nep-des New Economics Papers
on Economic Design
Issue of 2021‒05‒31
twelve papers chosen by
Alex Teytelboym
University of Oxford

  1. Application Costs and Congestion in Matching Markets By He, Yinghua; Magnac, Thierry
  2. Singles monotonicity and stability in one-to-one matching problems By Yoichi Kasajima; Manabu Toda
  3. Progressive Participation By Bergemann, Dirk; Strack, Philipp
  4. Information, Market Power and Price Volatility By Bergemann, Dirk; Heumann, Tibor; Morris, Stephen
  5. Preparing for the Worst But Hoping for the Best: Robust (Bayesian) Persuasion By Dworczak, Piotr; Pavan, Alessandro
  6. An Implementation Approach to Rotation Programs By Korpela, Ville; Lombardi, Michele; Saulle, Riccardo D.
  7. Robust Equilibria in General Competing Mechanism Games By Seungjin Han
  8. Probabilistic Fixed Ballot Rules and Hybrid Domains By Shurojit Chatterji; Souvik Roy; Soumyarup Sadhukhan; Arunava Sen; Huaxia Zeng
  9. Direct Nash Implementation with Evidence By Soumen Banerjee; Yi-Chun Chen; Yifei Sun
  10. Multi-Dimensional Screening: Buyer-Optimal Learning and Informational Robustness By Rahul Deb; Anne-Katrin Roesler
  11. Does Vote Trading Improve Welfare? By Casella, Alessandra; Macé, Antonin
  12. Spatial Coordination and Joint Bidding in Conservation Auctions By Timothy N. Cason; Simanti Banerjee; Frans P. De Vries; Nick Hanley

