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on Economic Design |
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Issue of 2020‒11‒02
ten papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Theo Offerman (University of Amsterdam); Giorgia Romagnoli (University of Amsterdam); Andreas Ziegler (University of Amsterdam) |
| Abstract: | The popularity of open ascending auctions is often attributed to the fact that openly observable bidding allows to aggregate dispersed information. Another reason behind the frequent utilization of open auction formats may be that they activate revenue enhancing biases. In an experiment, we compare three auctions that differ in how much information is revealed and in the potential activation of behavioral biases: (i) the ascending Vickrey auction, a closed format; and two open formats, (ii) the Japanese-English auction and (iii) the Oral Outcry auction. Even though bidders react to information conveyed in others’ bids, information aggregation fails in both open formats. In contrast, the Oral Outcry raises higher revenue than the other two formats, by stimulating bidders to submit unprofitable jump bids and triggering a quasi-endowment effect. |
| Keywords: | ascending auctions, information aggregation, jump bidding, auction fever |
| JEL: | C90 D44 D82 |
| Date: | 2020–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20200071&r=all |
| By: | Hitoshi Matsushima (University of Tokyo); Shunya Noda (University of British Columbia) |
| Abstract: | This study investigates the unique information elicitation problem. A central planner attempts to elicit correct information from multiple informed agents through mutual monitoring. There is a severe restriction on incentive devices: we assume neither public monitoring technology nor allocation rule is available; thus, the central planner only uses monetary payment rules. It is well-known that if all agents are selfish, it is impossible to elicit information as a unique equilibrium. We consider an epistemological possibility that some agents could be motivated by an intrinsic preference for honesty, while we allow that honest agents are mostly motivated by monetary interest. We prove that, once we introduce an epistemic type space that allows agents to be (weakly) honest, then the impossibility theorem reduces to a knife-edge case: The central planner can elicit correct information from agents as a unique Bayes Nash equilibrium behavior if and only if it is never common knowledge that all agents are selfish. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf496&r=all |
| By: | Clark, Robert; Coviello, Decio; de Leverano, Adriano |
| Abstract: | A number of recent papers have proposed that a pattern of isolated winning bids may be associated with collusion. In contrast, others have suggested that bid clustering, especially of the two lowest bids, is indicative of collusion. In this paper, we present evidence from an actual procurement cartel uncovered during an anticollusion investigation that reconciles these two points of view and shows that both patterns arise naturally together as part of a cartel arrangement featuring complementary bidding. Using a difference-in-difference approach, we compare the extent of winning-bid isolation and clustering of bids in Montreal's asphalt industry before and after the investigation to patterns over the same time span in Quebec City, whose asphalt industry has not been the subject of collusion allegations. Our findings provide causal evidence that the collusive arrangement featured both clustering and isolation. We use information from testimony of alleged participants in the cartels to explain how these two seemingly contradictory patterns can be harmonized. |
| Keywords: | Auction,Bidding ring,Collusion,Complementary bidding,Clustered bids,Missing bids,Public procurement |
| JEL: | L22 L74 D44 H57 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20052&r=all |
| By: | S. Nageeb Ali; Nima Haghpanah; Xiao Lin; Ron Siegel |
| Abstract: | The seller of an asset has the option to buy hard information about the value of the asset from an intermediary. The seller can then disclose the acquired information before selling the asset in a competitive market. We study how the intermediary designs and sells hard information to robustly maximize her revenue across all equilibria. Even though the intermediary could use an accurate test that reveals the asset's value, we show that robust revenue maximization leads to a noisy test with a continuum of possible scores that are distributed exponentially. In addition, the intermediary always charges the seller for disclosing the test score to the market, but not necessarily for running the test. This enables the intermediary to robustly appropriate a significant share of the surplus resulting from the asset sale even though the information generated by the test provides no social value. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.08037&r=all |
| By: | Herings, P. Jean-Jacques (RS: GSBE Theme Data-Driven Decision-Making, RS: GSBE Theme Conflict & Cooperation, Microeconomics & Public Economics); Karos, Dominik; Kerman, Toygar (General Economics 0 (Onderwijs), RS: GSBE other - not theme-related research) |
| Abstract: | We consider a group of receivers who share a common prior on a finite state space and who observe private correlated signals that are contingent on the true state of the world. We show that, while necessary, Bayes plausibility is not sufficient for a distribution over posterior belief vectors to be inducible, and we provide a characterization of inducible distributions. We classify communication strategies as minimal, direct, and language independent, and show that any inducible distribution can be induced by a language independent communication strategy (LICS). We investigate 12 the role of the different classes of communication strategies for the amount of higher order information that is revealed to receivers. We show that the least informative communication strategy which induces a fixed distribution over posterior belief vec tors lies in the relative interior of the set of all language independent communication strategies which induce that distribution. |
| Date: | 2020–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2020027&r=all |
