nep-des New Economics Papers
on Economic Design
Issue of 2020‒09‒28
nine papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Unpaired Kidney Exchange: Overcoming Double Coincidence of Wants without Money By Mohammad Akbarpour; Julien Combe; Yinghua He; Victor Hiller; Robert Shimer; Olivier Tercieux
  2. School Choice with Transferable Students Characteristics By Carmelo Rodríguez-Álvarez; Antonio Romero Medina
  3. Mechanism Design with Narratives By Matthias Lang
  4. Identification and Estimation in a Third-Price Auction Model By Andreea Enache; Jean-Pierre Florens
  5. Voting over a Distributed Ledger: An interdisciplinary perspective By Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
  6. Payoff Implications of Incentive Contracting By Garrett, Daniel F.
  7. Implementation with foresighted agents By Korpela, Ville; Lombardi, Michele; Vartiainen, Hannu
  8. Pricing Group Membership By Siddhartha Bandyopadhyay; Antonio Cabrales
  9. Stable agreements through liability rules: a multi-choice games approach to the social cost problem By Kevin Techer

  1. By: Mohammad Akbarpour; Julien Combe; Yinghua He; Victor Hiller; Robert Shimer; Olivier Tercieux
    Abstract: For an incompatible patient-donor pair, kidney exchanges often forbid receipt-before-donation (the patient receives a kidney before the donor donates) and donation-before-receipt, causing a double-coincidence-of-wants problem. Our proposed algorithm, the Unpaired kidney exchange algorithm, uses “memory” as a medium of exchange to eliminate these timing constraints. In a dynamic matching model, we prove that Unpaired delivers a waiting time of patients close to optimal and substantially shorter than currently utilized state-of-the-art algorithms. Using a rich administrative dataset from France, we show that Unpaired achieves a match rate of 57 percent and an average waiting time of 440 days. The (infeasible) optimal algorithm is only slightly better (58 percent and 425 days); state-of-the-art algorithms deliver less than 34 percent and more than 695 days. We draw similar conclusions from the simulations of two large U.S. platforms. Lastly, we propose a range of solutions that can address the potential practical concerns of Unpaired.
    JEL: C78 D47 E49
    Date: 2020–09
  2. By: Carmelo Rodríguez-Álvarez (Instituto Complutense de Análisis Económico. Universidad Complutense de Madrid); Antonio Romero Medina (Department of Economics. Universidad Carlos III de Madrid)
    Abstract: We consider a school choice problem where schools' priorities depend on transferable students' characteristics. A school choice algorithm selects for each profile of students' preferences over schools an assignment of students to schools and a final allocation of characteristics (an extended matching). We define the Student Exchange with Transferable Characteristics (SETC) class of algorithms. Each SETC always selects a constrained efficient extended matching. That is an extended matching that i) is stable according to the priorities generated by the final allocation of characteristics and ii) is not Pareto dominated by another stable extended matching. Every constrained efficient extended matching that Pareto improves upon a stable extended matching can be obtained via an algorithm in the SETC class. When students' characteristics are fully transferable, a specific algorithm in the SETC family is equivalent to the application of the Top Trade Cycle Algorithm starting from the Student Optimal Stable Matching.
    Keywords: School Choice; Transferable Characteristics; Priorities; Constrained Efficiency.
    JEL: C78 D61 D78 I20
    Date: 2020–07
  3. By: Matthias Lang
    Abstract: Individuals use narratives as rationales or justifications to make their claims more convincing. I provide a general framework for partial verifiability based on narratives. Narratives give many reasons and arguments. The receiver derives the message’s meaning by aggregating these reasons; her private information tells her whether some potential reasons support the sender’s claims. Therefore, the receiver detects misreports with positive probability. Narratives flexibly allow for different degrees of partial verifiability and allow using the revelation principle. Considering mechanism design as an example, I prove that narratives are so powerful to implement efficient trade in the canonical bilateral-trade setting.
    Keywords: narrative, communication, partial verifiability, mechanism design, bilateral trade
    JEL: D81 D82 D86
    Date: 2020
  4. By: Andreea Enache (SSE - Stockholm School of Economics); Jean-Pierre Florens (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: The first novelty of this paper is that we show global identification of the private values distribution in a sealed-bid third-price auction model using a fully nonparametric methodology. The second novelty of the paper comes from the study of the identification and estimation of the model using a quantile approach. We consider an i.i.d. private values environment with risk-averse bidders. In the first place, we consider the case where the risk-aversion parameter is known. We show that the speed of convergence in process of our nonparametric estimator produces at the root-n parametric rate and we explain the intuition behind this apparently surprising result. Next, we consider that the risk-aversion parameter is unknown and we locally identify it using exogenous variation in the number of participants. We extend our procedure to the case where we observe only the bids corresponding to the transaction prices, and we generalize the model so as to account for the presence of exogenous variables. The methodological toolbox used to analyse identification of the third-price auction model can be employed in the study of other games of incomplete information. Our results are interesting also from a policy perspective,as some authors recommend the use of the third-price auction format for certain Internet auctions. Moreover, we contribute to the econometric literature on auctions using a quantile approach.
