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on Economic Design |
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Issue of 2021‒05‒17
twelve papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Pycia, Marek; Woodward, Kyle |
| Abstract: | The pay-as-bid (or discriminatory) auction is a prominent format for selling homogenous goods such as treasury securities and commodities. We prove the uniqueness of its pure-strategy Bayesian Nash equilibrium and establish a tractable representation of equilibrium bids. Building on these results we analyze the optimal design of pay-as-bid auctions, as well as uniform-price auctions (the main alternative auction format), allowing for asymmetric information. We show that supply transparency and full disclosure are optimal in pay-as-bid, though not necessarily in uniform-price; pay-as-bid is revenue dominant and might be welfare dominant; and, under assumptions commonly imposed in empirical work, the two formats are revenue and welfare equivalent. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15656&r= |
| By: | Wanchang Zhang |
| Abstract: | We study the design of auction within the correlation-robust framework in which the auctioneer is assumed to have information only about marginal distributions, but does not know the correlation structure of the joint distribution. The performance of a mechanism is evaluated in the worst-case over the uncertainty of joint distributions that are consistent with the marginal distributions. For the two-bidder case, we characterize the Second Price Auction with Uniformly Distributed Reserves as a maxmin auction among dominant strategy incentive compatible (DSIC) and ex-post individually rational (EPIR) mechanisms under the robust-version regularity conditions. For the $N$-bidder ($N\ge 3$) case, we characterize the Second Price Auction with $Beta (\frac{1}{N-1},1)$ Distributed Reserves as a maxmin auction among exclusive (a bidder whose bid is not the highest will never be allocated) DSIC and EPIR mechanisms under the general robust-version regularity conditions (I). |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.04697&r= |
| By: | Ashutosh Thakur (Stanford Graduate School of Business and University of Cologne) |
| Abstract: | In many organizations, members need to be assigned to certain positions, whether these are legislators to committees, executives to roles, or workers to teams. I show that these assignment problems lead to novel questions about institutional stability. Will the set of agents being assigned prefer or vote in favor of some alternative allocation over their current allocation thereby lobbying to reform the institution? I explore questions of institutional stability where the choice of the institution (i.e., the matching mechanism) is chosen and agreed upon by the very people who are assigned by the assignment procedure. I endogenize an institution's choice of assignment procedures by analyzing an important sub-case of social choice that I call a social allocation choice problem. I discuss a variety of voting rules (plurality, majority, and unanimity) and their institutional stability counterparts in matching theory (popular matching, majority stability, and pareto efficiency). The novel property of majority stability is introduced and its existence and robustness to correlated preferences and interdependent preferences are analyzed. Chains of envy are necessary to overcome the packing problem that arises in reallocating a majority to a new set of assignments under an alternative allocation. This makes majority stability, in sharp contrast to plurality rule, strikingly robust to correlated preferences. |
| Keywords: | institutional stability, matching, assignment, voting, correlated preferences |
| JEL: | D71 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:085&r= |
| By: | Koessler, Frederic; Skreta, Vasiliki |
| Abstract: | A designer is privately informed about the state and chooses an information disclosure mechanism to influence the decisions of multiple agents playing a game. We define an intuitive class of incentive compatible information disclosure mechanisms which we coin interim optimal mechanisms. We prove that an interim optimal mechanism exists, and that it is an equilibrium outcome of the interim information design game. An ex-ante optimal mechanism may not be interim optimal, but it is whenever it is ex-post optimal. In addition, in leading settings in which action sets are binary, every ex-ante optimal mechanism is interim optimal. We relate interim optimal mechanisms to other solutions of informed principal problems. |
| Keywords: | Bayesian persuasion; core mechanism; Informed principal; interim information design; neutral optimum; strong-neologism proofness; verifiable types |
| JEL: | C72 D82 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15709&r= |
| By: | Jacquet, Laurence; Lehmann, Etienne |
| Abstract: | We propose a new method, that we call an allocation perturbation, to derive the optimal nonlinear income tax schedules with multidimensional individual characteristics on which taxes cannot be conditioned. It is well established that, when individuals differ in terms of preferences on top of their skills, optimal marginal tax rates can be negative. In contrast, we show that with heterogeneous behavioral responses and skills, one has optimal positive marginal tax rates, under utilitarian preferences and maximin. |
| Keywords: | allocation perturbation; mechanism design; multidimensional screening problems; optimal taxation |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15721&r= |
| By: | Pablo Arribillaga (Universidad de San Luis/CONICET); Jordi Massó (Universitat Autonoma de Barcelona); Alejandro Neme (Universidad de San Luis/CONICET) |
