nep-des New Economics Papers
on Economic Design
Issue of 2021‒08‒30
nine papers chosen by
Alex Teytelboym
University of Oxford

  1. Fritz John's equation in mechanism design By Alfred Galichon
  2. Stable and extremely unequal By Alfred Galichon; Octavia Ghelfi; Marc Henry
  3. Becker-Shapley-Shubik in the Lab: An Experimental Study of Decentralized Matching with Transfers By Zhang, Hanzhe; He, Simin; Wu, Jiabin
  4. Ex-post implementation with interdependent values By Saurav Goyal; Aroon Narayanan
  5. Single-peaked domains with designer uncertainty By Aroon Narayanan
  6. Persuasion and Information Aggregation in Elections By Carl Heese; Stephan Lauermann
  7. Two-sided Markets, Pricing, and Network Effects By Jullien, Bruno; Pavan, Alessandro; Rysman, Marc
  8. Curbing Price Fluctuations in Cap-and-Trade Auctions By Thomas D. Jeitschko; Pallavi Pal
  9. Strategic Reserves versus Market-wide Capacity Mechanisms By Pär Holmberg; Thomas Tangerås

  1. By: Alfred Galichon
    Abstract: We show the role that an important equation first studied by Fritz John plays in mechanism design.
    Date: 2021–08
  2. By: Alfred Galichon; Octavia Ghelfi; Marc Henry
    Abstract: We highlight the tension between stability and equality in non transferable utility matching. We consider many to one matchings and refer to the two sides of the market as students and schools. The latter have aligned preferences, which in this context means that a school's utility is the sum of its students' utilities. We show that the unique stable allocation displays extreme inequality between matched pairs.
    Date: 2021–08
  3. By: Zhang, Hanzhe (Michigan State University, Department of Economics); He, Simin (Department of Economics, Shanghai University of Finance and Economics); Wu, Jiabin (Department of Economics, University of Oregon)
    Abstract: We experimentally study Becker-Shapley-Shubik matching models. We show that whether efficient matching is assortative and whether the pairwise Nash-Rubinstein bargaining outcome is stable affects matching and surplus; the canonical theory predicts no effect. In markets with equal numbers of participants on the two sides, individual payoffs in our and others’ experiments cannot be explained by existing refinements of the core, but are consistent with our noncooperative model’s prediction. In markets with unequal numbers of participants on the two sides, noncompetitive outcomes—subjects on the long side do not fully compete—are not captured by the canonical theory, but by our noncooperative model.
    Keywords: decentralized matching; matching with transfers; assignment games; bargaining experiments
    JEL: C71 C72 C78 C90
    Date: 2021–08–23
  4. By: Saurav Goyal; Aroon Narayanan
    Abstract: We characterize ex-post implementable allocation rules for single object auctions under quasi-linear preferences with convex interdependent value functions. We show that requiring ex-post implementability is equivalent to requiring that the allocation rule must satisfy a condition that we call eventual monotonicity (EM), which is a weakening of monotonicity, a familiar condition used to characterize dominant strategy implementation.
    Date: 2021–08
  5. By: Aroon Narayanan
    Abstract: This paper studies single-peaked domains where the designer is uncertain about the underlying alignment according to which the domain is single-peaked. The underlying alignment is common knowledge amongst agents, but preferences are private knowledge. Thus, the state of the world has both a public and private element, with the designer uninformed of both. I first posit a relevant solution concept called implementation in mixed information equilibria, which requires Nash implementation in the public information and dominant strategy implementation in the private information given the public information. I then identify necessary and sufficient conditions for social rules to be implementable. The characterization is used to identify unanimous and anonymous implementable social rules for various belief structures of the designer, which basically boils down to picking the right rules from the large class of median rules identified by Moulin (1980), and hence this result can be seen as identifying which median rules are robust to designer uncertainty.
    Date: 2021–08
  6. By: Carl Heese (University of Vienna, Department of Economics); Stephan Lauermann (University of Bonn, Department of Economics)
    Abstract: This paper studies a large majority election with voters who have heterogeneous, private preferences and exogenous private signals. We show that a Bayesian persuader can implement any state-contingent outcome in some equilibrium by providing additional information. In this setting, without the persuader's information, a version of the Condorcet Jury Theorem holds. Persuasion does not require detailed knowledge of the voters' private information and preferences: the same additional information is effective across environments. The results require almost no commitment power by the persuader. Finally, the persuasion mechanism is effective also in small committees with as few as 15 members.
    Keywords: Information Aggregation, Bayes Correlated Equilibria, Persuasion, Condorcet Jury Theorem
    JEL: C72 D72 D82
    Date: 2021–08
  7. By: Jullien, Bruno; Pavan, Alessandro; Rysman, Marc
    Abstract: The chapter has 9 sections, covering the theory of two-sided markets and related empirical work. Section 1 introduces the reader to the literature. Section 2 covers the case of markets dominated by a single monopolistic rm. Section 3 discusses the theoretical literature on competition for the market, focusing on pricing strategies that rms may follow to prevent entry. Section 4 discusses pricing in markets in which multiple platforms are active and serve both sides. Section 5 presents alternative models of platform competition. Section 6 discusses richer matching protocols whereby platforms pricediscriminate by granting access only to a subset of the participating agents from the other side and discusses the related literature on matching design. Section 7 discusses identication in empirical work. Section 8 discusses estimation in empirical work. Finally, Section 9 concludes.
    Keywords: Two-sided market; platform; pricing; network effects; matching
    Date: 2021–08–21
  8. By: Thomas D. Jeitschko; Pallavi Pal
    Abstract: In recent years, a significant problem with the carbon credit market has been the higher than initially predicted price volatility. It is essential to study the market in a repeated-period dynamic setting to identify the factors enabling high fluctuations in prices. In this paper, we examine the dynamic auction design and propose a method to curb price volatility through a flexible supply cap. The equilibrium analysis shows that modifying the cap on per period supply can decrease price fluctuations. Currently, the government or the auctioneer sets a per-period limit on the supply, which reduces at a fixed rate over time. However, this paper suggests that a flexible cap on the per-period supply would be a better alternative. Specifically, we show that correlating the supply rate with expected future demand results in a more stable price.
    Keywords: dynamic mechanism design, auctions, emissions permits, environmental regulation, climate change
    JEL: D43 L11 L42
    Date: 2021
  9. By: Pär Holmberg (Research Institute of Industrial Economics (IFN), Stockholm); Thomas Tangerås (Research Institute of Industrial Economics (IFN), Stockholm)
    Keywords: Capacity mechanism, market design, reliability, resource efficiency
    JEL: D25 D47 Q40 Q48
    Date: 2021–04

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