    Keywords: structural nonparametric estimation,nonlinear inverse problems,global identification,functional convergence of estimators,third-price auction mode
    Date: 2020–06
  5. By: Dhillon, Amrita; Kotsialou, Grammateia; McBurney, Peter; Riley, Luke
    Abstract: This work discusses the potential of a blockchain based infrastructure for a decentralised online voting platform. When compared to paper based voting, online voting can vastly increase the speed that votes can be counted, expand the overall accessibility of the election system and decrease the cost of turnout. Yet despite these advantages, online voting for political office is subject to fraud at various levels due to its centralised nature. In this paper, we describe a general architecture of a centralised online voting system and detail which areas of such a system are vulnerable to electoral fraud. We then proceed to introduce the key ideas underlying blockchain technology as a decentralised mechanism that can address these problems. We discuss the advantages and weaknesses of the blockchain technology, the protocols the technology uses and what criteria a good blockchain protocol should satisfy (depending on the voting application). We argue that the decentralisation inherent in the blockchain technology could increase the public's trust in national elections, as well as eliminate voter impersonation and double voting. We conclude with a discussion regarding how economists and social scientists can collaborate with the blockchain community in a research agenda on the design of efficient blockchain protocols and new voting systems such as liquid democracy.
    Date: 2020–08–29
  6. By: Garrett, Daniel F.
    Abstract: In the context of a canonical agency model, we study the payo implications of introducing optimally-structured incentives. We do so from the perspective of an analyst who does not know the agent's preferences for responding to incentives, but does knowthat the principal knows them. We provide, in particular, tight bounds on the principal's expected benet from optimal incentive contracting across feasible values of the agent's expected rents. We thus show how economically relevant predictions can be made robustly given ignorance of a key primitive.
    Keywords: asymmetric information, mechanism design, robustness, procurement
    JEL: D82
    Date: 2020–09–07
  7. By: Korpela, Ville; Lombardi, Michele; Vartiainen, Hannu
    Abstract: Agents are farsighted when they consider the ultimate consequences of their actions. We re-examine the classical questions of implementation theory under complete information in a setting with transfers, where farsighted coalitions are considered fundamental behavioral units, and the equilibrium outcomes of their interactions are predicted via the stability notion of the largest consistent set. The designer's exercise consists of designing a rights structure that formalizes the idea of power distribution in society. The designer's challenge lies in forming a rights structure in which the equilibrium behavior of agents always coincides with the recommendation given by a social choice rule. We show that (Maskin) monotonicity fully identifies the class of implementable single-valued social choice rules. Even though, monotonicity is not necessary for implementation in general, we show that every monotonic social choice rule can be implemented. These findings imply that the class of implementable social choice rules in core equilibria is unaltered by farsighted reasoning.
    Keywords: Implementation, largest consistent set, monotonicity
    JEL: D6
    Date: 2019
  8. By: Siddhartha Bandyopadhyay; Antonio Cabrales
    Abstract: We consider a model where agents differ in their ‘types’ which determines their voluntary contribution towards a public good. We analyze what the equilibrium composition of groups are under centralized and centralized choice. We show that there exists a top-down sorting equilibrium i.e. an equilibrium where there exists a set of prices which leads to groups that can be ordered by level of types, with the first k types in the group with the highest price and so on. This exists both under decentralized and centralized choosing. We also analyze the model with endogenous group size and examine under what conditions is top-down sorting socially efficient. We illustrate when integration (i.e. mixing types so that each group's average type if the same) is socially better than top-down sorting. Finally, we show that top down sorting is efficient even when groups compete among themselves.
    Keywords: top down sorting, group formation, public good, segregation, integration
    JEL: D02 D64 D71 H41
    Date: 2020
  9. By: Kevin Techer (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint-Etienne, France)
    Abstract: We consider a class of social cost problems where one polluter interacts with an arbitrary number of potential victims. Agents are supposed to cooperate and negotiate an optimal pollution level together with monetary transfers. We examine multi-choice cooperative games associated with a social cost problem and an assignment (or mapping) of rights. We introduce a class of mappings of rights that takes into account the pollution intensity and we consider three properties on mappings of rights: core compatibility, Kaldor-Hicks core compatibility and no veto power for a victim. We demonstrate that there exist only two families of mappings of rights that satisfy core compatibility. However, no mapping of rights satisfies Kaldor-Hicks core compatibility and no veto power for a victim.
    Keywords: Externality, Liability rules, Multi-choice cooperative game, Core
    JEL: C71 D62 Q52
    Date: 2020

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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