| Abstract: | For division problems with single-peaked preferences (Sprumont, 1991) we show that all sequential allotment rules, identified by Barberà, Jackson and Neme (1997) as the class of strategy-proof, eficient and replacement monotonic rules, are also obviously strategy-proof. Although obvious strategy-proofness is in general more restrictive than strategy-proofness, this is not the case in this setting. |
| Keywords: | Obvious Strategy-proofness Sequential Allotment Rules Division Problems Single-peaked Preferences |
| JEL: | D71 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:49&r= |
| By: | Agustín Bonifacio (Universidad Nacional de San Luis / CONICET); Nadia Guiñazú (Universidad Nacional de San Luis / CONICET); Noelia Juarez (Universidad Nacional de San Luis / CONICET); Pablo Neme (Universidad Nacional de San Luis / CONICET); Jorge Oviedo (Universidad Nacional de San Luis / CONICET) |
| Abstract: | In a many-to-one matching model, we study the set of worker-quasi-stable matchings when firms' preferences satisfy substitutability. Worker-quasi-stability is a relaxation of stability that allows blocking pairs involving a firm and an unemployed worker. We show that this set has a lattice structure and define a Tarski operator on this lattice that models a re-equilibration process and has the set of stable matchings as its fixed points. |
| Keywords: | Matching worker-quasi-stability lattice Tarski operator re-stabilization process |
| JEL: | C78 D47 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:64&r= |
| By: | Echenique, Federico; Gonzalez, Ruy; Wilson, Alistair; Yariv, Leeat |
| Abstract: | Most doctors in the NRMP match with one of their most-preferred internship programs. However, surveys indicate doctors' preferences are similar, suggesting a puzzle: how can so many doctors match with their top choices when positions are scarce? We provide one possible explanation. We show that the patterns in the NRMP data may be an artifact of the interview process that precedes the match. Our study highlights the importance of understanding market interactions occurring before and after a matching clearinghouse, and casts doubts on analyses of clearinghouses that take reported preferences at face value. |
| Keywords: | Deferred acceptance; First-rank matches; Interviews; NRMP |
| JEL: | C78 D47 J44 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15559&r= |
| By: | Goldlücke, Susanne; Tröger, Thomas |
| Abstract: | We consider mechanisms for assigning an unpleasant task among a group of agents with heterogenous abilities. We emphasize threshold rules: every agent decides whether or not to ``volunteer''; if the number of volunteers exceeds a threshold number, the task is assigned to a random volunteer; if the number is below the threshold, the task is assigned to a random non-volunteer. We show that any non-extreme threshold rule allows for a symmetric equilibrium in which every ability type is strictly better off than in a random assignment. This holds for arbitrarily high costs of performing the task. Within the class of binary-action mechanisms, some threshold rule is utilitarian optimal. The first-best can be approximated arbitrarily closely with a threshold rule as the group size tends to infinity; that is, there exist threshold numbers such that with probability arbitrarily close to 1 the task is performed by an agent with an ability arbitrarily close to the highest possible ability. The optimal threshold number goes to infinity as the group size tends to infinity. |
| Keywords: | mechanism design without transfers; Public Good Provision; volunteering |
| JEL: | D82 H41 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15580&r= |
| By: | Wanchang Zhang |
| Abstract: | We study the design of revenue-maximizing bilateral trade mechanisms in the correlated private value environment. We assume the designer only knows the expectations of the agents' values, but knows neither the marginal distribution nor the correlation structure. The performance of a mechanism is evaluated in the worst-case over the uncertainty of joint distributions that are consistent with the known expectations. Among all dominant-strategy incentive compatible and ex-post individually rational mechanisms, we provide a complete characterization of the maxmin trade mechanisms and the worst-case joint distributions. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.05427&r= |
| By: | Inés Macho-Stadler (UAB - Universitat Autònoma de Barcelona); David Pérez-Castrillo (UAB - Universitat Autònoma de Barcelona); Nicolas Quérou (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We consider a market where "standard" risk-neutral agents coexist with "goaloriented" agents who, in addition to the expected income, seek a high-enough monetary payoff (the "trigger") to fulfill a goal. We analyze a two-sided one-to-one matching model where the matching between principals and agents and incentive contracts are endogenous. In any equilibrium contract, goal-oriented agents are matched with the principals with best projects and receive the trigger with positive probability. Moreover, goal and monetary incentives are complementary: goaloriented agents receive stronger monetary incentives. Finally, we discuss policy interventions in relevant environments. |
| Keywords: | Goal-oriented agents,incentives,matching market |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03214933&r= |
| By: | Arash Abizadeh; Adrian Vetta |
| Abstract: | We design a recursive measure of voting power based upon partial voting efficacy as well as full voting efficacy. In contrast, classical indicies and measures of voting power incorporate only partial voting efficacy. We motivate our design by representing voting games using a division lattice and via the notion of random walks in stochastic processes, and show the viability of our recursive measure by proving it satisfies a plethora of postulates that any reasonable voting measure should satisfy. These include the iso-invariance, dummy, dominance, donation, bloc, quarrel, and added blocker postulates. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.03006&r= |