reserves By Parag A. Pathak; Tayfun Sönmez; M. Utku Unver; M. Bumin Yenmez
  2. Complexity of finding Pareto-efficient allocations of highest welfare By Peter Biro; Jens Gudmundsson
  3. A small volume reduction that melts down the market: Auctions with endogenous rationing By Ehrhart, Karl-Martin; Hanke, Ann-Katrin; Ott, Marion
  4. Market for Information and Selling Mechanisms By David Bounies; Antoine Dubus; Patrick Waelbroeck
  5. The stable marriage problem with ties and restricted edges By Agnes Cseh; Klaus Heeger
  6. Trading Networks with Frictions By Tamas Fleiner; Ravi Jagadeesan; Zsuzsanna Janko; Alexander Teytelboym

  1. By: Parag A. Pathak; Tayfun Sönmez; M. Utku Unver; M. Bumin Yenmez
    Abstract: In the wake of the Covid-19 pandemic, the rationing of medical resources has become a critical issue. Nearly all existing triage protocols are based on a priority point system, in which an explicit formula specifies the order in which the total supply of a particular resource, such as a ventilator, is to be rationed for eligible patients. A priority point system generates the same priority ranking to ration all the units. Triage protocols in some states (e.g. Michigan) prioritize frontline health workers giving heavier weight to the ethical principle of instrumental value. Others (e.g. New York) do not, reasoning that if medical workers obtain high enough priority, there is a risk that they obtain all units and none remain for the general community. This debate is particularly pressing given substantial Covid-19 related health risks for frontline medical workers. In this paper, we analyze the consequences of rationing medical resources through a reserve system. In a reserve system, ventilators are placed into multiple categories. Priorities guiding allocation of units can reflect different ethical values between these categories. For example, a reserve category for essential personnel can emphasize the reciprocity and instrumental value, and another reserve category for general community can give higher weight to the values of utility and distributive justice. A reserve system provides additional flexibility over a priority point system because it does not dictate a single priority order for the allocation of all units. It offers a middle-ground approach that balances competing objectives. However, this flexibility requires careful attention to implementation, most notably the processing order of reserve categories, given that transparency is essential for triage protocol design. In this paper, we describe our mathematical model of a reserve system, characterize its potential outcomes, and examine distributional implications of particular reserve systems. We also discuss several practical considerations with triage protocol design.
    JEL: D45 D47 I3
    Date: 2020–04
  2. By: Peter Biro (Centre for Economic and Regional Studies and Department of Operations Research and Actuarial Sciences, Corvinus University ofBudapest, Hungary); Jens Gudmundsson (Department of Food and Resource Economics, University of Copenhagen, Denmark,)
    Abstract: We allocate objects to agents as exemplified primarily by school choice. Welfare judgments of the object-allocating agency are encoded as edge weights in the acceptability graph. The welfare of an allocation is the sum of its edge weights. We introduce the constrained welfare-maximizing solution, which is the allocation of highest welfare among the Pareto-efficient allocations. We identify conditions under which this solution is easily determined from a computational point of view. For the unrestricted case, we formulate an integer program and find this to be viable in practice as it quickly solves a real-world instance of kindergarten allocation and large-scale simulated instances. Incentives to report preferences truthfully are discussed briefly.
    Keywords: Assignment, Pareto-efficiency, Welfare-maximization, Complexity, Integerprogrammin
    JEL: C6 C78 D61
    Date: 2020–04
  3. By: Ehrhart, Karl-Martin; Hanke, Ann-Katrin; Ott, Marion
    Abstract: Auctions with endogenous rationing have been introduced to stimulate competition. Such (procurement) auctions reduce the volume put out to tender when competition is low. This paper finds a strong negative effect of endogenous rationing on participation when bid-preparation is costly, counteracting the aim to stimulate competition. For multiple auctioneer's objectives mentioned in directives, we derive optimal mechanisms, which differ due to different evaluation of the tradeoff between participation and bid-preparation costs. Thus, the auctioneer needs to decide on an objective. However, reducing bid-preparation costs improves the optimal values of multiple objective functions.
    Keywords: auction,participation,market design,optimal mechanism,renewable energy support
    JEL: D82 Q48 D47 D44
    Date: 2020
  4. By: David Bounies; Antoine Dubus; Patrick Waelbroeck
    Abstract: We investigate the strategies of a data intermediary selling consumer information to firms for price discrimination purpose. We analyze how the mechanism through which the data intermediary sells information influences how much consumer information she will collect and sell to firms, and how it impacts consumer surplus. We consider three selling mechanisms tailored to sell consumer information: take it or leave it, sequential bargaining, and auctions. We show that the more information the intermediary collects, the lower consumer surplus. Consumer information collection is minimized, and consumer surplus maximized under the take it or leave it mechanism, which is the least profitable mechanism for the intermediary. We discuss two regulatory tools { a data minimization principle and a price cap { that can be used by data protection agencies and competition authorities to limit consumer information collection, increase consumer surplus, and ensure a fair access to information to firms.
    Date: 2020–04
  5. By: Agnes Cseh (Centre for Economic and Regional Studies, Institute of Economics); Klaus Heeger (Technische Universität Berlin, Faculty IV Electrical Engineering and Computer Science, Institute of Software Engineering and Theoretical Computer Science, Chair of Algorithmics and Computational Complexity)
    Abstract: In the stable marriage problem, a set of men and a set of women are given, each of whom has a strictly ordered preference list over the acceptable agents in the opposite class. A matching is called stable if it is not blocked by any pair of agents, who mutually prefer each other to their respective partner. Ties in the preferences allow for three different definitions for a stable matching: weak, strong and super-stability. Besides this, acceptable pairs in the instance can be restricted in their ability of blocking a matching or being part of it, which again generates three categories of restrictions on acceptable pairs. Forced pairs must be in a stable matching, forbidden pairs must not appear in it, and lastly, free pairs cannot block any matching.Our computational complexity study targetsthe existence of a stable solution for each of the three stability definitions, in the presence of each of the three types of restricted pairs. We solve all cases that were still open. As a byproduct, we also derive that the maximum size weakly stable matching problem is hard even in very dense graphs, which may be of independent interest.
    Keywords: stable matchings, restricted edges,complexity
    JEL: C63 C78
    Date: 2020–01
  6. By: Tamas Fleiner (Centre for Economic and Regional Studies, Institute of Economics); Ravi Jagadeesan (Harvard Business School, and Department of Economics, Harvard University); Zsuzsanna Janko (Department of Mathematics, University of Hamburg); Alexander Teytelboym (Department of Economics, Institutefor New Economics Thinking, and St.-Catherine's College, University of Oxford)
    Abstract: We show how frictions and continuous transfers jointly affect equilibria in a model of matching in trading networks. Our model incorporates distortionary frictions such as transaction taxes, bargaining costs, and incomplete markets. When contracts are fully substitutable for firms, competitive equilibria exist and coincide with outcomes that satisfy a cooperative stability property called trail stabity. In the presence of frictions, competitive equilibria might be neither stable nor (constrained) Pareto-efficient. In the absence of frictions, on the other hand, competitive equilibria are stable and in the core, even if utility is imperfectly transferable.
    Keywords: Trading networks; frictions; competitive equilibrium; matching withcontracts; trail stabity; transaction taxes; commission
    JEL: C62 C78 D47 D51 D52 L14
    Date: 2020–02

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