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on Economic Design |
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Issue of 2020‒10‒26
nine papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Committee, Nobel Prize (Nobel Prize Committee) |
| Abstract: | Every day, auctions distribute astronomical values between buyers and sellers. This year’s Laureates, Paul Milgrom and Robert Wilson, have improved auction theory and invented new auction formats, benefitting sellers, buyers and taxpayers around the world |
| Keywords: | Auctions |
| JEL: | D44 |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_001&r=all |
| By: | Committee, Nobel Prize (Nobel Prize Committee) |
| Abstract: | The practice of selling valuable items to the highest bidder, or procuring valuable services fromthe lowest bidder, goes as far back in history as we have written records. The Greek historianHerodotus documented auctions in ancient Babylon already 2500 years ago.1In the RomanEmpire, creditors regularly used auctions to sell off assets confiscated from delinquent debtors.In more modern times, Stockholms Auktionsverk, the oldest surviving auction house in the worldwas founded by the Swedish Baron Claes Rålamb in 1674. In addition to confiscated assets,Stockholms Auktionsverk auctioned a wide range of goods on behalf of willing sellers—forexample, Sweden’s late 17thcentury king, Karl XI, offered a batch of hunting weapons for sale.Similar auction houses existed all around Europe. In 1744, Samuel Baker and George Leigh solda set of valuable books for a grand total of £826 at their newly established auction company. ThatLondon-based company was to become Sotheby’s, presently the world’s largest fine-arts auctionhouse. |
| Keywords: | Austions |
| JEL: | D44 |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_002&r=all |
| By: | Sushil Bikhchandani; Debasis Mishra |
| Abstract: | It is well-known that optimal (i.e., revenue-maximizing) selling mechanisms in multidimensional type spaces may involve randomization. We study mechanisms for selling two identical, indivisible objects to a single buyer. We analyze two settings: (i) decreasing marginal values (DMV) and (ii) increasing marginal values (IMV). Thus, the two marginal values of the buyer are not independent. We obtain sufficient conditions on the distribution of buyer values for the existence of an optimal mechanism that is deterministic. In the DMV model, we show that under a well-known condition, it is optimal to sell the first unit deterministically. Under the same sufficient condition, a bundling mechanism (which is deterministic) is optimal in the IMV model. Under a stronger sufficient condition, a deterministic mechanism is optimal in the DMV model. Our results apply to heterogenous objects when there is a specified sequence in which the two objects must be sold. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.11545&r=all |
| By: | Joffrey Derchu; Philippe Guillot; Thibaut Mastrolia; Mathieu Rosenbaum |
| Abstract: | We introduce a new matching design for financial transactions in an electronic market. In this mechanism, called ad-hoc electronic auction design (AHEAD), market participants can trade between themselves at a fixed price and trigger an auction when they are no longer satisfied with this fixed price. In this context, we prove that a Nash equilibrium is obtained between market participants. Furthermore, we are able to assess quantitatively the relevance of ad-hoc auctions and to compare them with periodic auctions and continuous limit order books. We show that from the investors' viewpoint, the microstructure of the asset is usually significantly improved when using AHEAD. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.02827&r=all |
| By: | Hungria Gunnelin, Rosane (Department of Real Estate and Construction Management, Royal Institute of Technology) |
| Abstract: | This paper analyzes how listing price and bidding strategies impact sales prices in non-distressed residential real estate auctions. Furthermore, the paper is the first that tries to explicitly quantify how these strategies affect the probability of a winner’s curse in such auctions. The findings support the results in the general auction literature that the winning bid and the probability of a winner’s curse is increasing in the number of bidders. The results further supports the notion of “auction fever” since high paced auctions (where unexperienced bidders may resort to emotional bidding) increases selling price and the probability of a winner’s curse. The results with respect to jump bidding and list price setting are mixed. Jump bidding has the intended effect of scaring off bidders, but not sufficiently to reduce the winning bid and the probability of a winner’s curse. Lowering the list price to market value ratio (the degree of underpricing) increases the number of bidders, but not sufficiently to counteract the anchoring effect of the list price leading to a reduction of the winning bid and the probability of a winner’s curse. In summary, the findings in this paper show that the unfolding of auctions of non-distressed residential real estate has a significant impact on selling price and the probability of a winner’s curse. |
