nep-des New Economics Papers
on Economic Design
Issue of 2020‒12‒21
seven papers chosen by
Alex Teytelboym
University of Oxford

  1. Pick-an-object Mechanisms By In\'acio B\'o; Rustamdjan Hakimov
  2. A Common-Value Auction with State-Dependent Participation By Stephan Lauermann; Asher Wolinsky
  3. Strategy-proof Popular Mechanisms By Mustafa O\u{g}uz Afacan; In\'acio B\'o
  4. Choice Screen Auctions By Michael Ostrovsky
  5. Simple Mechanisms for Non-linear Agents By Yiding Feng; Jason Hartline; Yingkai Li
  6. Enabling reciprocity through blockchain design By Jens Gudmundsson; Jens Leth Hougaard
  7. Influence of Dynamic Congestion on Carpooling Matching By André de Palma; Patrick Stokkink; Nikolas Geroliminis

  1. By: In\'acio B\'o; Rustamdjan Hakimov
    Abstract: We introduce a new family of mechanisms for one-sided matching markets, denoted pick-an-object (PAO) mechanisms. When implementing an allocation rule via PAO, agents are asked to pick an object from individualized menus. These choices may be rejected later on, and these agents are presented with new menus. When the procedure ends, agents are assigned the last object they picked. We characterize the allocation rules that can be sequentialized by PAO mechanisms, as well as the ones that can be implemented in a robust truthful equilibrium. We justify the use of PAO as opposed to direct mechanisms by showing that its equilibrium behavior is closely related to the one in obviously strategy-proof (OSP) mechanisms, but includes commonly used rules, such as Gale-Shapley DA and Top Trading Cycles, which are not OSP-implementable. We run laboratory experiments comparing truthful behavior when using PAO, OSP, and direct mechanisms to implement different rules. These indicate that individuals are more likely to behave in line with the theoretical prediction under PAO and OSP implementations than their direct counterparts.
    Date: 2020–12
  2. By: Stephan Lauermann; Asher Wolinsky
    Abstract: This paper analyzes a common-value, …rst-price auction with state-dependent participation. The number of bidders, which is unobservable to them, depends on the true value. For exogenously given participation patterns that involve many bidders in each state, the bidding equilibrium may be of a “pooling” type—with high probability, the winning bid is the same across states and is below the ex-ante expected value—or of a “partially revealing” type—with no signi…cant atoms in the winning bid distribu- tion and an expected winning bid increasing in the true value. Which of these forms will arise is determined by the likelihood ratio at the top of the signal distribution and the participation across states. When the state-dependent participation is endogenized as the strategic solicitation by an informed seller who bears a small cost for each solicited bidder, an equilibrium of the partially revealing type always exists and is unique of this type; for certain signal distributions there also exist equilibria of the pooling type.
    Keywords: Search, Auctions, Adverse Selection
    JEL: C78 D83
    Date: 2020–12
  3. By: Mustafa O\u{g}uz Afacan; In\'acio B\'o
    Abstract: We consider the allocation of indivisible objects when agents have preferences over their own allocations, but share the ownership of the resources to be distributed. Examples might include seats in public schools, faculty offices, and time slots in public tennis courts. Given an allocation, groups of agents who would prefer an alternative allocation might challenge it. An assignment is popular if it is not challenged by another one. By assuming that agents' ability to challenge allocations can be represented by weighted votes, we characterize the conditions under which popular allocations might exist and when these can be implemented via strategy-proof mechanisms. Serial dictatorships that use orderings consistent with the agents' weights are not only strategy-proof and Pareto efficient, but also popular, whenever these assignments exist. We also provide a new characterization for serial dictatorships as the only mechanisms that are popular, strategy-proof, non-wasteful, and satisfy a weak consistency condition.
    Date: 2020–12
  4. By: Michael Ostrovsky
    Abstract: Choice screen auctions have been recently deployed in 31 European countries, allowing consumers to choose their preferred search engine on Google's Android platform instead of being automatically defaulted to Google's own search engine. I show that a seemingly minor detail in the design of these auctions—whether they are conducted on a “per appearance” or a “per install” basis—plays a major role in the mix and characteristics of auction winners, and, consequently, in their expected overall market share. I also show that “per install” auctions distort the incentives of alternative search engines toward extracting as much revenue as possible from each user who installs them, at the expense of lowering the expected number of such users. The distortion becomes worse as the auction gets more competitive and the number of bidders increases. Empirical evidence from Android choice screen auctions conducted in 2020 is consistent with my theoretical results.
    JEL: C72 D44 D47 K21 L40 L50 L86
    Date: 2020–11
  5. By: Yiding Feng; Jason Hartline; Yingkai Li
    Abstract: We consider agents with non-linear preferences given by private values and private budgets. We quantify the extent to which posted pricing approximately optimizes welfare and revenue for a single agent. We give a reduction framework that extends the approximation of multi-agent pricing-based mechanisms from linear utility to nonlinear utility. This reduction framework is broadly applicable as Alaei et al. (2012) have shown that mechanisms for linear agents can generally be interpreted as pricing-based mechanisms. We give example applications of the framework to oblivious posted pricing (e.g., Chawla et al., 2010), sequential posted pricing (e.g., Yan, 2011), and virtual surplus maximization (Myerson, 1981).
    Date: 2020–03
  6. By: Jens Gudmundsson (Department of Food and Resource Economics, University of Copenhagen); Jens Leth Hougaard (NYU-Shanghai, China; Department of Food and Resource Economics, University of Copenhagen)
    Abstract: We introduce a reciprocity protocol, an innovative approach to coordinating and sharing rewards in blockchains. Inherently decentralized and easy to implement, it puts emphasis on incentives rather than forcing specific sharing rules from the outset. Analyzing the non-cooperative game the protocol induces, we identify a robust, strict, and Pareto-dominant symmetric equilibrium. In it, even self-centered participants show extensive reciprocity to one another. Thus, despite a setting that is generally unfavorable to reciprocal behavior, the protocol manages to build trust between the users by taking on a role akin to a social contract.
    Keywords: Blockchain, reciprocity, protocol design, Nash equilibrium
    JEL: C62 C72 D02 D63 D91
    Date: 2020–12
  7. By: André de Palma; Patrick Stokkink; Nikolas Geroliminis (Université de Cergy-Pontoise, THEMA)
    Abstract: Carpooling is an efficient measure to fight car ownership and reduce vehicle kilometers travelled. By sharing their commutes, vehicle occupancy increases and congestion is reduced. We develop a dynamic ADL (Arnott, de Palma, Lindsey)-Vickrey approach for a corridor monocentric city à la Hotelling. First, we formulate the matching problem of heterogeneous users in carpooling as an MILP problem and we discuss its analytical properties. Next, we construct a bi-level optimization problem involving matching (first stage) and dynamic traffic congestion (second stage). We provide a heuristic to attain an optimal matching for a dynamic traffic equilibrium with congestion. Such a template allows studying the two-way causality between dynamic congestion and carpooling matching.
    Keywords: Carpooling, Ride-sharing, Matching, Scheduling delay, Bottleneck congestion
    JEL: C78 R40 R41
    Date: 2020

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