| By: | Karmokar, Madhuparna; Roy, Souvik |
| Abstract: | We explore the structure of local ordinal Bayesian incentive compatible (LOBIC) random Bayesian rules (RBRs). We show that under lower contour monotonicity, almost all (with Lebesgue measure 1) LOBIC RBRs are local dominant strategy incentive compatible (LDSIC). We also provide conditions on domains so that unanimity implies lower contour monotonicity for almost all LOBIC RBRs. We provide sufficient conditions on a domain so that almost all unanimous RBRs on it (i) are Pareto optimal, (ii) are tops-only, and (iii) are only-topset. Finally, we provide a wide range of applications of our results on the unrestricted, single-peaked (on graphs), hybrid, multiple single-peaked, single-dipped, single-crossing, multidimensional separable, lexicographic, and domains under partitioning. We additionally establish the marginal decomposability property for both random social choice functions and almost all RBRs on multi-dimensional domains, and thereby generalize Breton and Sen (1999). Since OBIC implies LOBIC by definition, all our results hold for OBIC RBRs. |
| Keywords: | random Bayesian rules; random social choice functions; (local) ordinal Bayesian incentive compatibility; (local) dominant strategy incentive compatibility |
| JEL: | D71 D82 |
| Date: | 2020–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:103494&r=all |
| By: | Hammond, Peter J. (Department of Economics, University of Warwick) |
| Abstract: | Roberts' "weak neutrality" or "weak welfarism" theorem concerns Sen social welfare functionals which are de ned on an unrestricted domain of utility function profiles and satisfy independence of irrelevant alternatives, the Pareto condition, and a form of weak continuity. Roberts (1980) claimed that the induced welfare ordering on social states has a one-way representation by a continuous, monotonic real-valued welfare function defined on the Euclidean space of interpersonal utility vectors | that is, an increase in this welfare function is sufficient, but may not be necessary, for social strict preference. A counter-example shows that weak continuity is insufficient; a minor strengthening to pairwise continuity is proposed instead and its sufficiency demonstrated. JEL Codes: D71 |
| Keywords: | social welfare functionals ; weak welfarism. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wcreta:66&r=all |
| By: | Hammond, Peter J. (Department of Economics, University of Warwick); Qiao, Lei (School of Economics, Shanghai University of Finance and Economics); Sun, Yeneng (Departments of Economics and Mathematics, National University of Singapore) |
| Abstract: | Monte Carlo simulation is used in Hammond and Sun (2008) to characterize a standard stochastic framework involving a continuum of random variables that are conditionally independent given macro shocks. This paper presents some general properties of such Monte Carlo sampling processes, including their one-way Fubini extension and regular conditional independence. In addition to the almost sure convergence of Monte Carlo simulation considered in Hammond and Sun (2008), here we also consider norm convergence when the random variables are square integrable. This leads to a necessary and su cient condition for the classical law of large numbers to hold in a general Hilbert space. Applying this analysis to large economies with asymmetric information shows that the con ict between incentive compatibility and Pareto efficiency is resolved asymptotically for almost all sampling economies, corresponding to some results in McLean and Postlewaite (2002) and Sun and Yannelis (2007). |
| Keywords: | Law of large numbers ; Monte Carlo sampling process ; one-way Fubini property ; Hilbert space ; incentive compatibility ; asymmetric information ; Pareto efficiency JEL Codes: C65 ; D51 ; D61 ; D82 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wcreta:65&r=all |
| By: | Felix Bierbrauer (University of Cologne); Mattias Polborn (mattias.polborn@vanderbilt.edu) |
| Abstract: | Gerrymandering undermines representative democracy by creating many uncompetitive legislative districts, and generating the very real possibility that a party that wins a clear majority of the popular vote does not win a majority of districts. We present a new approach to the determination of electoral districts, taking a design perspective. Specifically, we develop a redistricting game between two parties who both seek an advantage in upcoming elections, and show that we can achieve two desirable properties: First, the overall election outcome corresponds to the popular vote. Second, most districts are competitive. |
| Keywords: | Gerrymandering, Popular Vote |
| JEL: | C72 D71 D72 D82 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:034&r=all |
| By: | Zargham, Michael; Shorish, Jamsheed; Paruch, Krzysztof |
| Abstract: | Bonding curves are continuous liquidity mechanisms which are used in market design for cryptographically-supported token economies. Tokens are atomic units of state information which are cryptographically verifiable in peer-to-peer networks. Bonding curves are an example of an enforceable mechanism through which participating agents influence this state. By designing such mechanisms, an engineer may establish the topological structure of a token economy without presupposing the utilities or associated actions of the agents within that economy. This is accomplished by introducing configuration spaces, which are proper subsets of the global state space representing all achievable states under the designed mechanisms. Any global properties true for all points in the configuration space are true for all possible sequences of actions on the part of agents. This paper generalizes the notion of a bonding curve to formalize the relationship between cryptographically enforced mechanisms and their associated configuration spaces, using invariant properties of conservation functions. We then proceed to apply this framework to analyze the augmented bonding curve design, which is currently under development by a project in the non-profit funding sector. |
| Keywords: | Economics, Blockchain, Dynamic Games |
| Date: | 2019–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wus051:7381&r=all |