nep-des New Economics Papers
on Economic Design
Issue of 2020‒05‒25
eight papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Fractional Top Trading Cycle By Jingsheng Yu; Jun Zhang
  2. Paying It Backward and Forward: Expanding Access to Convalescent Plasma Therapy Through Market Design By Scott Duke Kominers; Parag A. Pathak; Tayfun Sönmez; M. Utku Ünver
  3. Information Design for Congested Social Services: Optimal Need-Based Persuasion By Jerry Anunrojwong; Krishnamurthy Iyer; Vahideh Manshadi
  4. Exploring Weak Strategy-Proofness in Voting Theory By Anne Carlstein
  5. Infinite-Duration All-Pay Bidding Games By Guy Avni; Isma\"el Jecker; {\DJ}or{\dj}e \v{Z}ikeli\'c
  6. On the Optimality of Price-posting in Rental Markets By Juan Beccuti
  7. Stabilizing Congestion in Decentralized Record-Keepers By Assimakis Kattis; Fabian Trottner
  8. Mechanisms in a digitalized world By Gabrielle Demange

  1. By: Jingsheng Yu; Jun Zhang
    Abstract: Efficiency and fairness are two desiderata in market design. Fairness requires randomization in many environments. As one of the few successful matching mechanisms, Top Trading Cycle is best known for being efficient to solve deterministic allocation problems, but it is inadequate to incorporate randomization efficiently and fairly. We propose a class of Fractional Top Trading Cycle mechanisms to solve allocation problems in which agents have fractional endowments or are ranked by coarse priorities. Dropping the graph-based definition of Top Trading Cycle, we use parameterized linear equations to describe how agents trade endowments or priorities. Our mechanisms are ex-ante efficient. They satisfy various fairness axioms when parameter values in the equations are properly chosen. We apply our mechanisms to a couple of market design problems and obtain efficient and fair assignments in all of them.
    Date: 2020–05
  2. By: Scott Duke Kominers (Harvard University); Parag A. Pathak (MIT); Tayfun Sönmez (Boston College); M. Utku Ünver (Boston College)
    Abstract: COVID-19 convalescent plasma (CCP) therapy is currently a leading treatment for COVID-19. At present, there is a shortage of CCP relative to demand. We develop and analyze a model of centralized CCP allocation that incorporates both donation and distribution. In order to increase CCP supply, we introduce a mechanism that utilizes two incentive schemes, respectively based on principles of “paying it backward” and “paying it forward.” Under the first scheme, CCP donors obtain treatment vouchers that can be transferred to patients of their choosing. Under the latter scheme, patients obtain priority for CCP therapy in exchange for a future pledge to donate CCP if possible. We show that in steady-state, both principles generally increase overall treatment rates for all patients—not just those who are voucher-prioritized or pledged to donate. Our results also hold under certain conditions if a fraction of CCP is reserved for patients who participate in clinical trials. Finally, we examine the implications of pooling blood types on the efficiency and equity of CCP distribution.
    Keywords: COVID-19, convalescent plasma, vouchers
    JEL: D47 C78
    Date: 2020–05–04
  3. By: Jerry Anunrojwong; Krishnamurthy Iyer; Vahideh Manshadi
    Abstract: We study the effectiveness of information design in reducing congestion in social services catering to users with varied levels of need. In the absence of price discrimination and centralized admission, the provider relies on sharing information about wait times to improve welfare. We consider a stylized model with heterogeneous users who differ in their private outside options: low-need users have an acceptable outside option to the social service, whereas high-need users have no viable outside option. Upon arrival, a user decides to wait for the service by joining an unobservable first-come-first-serve queue, or leave and seek her outside option. To reduce congestion and improve social outcomes, the service provider seeks to persuade more low-need users to avail their outside option, and thus better serve high-need users. We characterize the Pareto-optimal signaling mechanisms and compare their welfare outcomes against several benchmarks. We show that if either type is the overwhelming majority of the population, information design does not provide improvement over sharing full information or no information. On the other hand, when the population is a mixture of the two types, information design not only Pareto dominates full-information and no-information mechanisms, in some regimes it also achieves the same welfare as the "first-best", i.e., the Pareto-optimal centralized admission policy with knowledge of users' types.