  1. By: He, Yinghua; Magnac, Thierry
    Abstract: A matching market often requires recruiting agents, or ``programs,'' to costly screen ``applicants,'' and congestion increases with the number of applicants to be screened. We investigate the role of application costs: Higher costs reduce congestion by discouraging applicants from applying to certain programs; however, they may harm match quality. In a multiple-elicitation experiment conducted in a real-life matching market, we implement variants of the Gale-Shapley Deferred-Acceptance mechanism with different application costs. Our experimental and structural estimates show that a (low) application cost effectively reduces congestion without harming match quality.
    Keywords: congestion; Costly Preference Formation; Gale-Shapley deferred acceptance mechanism; Matching Market Design; screening; Stable matching
    JEL: C78 D47 D50 D61 I21
    Date: 2020–07
  2. By: Yoichi Kasajima (School of Social Sciences, Waseda University); Manabu Toda (School of Social Sciences, Waseda University)
    Abstract: We consider two-sided one-to-one matching problems (between men and women) and study a new requirement called gown-side singles monotonicity. h Suppose that there is an agent who is not matched in a problem. Suppose for simplicity it is a woman. Now in a new problem (with the same set of agents), we improve (or leave unchanged) her ranking for each agent on the opposite side of her. Own-side singles monotonicity requires that each agent on her side should not be made better off (except for her). Unfortunately, no single-valued solution satisfies own-side singles monotonicity and stability. However, there is a (multi-valued) solution, the stable solution, that does. We provide two characterizations of the stable solution based on this property. It is the unique solution satisfying weak unanimity, null player invariance, own-side singles monotonicity, and consistency. The uniqueness also holds by replacing consistency with Maskin invariance. In addition, we study the impact of improving her ranking on the welfare of the agents on the opposite side of her.
    Keywords: property regimes, one-to-one matching; own-side singles monotonicity; other-side singles monotonicity; stability; consistency; Maskin invariance.
    JEL: C71 C78 D47
    Date: 2021–03
  3. By: Bergemann, Dirk; Strack, Philipp
    Abstract: A single seller faces a sequence of buyers with unit demand. The buyers are forward-looking and long-lived but vanish (and are replaced) at a constant rate. The arrival time and the valuation is private information of each buyer and unobservable to the seller. Any incentive compatible mechanism has to induce truth-telling about the arrival time and the evolution of the valuation. We derive the optimal stationary mechanism in closed form and characterize its qualitative structure. As the arrival time is private information, the buyer can choose the time at which he reports his arrival. The truth-telling constraint regarding the arrival time can be represented as an optimal stopping problem. The stopping time determines the time at which the buyer decides to participate in the mechanism. The resulting value function of each buyer cannot be too convex and must be continuously differentiable everywhere, reflecting the option value of delaying participation. The optimal mechanism thus induces progressive participation by each buyer: he participates either immediately or at a future random time.
    Keywords: Dynamic Mechanism Design; Interim Incentive Constraints; Interim Participation Constraints; Observable Arrival; Option value; Progressive Participation; Repeated Sales; Stopping Problem; Unobservable Arrival
    JEL: D44 D82 D83
    Date: 2020–07
  4. By: Bergemann, Dirk; Heumann, Tibor; Morris, Stephen
    Abstract: We consider demand function competition with a finite number of agents and private information. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. Regardless of the number of agents and the correlation of payo¤ shocks, market power may be arbitrarily close to zero (the competitive outcome) or arbitrarily large (so there is no trade). By contrast, price volatility is always lower than the variance of the aggregate shock across all information structures. Alternative trading mechanisms lead to very distinct bounds as a comparison with Cournot competition establishes.
    Keywords: Cournot Competition; Demand function competition; incomplete information; market power; price impact; Price volatility; Supply function competition
    JEL: C72 D43 D44 D83 G12
    Date: 2020–07
  5. By: Dworczak, Piotr; Pavan, Alessandro
    Abstract: We propose a robust solution concept for Bayesian persuasion that accounts for the Sender's ambiguity over (i) the exogenous sources of information the Receivers may learn from, and (ii) the way the Receivers play (when multiple strategy profiles are consistent with the assumed solution concept and the available information). The Sender proceeds in two steps. First, she identifies all information structures that yield the largest payoff in the "worst-case scenario," i.e., when Nature provides information and coordinates the Receivers' play to minimize the Sender's payoff. Second, she picks an information structure that, in case Nature and the Receivers play favorably to her, maximizes her expected payoff over all information structures that are "worst-case optimal." We characterize properties of robust solutions, identify conditions under which robustness requires separation of certain states, and qualify in what sense robustness calls for more information disclosure than standard Bayesian persuasion. Finally, we discuss how some of the results in the Bayesian persuasion literature change once robustness is accounted for.
    Keywords: information design; Persuasion; robustness; worst-case optimality
    JEL: D82
    Date: 2020–07
  6. By: Korpela, Ville; Lombardi, Michele; Saulle, Riccardo D.
    Abstract: Rotation programs are widely used in societies. Some examples are job rotations, rotation schemes in the management of common-pool resources, and rotation procedures in fair division problems. We study rotation programs via the implementation of Pareto efficient social choice rules under complete information. The notion of the rotation program predicts the outcomes. A rotation program is a myopic stable set whose states are arranged circularly, and agents can effectively move only between two consecutive states. We provide characterizing conditions for the implementation in rotation programs and show that, for multi-valued rules, our notion of rotation monotonicity is necessary and sufficient for implementation. Finally, we identify two classes of assignment problems that are implementable in rotation programs.
    Keywords: Research Methods/ Statistical Methods
    Date: 2021–05–24
  7. By: Seungjin Han
    Abstract: This paper proposes a general competing mechanism game of incomplete information where a mechanism allows its designer to send a message to himself at the same time agents send messages. This paper introduces a notion of robust equilibrium. If each agent’s payoff function is separable with respect to principals’ actions, they lead to the full characterization of equilibrium allocations in terms of incentive compatible direct mechanisms without reference to the set of arbitrary mechanisms allowed in the game. Szentes’ Critique (Szentes (2010)) on the standard competing mechanism game of complete information is also valid in a model with incomplete information.
    Keywords: competing mechanisms; robust equations; general mechanisms; direct mechanisms
    JEL: D82 D86
    Date: 2021–05
  8. By: Shurojit Chatterji; Souvik Roy; Soumyarup Sadhukhan; Arunava Sen; Huaxia Zeng
    Abstract: We characterize a class of preference domains called hybrid* domains. These are specific collections of preferences that are single-peaked at the extremes and unrestricted in the middle. They are characterized by the familiar properties of minimal richness, diversity and no-restoration. We also study the structure of strategy-proof and unanimous Random Social Choice Functions on these domains. We show them to be special cases of probabilistic fixed ballot rules (or PFBR). These PFBRs are not necessarily decomposable, i.e., cannot be written as a convex combination of their deterministic counterparts. We identify a necessary and sufficient condition under which decomposability holds for anonymous PFBRs.
    Date: 2021–05
  9. By: Soumen Banerjee; Yi-Chun Chen; Yifei Sun
    Abstract: We study full implementation with hard evidence in a bounded environment. By invoking monetary transfers off the equilibrium, we show that a social choice function is Nash implementable in a direct revelation mechanism if and only if it satisfies the measurability condition proposed by Ben-Porath and Lipman (2012). Building on a novel classification of lies according to their refutability with evidence, the mechanism requires only two agents, accounts for mixed-strategy equilibria, accommodates evidentiary costs, and can also be modified to account for limited solvency of the agents. We also establish a necessary and sufficient condition on the evidence structure for renegotiation-proof bilateral contracts, based on the classification of lies.
    Date: 2021–05
  10. By: Rahul Deb; Anne-Katrin Roesler
    Abstract: A monopolist seller of multiple goods screens a buyer whose type is initially unknown to both but drawn from a commonly known distribution. The buyer privately learns about his type via a signal. We derive the seller's optimal mechanism in two different information environments. We begin by deriving the buyer-optimal outcome. Here, an information designer first selects a signal, and then the seller chooses an optimal mechanism in response; the designer's objective is to maximize consumer surplus. Then, we derive the optimal informationally robust mechanism. In this case, the seller first chooses the mechanism, and then nature picks the signal that minimizes the seller's profits. We derive the relation between both problems and show that the optimal mechanism in both cases takes the form of pure bundling.
    Date: 2021–05
  11. By: Casella, Alessandra; Macé, Antonin
    Abstract: Voters have strong incentives to increase their influence by trading votes, a practice indeed believed to be common. But is vote trading welfare-improving or welfare-decreasing? We review the theoretical literature and, when available, its related experimental tests. We begin with the analysis of logrolling -- the exchange of votes for votes, considering both explicit vote exchanges and implicit vote trades engineered by bundling issues in a single bill. We then focus on vote markets, where votes can be traded against a numeraire. We cover competitive markets, strategic market games, decentralized bargaining, and more centralized mechanisms, such as quadratic voting, where votes can be bought at a quadratic cost. We conclude with procedures allowing voters to shift votes across decisions -- to trade votes with oneself only -- such as storable votes or a modified form of quadratic voting. We find that vote trading and vote markets are typically inefficient; more encouraging results are obtained by allowing voters to allocate votes across decisions.
    Keywords: bundling; logrolling; quadratic voting; storable votes; vote markets; voting
    JEL: D6 D71 D72
    Date: 2020–08
  12. By: Timothy N. Cason; Simanti Banerjee; Frans P. De Vries; Nick Hanley
    Abstract: Classification-
    Date: 2021–06

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