nep-des New Economics Papers
on Economic Design
Issue of 2021‒04‒19
seven papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. How to De-reserve Reserves By Aygün, Orhan; Turhan, Bertan
  2. Shapley-Scarf Housing Markets: Respecting Improvement, Integer Programming, and Kidney Exchange By P\'eter Bir\'o; Flip Klijn; Xenia Klimentova; Ana Viana
  3. Ordinal and cardinal solution concepts for two-sided matching By Federico Echenique; Alfred Galichon
  4. Bid Caps and Disclosure Policies By Bo Chen; Marco Serena
  5. Dynamic Allocation without Money By Yingni Guo; Johannes Hörner
  6. A Network Solution to Robust Implementation: The Case of Identical but Unknown Distributions By Mariann Ollar; Antonio Penta
  7. Motivational Ratings By Johannes Hörner; Nicolas Lambert

  1. By: Aygün, Orhan; Turhan, Bertan
    Abstract: Reserve systems have been designed and implemented for numerous real-world resource allocation problems. Often, de-reservation policies accompany reserve systems to prevent waste in instances of low demand for exclusive reserve categories. De-reservation policies must be executed carefully so that allocation mechanisms have desired properties. We evaluate the de-reservation policy that has been implemented in admissions to technical universities in India and reveal its shortcomings. We introduce two families of choice procedures—backward and forward transfers choice rules—and deferred acceptance mechanisms with respect to these choice rules to retrieve these shortcomings. We introduce a framework to compare choice rules on the basis of merit and show that forward transfers choice rules select more meritorious sets than backward transfers choice rules.
    Date: 2021–04–13
  2. By: P\'eter Bir\'o; Flip Klijn; Xenia Klimentova; Ana Viana
    Abstract: In a housing market of Shapley and Scarf, each agent is endowed with one indivisible object and has preferences over all objects. An allocation of the objects is in the (strong) core if there exists no (weakly) blocking coalition. In this paper we show that in the case of strict preferences the unique strong core allocation (or competitive allocation) respects improvement: if an agent's object becomes more attractive for some other agents, then the agent's allotment in the unique strong core allocation weakly improves. We obtain a general result in case of ties in the preferences and provide new integer programming formulations for computing (strong) core and competitive allocations. Finally, we conduct computer simulations to compare the game-theoretical solutions with maximum size and maximum weight exchanges for markets that resemble the pools of kidney exchange programmes.
    Date: 2021–01
  3. By: Federico Echenique; Alfred Galichon
    Abstract: We characterize solutions for two-sided matching, both in the transferable and in the nontransferable-utility frameworks, using a cardinal formulation. Our approach makes the comparison of the matching models with and without transfers particularly transparent. We introduce the concept of a no-trade matching to study the role of transfers in matching. A no-trade matching is one in which the availability of transfers do not affect the outcome.
    Date: 2021–02
  4. By: Bo Chen; Marco Serena
    Abstract: We examine the effect of publicly disclosing or concealing bidders’ types in an all-pay auction with a common bid cap. We call partial (full) disclosure policy the setup where the contest designer’s disclosure policy is (not) contingent on type realization. Despite a bid cap possibly increasing the expected expenditures under a partial disclosure policy and the expected expenditures of low-types under a policy of full disclosure, the bid cap unambiguously decreases the expected total expenditures, regardless of the disclosure policy. For any given bid cap and allowing for full and partial disclosure policies, we ï¬ nd that expenditures are minimized with the policy in which a designer discloses bidders’ types only if both players have a low valuation of the prize. The expenditures are maximized with the full concealment policy or with the policy in which a designer discloses the information only if both players have a high valuation. All in all, when the designer can choose both the disclosure policy and the bid cap, revenue is maximized employing full concealment with no bid cap.
    Keywords: contest, all-pay auction, stochastic abilities, bid cap, disclosure
    JEL: C72 D44 D82
    Date: 2020–06
  5. By: Yingni Guo (Unknown); Johannes Hörner
    Abstract: We analyze the optimal design of dynamic mechanisms in the absence of transfers. The agent's value evolves according to a two-state Markov chain. The designer uses future allocation decisions to elicit private information. We solve for the optimal allocation mechanism. Unlike with transfers, efficiency decreases over time. In the long run, polarization occurs. A simple implementation is provided. The agent is endowed with a "quantified entitlement," corresponding to the number of units he is entitled to claim in a row.
    Keywords: mechanism design,principal-agent,quota mechanism,token budget
    Date: 2021–04–01
  6. By: Mariann Ollar; Antonio Penta
    Abstract: We consider mechanism design environments in which agents commonly know that others’ types are identically distributed, but without assuming that the actual distribution is common knowledge, nor that it is known to the designer (common knowledge of identicality, CKI). Under these assumptions, we study problems of partial and full implementation, as well as robustness. First, we characterize the transfers which are incentive compatible under the CKI assumption, and provide necessary and sufficient conditions for partial implementation. Second, we characterize the conditions under which full implementation is possible via direct mechanisms, as well as the transfer schemes which achieve full implementation whenever it is possible. We do this by pursuing a network approach, which is based on the observation that the full implementation problem in our setting can be conveniently transformed into one of designing a network of strategic externalities, subject to suitable constraints which are dictated by the incentive compatibility requirements entailed by the CKI assumption. This approach enables us to uncover a fairly surprising result: the possibility of full implementation is characterized by the strength of the preference interdependence of the two agents with the least amount of preference interdependence, regardless of the total number of agents, and of their preferences. Finally, we study the robustness properties of the implementing transfers with respect to both misspecifications of agents’ preferences and with respect to lower orders beliefs in rationality.
    Keywords: moment conditions, robust full implementation, Rationalizability, interdependent values, identical but unknown distributions, uniqueness, strategic externalities, spectral radius, canonical transfers, loading transfers, equal-externality transfers
    JEL: D62 D82 D83
    Date: 2021–04
  7. By: Johannes Hörner (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Nicolas Lambert (Unknown)
    Abstract: Performance evaluation (\rating") systems not only provide information to users but also motivate the rated worker. This paper solves for the optimal(effort-maximizing) rating within the standard career concerns framework. We prove that this rating is a linear function of past observations. The rating, however, is not a Markov process, but rather the sum of two Markov processes. We show how it combines information of different types and vintages. An increase in effort may adversely affect some (but not all) future ratings.
    Keywords: Career Concerns,Mechanism Design,Ratings.
    Date: 2021–04–01

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