nep-des New Economics Papers
on Economic Design
Issue of 2021‒02‒08
eight papers chosen by
Alex Teytelboym
University of Oxford

  1. Assignment mechanisms: common preferences and information acquisition By Georgy Artemov
  2. Strategy-proof Allocation of Indivisible Goods when Preferences are Single-peaked By Mandal, Pinaki; Roy, Souvik
  3. The General Graph Matching Game: Approximate Core By Vijay V. Vazirani
  4. Stable Coalition Structures and Power Indices for Majority Voting By Takaaki Abe
  5. Two-Sided Matching Markets in the ELLIS 2020 PhD Program By Maximilian Mordig; Riccardo Della Vecchia
  6. Designing Preference Voting By Philipp Harfst; Damien Bol; Jean-François Laslier
  7. Competitive Procurement With Ex Post Moral Hazard By Indranil Chakraborty; Fahad Khalil; Jacques Lawarree
  8. Implementation with farsighted agents By Ville Korpela; Michele Lombardi; Hannu Vartiainen

  1. By: Georgy Artemov
    Abstract: I study costly information acquisition in a two-sided matching problem, such as matching applicants to schools. An applicant's utility is a sum of common and idiosyncratic components. The idiosyncratic component is unknown to the applicant but can be learned at a cost. When applicants are assigned using an ordinal strategy-proof mechanism, too few acquire information, generating a significant welfare loss. Affirmative action and other realistic policies may lead to a Pareto improvement. As incentives to acquire information differ across mechanisms, ignoring such incentives may lead to incorrect welfare assessments, for example, in comparing a popular Immediate Assignment and an ordinal strategy-proof mechanism.
    Date: 2021–01
  2. By: Mandal, Pinaki; Roy, Souvik
    Abstract: We consider assignment problems where heterogeneous indivisible goods are to be assigned to individuals so that each individual receives at most one good. Individuals have single-peaked preferences over the goods. In this setting, first we show that there is no strategy-proof, non-bossy, Pareto efficient, and strongly pairwise reallocation-proof assignment rule on a minimally rich single-peaked domain when there are at least three individuals and at least three objects in the market. Next, we characterize all strategy-proof, Pareto efficient, top-envy-proof, non-bossy, and pairwise reallocation-proof assignment rules on a minimally rich single-peaked domain as hierarchical exchange rules. We additionally show that strategy-proofness and non-bossiness together are equivalent to group strategy-proofness on a minimally rich single-peaked domain, and every hierarchical exchange rule satisfies group-wise reallocation-proofness on a minimally rich single-peaked domain.
    Keywords: Assignment problem; Single-peaked preferences; Strategy-proofness; Pareto efficiency; Non-bossiness; Top-envy-proofness; Strong reallocation-proofness; Pairwise/group-wise reallocation-proofness
    JEL: C78 D82
    Date: 2021–01–15
  3. By: Vijay V. Vazirani
    Abstract: The classic paper of Shapley and Shubik \cite{Shapley1971assignment} characterized the core of the assignment game using powerful ideas from matching theory and LP-duality theory and their highly non-trivial interplay. Whereas the core of the assignment game is always non-empty, that of the general graph matching game the core can be empty. This paper salvages the situation by giving an imputation in the $2/3$-approximate core for the latter. We show that this bound is best possible -- it is the integrality gap of the natural underlying LP. Our profit allocation method goes further: the multiplier on the profit of an agent lies in the interval $[{2 \over 3}, 1]$, depending on how severely constrained the agent is. The core is a quintessential solution concept in cooperative game theory. It contains ways of distributing the total worth of a game among agents in such a way that no sub-coalition has incentive to secede from the grand coalition. Our $2/3$-approximate imputation implies that a sub-coalition will be able to gain at most a $3/2$ factor by seceding, and less in typical cases.
    Date: 2021–01
  4. By: Takaaki Abe (School of Political Science and Economics, Waseda University)
    Abstract: An (n,k)-game is a voting game in which each player has exactly one vote, and decisions are made by at least k affirmative votes of the n players. A power index is a measure of the a priori power of the n voters. The purpose of this paper is to show what axioms of power indices generate stable coalition structures for each (n,k)-game. Using the stability notion of the core, we show that a coalition structure containing a minimal winning coalition is stable for a wide range of general power indices satisfying a set of axioms, such as the Shapley-Shubik, Banzhaf, normalized Banzhaf, and Deegan-Packel power indices. Moreover, we also show that a coalition structure that represents a two-party system can be stable if the two large parties are close enough in size. Some unstable coalition structures are also analyzed.