| Keywords: | Housing; Auctions; List price; Bidding strategies; Winners curse |
| JEL: | D44 R31 |
| Date: | 2020–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:kthrec:2020_013&r=all |
| By: | Jugal Garg; Thorben Tr\"obst; Vijay V. Vazirani |
| Abstract: | The Arrow-Debreu extension of the classic Hylland-Zeckhauser scheme for a one-sided matching market -- called ADHZ in this paper -- has natural applications but has instances which do not admit equilibria. By introducing approximation, we define the $\epsilon$-approximate ADHZ model. We give the following results. * Existence of equilibrium for the $\epsilon$-approximate ADHZ model under linear utility functions. The equilibrium satisfies Pareto optimality, approximate envy-freeness and incentive compatibility in the large. * A combinatorial polynomial time algorithm for an $\epsilon$-approximate ADHZ equilibrium for the case of dichotomous, and more generally bi-valued, utilities. * An instance of ADHZ, with dichotomous utilities and a strongly connected demand graph, which does not admit an equilibrium. * A rational convex program for HZ under dichotomous utilities; a combinatorial polynomial time algorithm for this case was given by Vazirani and Yannakakis (2020). The $\epsilon$-approximate ADHZ model fills a void, described in the paper, in the space of general mechanisms for one-sided matching markets. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.10320&r=all |
| By: | Tobias Rachidi |
| Abstract: | This paper studies the design of voting mechanisms in a setting with more than two alternatives and arbitrarily many voters who have generalized single-peaked preferences derived from median spaces as introduced in [Nehring and Puppe, 2007b]. This class of preferences is considerably larger than the well-known class of preferences that are single-peaked on a line. I characterize the voting rules that maximize ex-ante utilitarian welfare among all social choice functions satisfying strategy-proofness, anonymity, and surjectivity. The optimal mechanism takes the form of voting by properties, that is, the social choice is determined through a collection of binary votes on subsets of alternatives involving qualified majority requirements that reflect the characteristics of these subsets of alternatives. I illustrate my general optimality result by means of applications including, for instance, collective choice when preferences are single-peaked with respect to a tree. Finally, I emphasize the importance of my characterization result for the analysis of stable constitutions. |
| Keywords: | Voting; Generalized Single-Peaked Preferences; Mechanism Design |
| JEL: | D71 D72 D82 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_214&r=all |
| By: | Agust\'in G. Bonifacio; Elena Inarra; Pablo Neme |
| Abstract: | We study the problem of convergence to stability in coalition formation games in which the strategies of each agent are coalitions in which she can participate and outcomes are coalition structures. Given a natural blocking dynamic, an absorbing set is a minimum set of coalition structures that once reached is never abandoned. The coexistence of single and non-single absorbing sets is what causes lack of convergence to stability. To characterize games in which both types of set are present, we first relate circularity among coalitions in preferences (rings) with circularity among coalition structures (cycles) and show that there is a ring in preferences if and only if there is a cycle in coalition structures. Then we identify a special configuration of overlapping rings in preferences characterizing games that lack convergence to stability. Finally, we apply our findings to the study of games induced by sharing rules. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2009.11689&r=all |
| By: | Vijay V. Vazirani |
| Abstract: | We prove that a fractional perfect matching in a non-bipartite graph can be written, in polynomial time, as a convex combination of perfect matchings. This extends the Birkhoff-von Neumann Theorem from bipartite to non-bipartite graphs. The greedy algorithm of Birkhoff and von Neumann, which starts with the given fractional perfect matching and successively "removes" from it perfect matchings, with appropriate multipliers, fails in non-bipartite graphs -- removing perfect matchings arbitrarily can lead to a graph that is non-empty but has no perfect matchings. Using odd cuts appropriately saves the day. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.05984&r=all |