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on Economic Design |
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Issue of 2021‒01‒11
nine papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Wilson, Robert B. (Stanford University) |
| Abstract: | Robert B. Wilson delivered his Prize Lecture on 7 December 2020. He was introduced by Professor Tore Ellingsen. |
| Keywords: | Auctions; |
| JEL: | D44 |
| Date: | 2020–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_004&r=all |
| By: | Milgrom, Paul R. (Stanford University) |
| Abstract: | Paul R. Milgrom delivered his Prize Lecture on 7 December 2020. He was introduced by Professor Tore Ellingsen. |
| Keywords: | Auctions |
| JEL: | D44 |
| Date: | 2020–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_003&r=all |
| By: | Galit Ashkenazi-Golan (The School of Mathematical Sciences, Tel Aviv University, Tel Aviv 6997800, Israel.); Yevgeny Tsodikovich (Aix Marseille Univ, CNRS, AMSE, Marseille, France.); Yannick Viossat (PSL, Université Paris-Dauphine, CEREMADE UMR7534, Paris, France) |
| Abstract: | A common practice in many auctions is to offer bidders an opportunity to improve their bids, known as a Best and Final Offer (BAFO) stage. This final bid can depend on new information provided about either the asset or the competitors. This paper examines the effects of new information regarding competitors, seeking to determine what information the auctioneer should provide assuming the set of allowable bids is discrete. The rational strategy profile that maximizes the revenue of the auctioneer is the one where each bidder makes the highest possible bid that is lower than his valuation of the item. This strategy profile is an equilibrium for a large enough number of bidders, regardless of the information released. We compare the number of bidders needed for this profile to be an equilibrium under different information settings. We find that it becomes an equilibrium with fewer bidders when no additional information is made available to the bidders compared to when information regarding the competition is available. As a result, from the auctioneer's revenue perspective, when the number of bidders is unknown, there are some advantages to not revealing information between the stages of the auction. |
| Keywords: | auctions, multistage auctions, BAFO, information utilization |
| JEL: | D44 D82 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2044&r=all |
| By: | M. Derksen; B. Kleijn; R. de Vilder |
| Abstract: | We study the tails of closing auction return distributions for a sample of liquid European stocks. We use the stochastic call auction model of Derksen et al. (2020a), to derive a relation between tail exponents of limit order placement distributions and tail exponents of the resulting closing auction return distribution and we verify this relation empirically. Counter-intuitively, large closing price fluctuations are typically not caused by large market orders, instead tails become heavier when market orders are removed. The model explains this by the observation that limit orders are submitted so as to counter existing market order imbalance. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2012.10145&r=all |
| By: | Lehmann, Timo; Weber, Matthias (University of St. Gallen) |
| Abstract: | We analyse a regulatory change in the Japanese IPO market that created an abrupt shift from hybrid price-discriminatory auctions to bookbuilding. We find that bookbuilding leads to significantly higher underpricing than hybrid price-discriminatory auctions. Further, we find evidence that price accuracy tends to be higher for auctions than for bookbuilding. The results hold under a variety of OLS specifications and with regression discontinuity designs exploiting the abrupt change of the regulation. The results suggest that the interests of issuers and underwriters are not aligned. The popularity of bookbuilding seems puzzling from this perspective. |
| Date: | 2021–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:sa385&r=all |
| By: | José Alcalde; Matthias Dahm |
| Abstract: | Procurement programs often aim to rely on a diverse pool of suppliers, besides achieving cost effectiveness. We propose complementing a share auction for dual sourcing with affirmative action to create an endogenous set-aside for a high-cost supplier. In our model more intensive affirmative action strengthens the targeted provider. This has the potential to level the playing field, inducing more competitive procurement overall. Our main result provides a condition under which the endogenous set-aside not only guarantees a very substantial share for the high-cost supplier, but also reduces the buyer’s provision cost compared to a first-price auction. This result is robust to variations of our benchmark model, including the assumptions specifying what providers know about each other, and how affirmative action programs are implemented. We also illustrate how our approach can help to reduce the severity and likelihood of health product shortages, such as those that occurred during the recent COVID-19 outbreak. |
| Keywords: | Affirmative Action, Bidding Credits, Bidding Preferences, Set-Asides, Dual Sourcing |
| JEL: | D44 D47 H57 J15 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:20/07&r=all |
| By: | Andersson , Tommy (Department of Economics, Lund University); Ehlers , Lars (Département de sciences économiques, Université de Montréal); Svensson , Lars-Gunnar (Department of Economics, Lund University) |
| Abstract: | We consider a market with indivisible objects, called houses, and money. On this market, each house is initially owned (or rented) by some agent and each agent demands precisely one house. The problem is to identify the complete set of direct allocation mechanisms that can be used to reallocate the houses among the agents. The focus is on price mechanisms, i.e., mappings of preference profiles to price equilibria, that are strategy-proof and satisfy an individual rationality condition. We prove that the only mechanism that satisfies these conditions is a price mechanism with a minimal equilibrium price vector. The result is not true in full preference domain. Instead, we identify a smaller domain, that contains almost all profiles, where the result holds. |
| Keywords: | Public housing; existing tenants; equilibrium; minimum equilibrium prices; domain |
| JEL: | C71 C78 D71 D78 |
| Date: | 2020–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2020_028&r=all |
| By: | Yusuke Narita (Massachusetts Institute of Technology) |
| Abstract: | Many centralized school admissions systems use lotteries to ration limited seats at oversubscribed schools. The resulting random assignment is used by empirical researchers to identify the effects of schools on outcomes like test scores. I first find that the two most popular empirical research designs may not successfully extract a random assignment of applicants to schools. When do the research designs overcome this problem? I show the following main results for a class of data-generating mechanisms containing those used in practice: The “first-choice” research design extracts a random assignment under a mechanism if the mechanism is strategy-proof for schools. In contrast, the other “qualification instrument” research design does not necessarily extract a random assignment under any mechanism. The former research design is therefore more compelling than the latter. Many applications of the two research designs need some implicit assumption, such as large-sample approximately random assignment, to justify their empirical strategy. |
| Keywords: | market design, natural experiment, school effectiveness |
| JEL: | C93 D47 I24 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2020-085&r=all |
| By: | Herings, Jean-Jacques; Mauleon, Ana (Université catholique de Louvain, LIDAM/CORE, Belgium); Vannetelbosch, Vincent (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | We consider marriage problems where myopic and farsighted players in- teract. To study such problems, we use the pairwise myopic-farsighted stable set. Blocking occurs by coalitions of size one or two. We require that all blocking players should strictly improve. We pay particular attention to the question whether core elements survive in this environment. This is the case when all players are myopic as well as when all players are farsighted. It also holds for matching problems satisfying the top-coalition property. For general matching problems where all women are farsighted, there is only one core element that can belong to the pairwise myopic-farsighted stable set, the woman-optimal stable matching, so all other stable outcomes are excluded for sure. If the woman-optimal stable matching is dominated from the woman point of view by an individually rational matching, then the pairwise myopic- farsighted stable set cannot contain a core element. We show that blocking by coalitions of arbitrary size leads to identical results. |
| Keywords: | Marriage problems ; core ; stable sets ; myopic and farsighted play- ers |
| JEL: | C70 C78 |
| Date: | 2020–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2020033&r=all |