    Keywords: coalition structure; core; majority voting; power index
    JEL: C71
    Date: 2020–10
  5. By: Maximilian Mordig; Riccardo Della Vecchia
    Abstract: The ELLIS PhD program is a European initiative that supports excellent young researchers by connecting them to leading researchers in AI. In particular, PhD students are supervised by two advisors from different countries: an advisor and a co-advisor. In this work we summarize the procedure that, in its final step, matches students to advisors in the ELLIS 2020 PhD program. The steps of the procedure are based on the extensive literature of two-sided matching markets and the college admissions problem [Knuth and De Bruijn, 1997, Gale and Shapley, 1962, Rothand Sotomayor, 1992]. We introduce PolyGS, an algorithm for the case of two-sided markets with quotas on both sides (also known as many-to-many markets) which we use throughout the selection procedure of pre-screening, interview matching and final matching with advisors. The algorithm returns a stable matching in the sense that no unmatched persons prefer to be matched together rather than with their current partners (given their indicated preferences). Roth [1984] gives evidence that only stable matchings are likely to be adhered to over time. Additionally, the matching is student-optimal. Preferences are constructed based on the rankings each side gives to the other side and the overlaps of research fields. We present and discuss the matchings that the algorithm produces in the ELLIS 2020 PhD program.
    Date: 2021–01
  6. By: Philipp Harfst (TUD - Technische Universität Dresden); Damien Bol (King‘s College London); Jean-François Laslier (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: Electoral systems in which voters can cast preference votes for individual candidates within a party list are increasingly popular. To the best of our knowledge, there is no research on whether and how the scale used to evaluate candidates can affect electoral behavior and results. In this paper, we analyze data from an original voting experiment leveraging real-life political preferences and embedded in a nationally representative online survey in Austria. We show that the scale used by voters to evaluate candidates makes differences. For example, the possibility to give up to two points advantages male candidates because male voters are more likely to give 'zero points' to female candidates. Yet this pattern does not exist in the system in which voters can give positive and negative points because male voters seem reluctant to actively withdraw points from female candidates. We thus encourage constitution makers to think carefully about the design of preference voting.
    Keywords: Electoral system,Proportional representation,Preference voting,Approval voting,experiment,Austria
    Date: 2020
  7. By: Indranil Chakraborty; Fahad Khalil; Jacques Lawarree
    Abstract: Unlike standard auctions, we show that competitive procurement may optimally limit competition or use inefficient allocation rules that award the project to a less efficient firm with positive probability. Procurement projects often involve ex post moral hazard after the competitive process is over. A procurement mechanism must combine an incentive scheme with the auction to guard against firms bidding low to win the contract and then cutting back on effort. While competition helps reduce the rent of efficient firms, it exacerbates the problem due to moral hazard. If allocative efficiency is a requirement, limiting the number of participants may be optimal. Alternatively, the same incentives can be optimally provided using inefficient allocation rules.
    Keywords: competitive procurement, auctions, moral hazard
    Date: 2021
  8. By: Ville Korpela (Turku School of Economics, University of Turku FI-20014, Finland); Michele Lombardi (Adam Smith Business School, University of Glasgow; Department of Economics and Statistics, University of Naples); Hannu Vartiainen (University of Helsinki and Helsinki Graduate School of Economics, Finland)
    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, rights structures, largest consistent set, core, (Maskin) monotonicity
    JEL: C72 C78 D71
    Date: 2021–01

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