    Date: 2020–05
  4. By: Anne Carlstein (Massachusetts Institute of Technology)
    Abstract: Voting is the aggregation of individual preferences in order to select a winning alternative. Selection of a winner is accomplished via a voting rule, e.g., rank-order voting, majority rule, plurality rule, approval voting. Which voting rule should be used? In social choice theory, desirable properties of voting rules are expressed as axioms to be satisfied. This thesis focuses on axioms concerning strategic manipulation by voters. Sometimes, voters may intentionally misstate their true preferences in order to alter the outcome for their own advantage. For example, in plurality rule, if a voter knows that their top-choice candidate will lose, then they might instead vote for their second-choice candidate just to avoid an even less desirable result. When no coalition of voters can strategically manipulate, then the voting rule is said to satisfy the axiom of Strategy-Proofness. A less restrictive axiom is Weak Strategy-Proofness (as defined by Dasgupta and Maskin (2019)), which allows for strategic manipulation by all but the smallest coalitions. Under certain intuitive conditions, Dasgupta and Maskin (2019) proved that the only voting rules satisfying Strategy-Proofness are rank-order voting and majority rule. In my thesis, I generalize their result, by proving that rank-order voting and majority rule are surprisingly still the only voting rules satisfying Weak Strategy-Proofness.
    Date: 2020–05
  5. By: Guy Avni; Isma\"el Jecker; {\DJ}or{\dj}e \v{Z}ikeli\'c
    Abstract: A graph game is a two-player zero-sum game in which the players move a token throughout a graph to produce an infinite path, which determines the winner or payoff of the game. In "bidding games", in each turn, we hold an 'auction' (bidding) to determine which player moves the token. The players simultaneously submit bids and the higher bidder moves the token. Several different payment schemes have been considered. In "first-price" bidding, only the higher bidder pays his bid, while in "all-pay" bidding, both players pay their bids. Bidding games were largely studied with variants of first-price bidding. In this work, we study, for the first time, infinite-duration all-pay bidding games, and show that they exhibit the elegant mathematical properties of their first-price counterparts. This is in stark contrast with reachability games, which are known to be much more complicated under all-pay bidding than first-price bidding. Another orthogonal distinction between the bidding rules is in the recipient of the payments: in "Richman" bidding, the bids are paid to the other player, and in "poorman" bidding, the bids are paid to the 'bank'. We focus on strongly-connected games with "mean-payoff" and "parity" objectives. We completely solve all-pay Richman games: a simple argument shows that deterministic strategies cannot guarantee anything in this model, and it is technically much more challenging to find optimal probabilistic strategies that achieve the same expected guarantees in a game as can be obtained with deterministic strategies under first-price bidding. Under poorman all-pay bidding, in contrast to Richman bidding, deterministic strategies are useful and guarantee a payoff that is only slightly lower than the optimal payoff under first-price poorman bidding. Our proofs are constructive and based on new and significantly simpler constructions for first-price bidding.
    Date: 2020–05
  6. By: Juan Beccuti
    Abstract: This paper considers a multi-period setting where a monopolist, with short-term commitment, rents one unit of a durable good to a single consumer in every period. The consumer's valuation constitutes his private information and remains constant over time. By using a mechanism design approach, the paper shows that the optimal renting strategy is to offer a simple price in every period. Although sophisticated mechanisms can make separation feasible when price-posting cannot achieve it, this happens precisely when separation is dominated by pooling. Moreover, the monopolist's choice of whether to discriminate or not depends on a simple and apparently myopic rule, reminiscent of its static equivalent.
    Keywords: Durable good, renting, dynamic adverse selection, mechanism design, short-term commitment, price-posting
    JEL: D82 D86 D42
    Date: 2020–03
  7. By: Assimakis Kattis; Fabian Trottner
    Abstract: We argue that recent developments in proof-of-work consensus mechanisms can be used in accordance with advancements in formal verification techniques to build a distributed payment protocol that addresses important economic drawbacks from cost efficiency, scalability and adaptablity common to current decentralized record-keeping systems. We enable the protocol to autonomously adjust system throughput according to a feasibly computable statistic - system difficulty. We then provide a formal economic analysis of a decentralized market place for record-keeping that is consistent with our protocol design and show that, when block rewards are zero, the system admits stable, self-regulating levels of transaction fees and wait-times across varying levels of demand. We also provide an analysis of the various technological requirements needed to instantiate such a system in a commercially viable setting, and identify relevant research directions.
    Date: 2020–05
  8. By: Gabrielle Demange (PSE - Paris-Jourdan Sciences Economiques - 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, PSE - Paris School of Economics)
    Abstract: Due to computing and communication facilities, formal procedures, often referred to as 'al-gorithms', are now extensively used in public, economic and social areas. These procedures, currently at the forefront of criticisms, share some features with mechanisms as defined by economists, following Hurwicz. My aim is to investigate these relationships and to discuss the risks due to the power of algorithms.
    Keywords: Admission post-bac,mechanisms,algorithms,algorithmic pricing and trading,social choice rule,data,Admission post-bac APB
    Date: 2019

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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