nep-des New Economics Papers
on Economic Design
Issue of 2021‒09‒20
six papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Balanced House Allocation By Xinghua Long; Rodrigo A. Velez
  2. Renegotiation and Discrimination in Symmetric Procurement Auctions By Leandro Arozamena; Juan José Ganuza; Federico Weinschelbaum
  3. Structural Estimation of Matching Markets with Transferable Utility By Alfred Galichon; Bernard Salani\'e
  4. Information Payoffs: An Interim Perspective By Smolin, Alex; Doval, Laura
  5. Quadratic Funding with Incomplete Information By Luis V. M. Freitas; Wilfredo L. Maldonado
  6. Contest Design with Threshold Objectives By Edith Elkind; Abheek Ghosh; Paul Goldberg

  1. By: Xinghua Long; Rodrigo A. Velez
    Abstract: We introduce balancedness a fairness axiom in house allocation problems. It requires a mechanism to assign the top choice, the second top choice, and so on, on the same number of profiles for each agent. This axiom guarantees equal treatment of all agents at the stage in which the mechanism is announced when all preference profiles are equally likely. We show that, with an interesting exception for the three-agent case, Top Trading Cycles from individual endowments is the only mechanism that is balanced, efficient, and group strategy-proof.
    Date: 2021–09
  2. By: Leandro Arozamena (Universidad Torcuato Di Tella / CONICET); Juan José Ganuza (Universitat Pompeu Fabra / Barcelona GSE); Federico Weinschelbaum (Universidad Torcuato Di Tella / CONICET)
    Abstract: In order to make competition open, fair and transparent, procurement regulations often require equal treatment for all bidders. This paper shows how a favorite supplier can be treated preferentially (opening the door to home bias and corruption) evenwhen explicit discrimination is not allowed. We analyze a procurement setting in which the optimal design of the project to be contracted is unknown. The sponsor has to invest in specifying the project. The larger the investment, the higher the probability that the initial design is optimal. When it is not, a bargaining process between the winning firm and the sponsor takes place. Profits from bargaining are larger for the favorite supplier than for its rivals. Given this comparative advantage, the favored firm bids more aggressively and then, it wins more often than standard firms. Finally, we show that the sponsor invests less in specifying the initial design, when favoritism is stronger. Underinvestment in design specification is a tool for providing a comparative advantage to the favored firm.
    Keywords: Auctions, Favoritism, Auction Design, Renegotiation, Corruption
    JEL: C72 D44 D82
    Date: 2021–08
  3. By: Alfred Galichon; Bernard Salani\'e
    Abstract: This paper provides an introduction to structural estimation methods for matching markets with transferable utility.
    Date: 2021–09
  4. By: Smolin, Alex; Doval, Laura
    Abstract: We study the payoffs that can arise under some information structure from an interim perspective. There is a set of types distributed according to some prior distribution and a payoff function that assigns a value to each pair of a type and a belief over the types. Any information structure induces an interim payoff profile which describes, for each type, the expected payoff under the information structure conditional on the type. We characterize the set of all interim payoff profiles consistent with some information structure. We illustrate our results through applications.
    Date: 2021–09–07
  5. By: Luis V. M. Freitas; Wilfredo L. Maldonado
    Abstract: A recently proposed mechanism for the provision of continuous public goods is the so-called quadratic funding mechanism, which has been shown to provide socially optimal outcomes under complete information. In this work we show that the conditions to obtain the same desirable property under incomplete information are strongly restrictive. We also propose two measures for the size of the inefficiency and show how that deadweight loss responds to changes in the size of the population, the valuation of the public good by individuals and the variance of the expected value of contributions to the fund.
    Keywords: Public goods provision; incomplete information; quadratic funding mechanism
    JEL: C72 D82 H41
    Date: 2021–09–08
  6. By: Edith Elkind; Abheek Ghosh; Paul Goldberg
    Abstract: We study contests where the designer's objective is an extension of the widely studied objective of maximizing the total output: The designer gets zero marginal utility from a player's output if the output of the player is very low or very high. We model this using two objective functions: binary threshold, where a player's contribution to the designer's utility is 1 if her output is above a certain threshold, and 0 otherwise; and linear threshold, where a player's contribution is linear if her output is between a lower and an upper threshold, and becomes constant below the lower and above the upper threshold. For both of these objectives, we study (1) rank-order allocation contests that use only the ranking of the players to assign prizes and (2) general contests that may use the numerical values of the players' outputs to assign prizes. We characterize the optimal contests that maximize the designer's objective and indicate techniques to efficiently compute them. We also prove that for the linear threshold objective, a contest that distributes the prize equally among a fixed number of top-ranked players offers a factor-2 approximation to the optimal rank-order allocation contest.
    Date: 2021–09

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