nep-des New Economics Papers
on Economic Design
Issue of 2021‒06‒14
six papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Reallocation with Priorities By Julien Combe; Jan Christoph Schlegel
  2. Bid coordination in sponsored search auctions: Detection methodology and empirical analysis By Francesco Decarolis; Maris Goldmanis; Antonio Penta; Ksenia Shakhgildyan
  3. Auctions with Ethical Concerns By Hitoshi Matsushima
  4. The net effect of advice on strategy-proof mechanisms: An experiment for the Vickrey auction Abstract: We conduct laboratory experiments for the multi-unit Vickrey auction with and without advice to subjects on strategy-proofness. The rate of truth-telling among the subjects without advice stays at 20%, whereas the rate increases to 47% among those who have received advice. By conducting similar experiments for the pay-your-bid auction, which is not strategy-proof, we confirm that the increase in truth-telling is due significantly to the net advice effect (i.e., the effect beyond the so-called experimenter demand effect). Moreover, we find that providing advice improves efficiency in the Vickrey auction, particularly in the early periods, when the subjects are less experienced. In general, subjects tend to overbid in Vickrey auction experiments. Our results indicate the possibility that providing simple advice decreases such overbidding by promoting a better understanding of the strategy-proofness of the Vickrey auction. Strategy-proof mechanisms are sometimes criticized because players often fail to recognize the benefit of telling the truth. However, our observations show that introducing advice on the property of strategy-proofness helps them behave “correctly.” By Takehito Masuda; Ryo Mikami; Toyotaka Sakai; Shigehiro Serizawa; Takuma Wakayama
  5. Voting by Simultaneous Vetoes By Margarita Kirneva; Matias Nunez
  6. Semi-flexible Majority Rules for Public Good Provision By Gersbach, Hans; Tejada, Oriol

  1. By: Julien Combe (CREST, Ecole Polytechnique, France); Jan Christoph Schlegel (City, University of London, United Kingdom)
    Abstract: We consider a reallocation problem with priorities where each agent is initially endowed with a house and is willing to exchange it but each house has a priority ordering over the agents of the market. In this setting, it is well known that there is no individually rational and stable mechanism. As a result, the literature has introduced a modified stability notion called µ0-stability. In contrast to college admission problems, in which priorities are present but there is no initial endowment, we show that the modified Deferred Acceptance mechanism identified in the literature is not the only individually rational, strategy-proof and µ0-stable mechanism. By introducing a new axiom called the independence of irrelevant agents and using the standard axiom of unanimity, we show that the modified Deferred Acceptance mechanism is the unique mechanism that is individually rational, strategy-proof, µ0-stable, unanimous and independent of irrelevant agents.
    Keywords: Matching, Housing Market, Reallocation, Stability, Priorities.
    JEL: C78 D47
    Date: 2021–06–03
  2. By: Francesco Decarolis; Maris Goldmanis; Antonio Penta; Ksenia Shakhgildyan
    Abstract: Bid delegation to specialized intermediaries is common in the auction systems used to sell internet advertising. When the same intermediary concentrates the demand for ad space from competing advertisers, its incentive to coordinate client bids might alter the functioning of the auctions. Using proprietary data from auctions held on a major search engine, this study develops a methodology to detect bid coordination. It also presents a strategy to estimate a bound on the search engine revenue losses imposed by coordination relative to a counterfactual benchmark of competitive bidding. In the data, coordination is detected in 55 percent of the cases of delegated bidding observed and the associated upper bound revenue loss for the search engine ranges between 5.3 and 10.4 percent.
    Keywords: online advertising, sponsored search auctions, delegation, common agency
    JEL: C72 D44 L81
    Date: 2021–05
  3. By: Hitoshi Matsushima (University of Tokyo)
    Abstract: We investigate implementation of social choice rules in the dominant strategy, where the central planner evaluates social welfare ethically rather than financially by excluding monetary transfers from the welfare evaluation, prohibiting redistribution, and putting asymmetric welfare weights on agents’ willingness to pay in a state-contingent manner. With such ethical concerns in mind, we show that side payment devices play a significant role in incentivizing agents to be honest. Focusing on multiunit auctions with a single-unit demand, we consider the case in which the central planner faces a situation where multiple conflicting ethical criteria with their own advantages coexist and cannot be aggregated into a single criterion. We demonstrate a new side-payment rule design that successfully implements reasonable SCRs that are induced by the method of procedure explored by Matsushima (2021). We further clarify when and how to use subsidies and set-asides as incentive and fairness devices, depending on the state.
    Date: 2021–05
  4. By: Takehito Masuda; Ryo Mikami; Toyotaka Sakai; Shigehiro Serizawa; Takuma Wakayama
    Date: 2020–12
  5. By: Margarita Kirneva (CREST, CNRS, Ecole Polytechnique); Matias Nunez (CREST, CNRS, Ecole Polytechnique)
    Abstract: We design voting mechanisms in which every Nash equilibrium is coalition proof, preventing the well known coordination failures of usual voting systems. In each of these simultaneous mechanisms, each voter has the right to select a list of alternatives to veto, and the winner is selected randomly from the nonvetoed alternatives. For each specification of the veto rights, we show that each of these mechanisms implements a veto by random priority rule introduced by Moulin[1981]. We then discuss necessary conditions for arbitrary mechanisms to satisfy implementation in both Nash and coalition proof and show that the existence of veto rights in the mechanism is unavoidableto achieve this demanding implementation notion.
    Keywords: Implementation, Voting, Vetoes, Coalition Formation, Efficiency.
    JEL: D71 D72
    Date: 2021–06–03
  6. By: Gersbach, Hans; Tejada, Oriol
    Abstract: We introduce semi-flexible majority rules for public good provision with private valuations. Such rules take the form of a two-stage, multiple-round voting mechanism where the output of the first stage is the default alternative for the second stage and the voting thresholds (a) vary with the proposal on the table and (b) require a qualified majority for final approval in the second stage. We show that the (detail-free) mechanism elicits the information about the valuations and uses it to implement the utilitarian optimal public-good level if valuations can be only high or low. This level is chosen after all potential socially optimal policies have been considered for voting. We explore ways to reduce the number of voting rounds and develop a compound mechanism when there are many types of citizens to approximate the optimal public-good level.
    Keywords: Voting - Utilitarianism - Implementation - Procedural democracy
    JEL: C72 D70
    Date: 2020–07

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