nep-des New Economics Papers
on Economic Design
Issue of 2021‒10‒11
seven papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Blood Allocation with Replacement Donors: A Theory of Multi-unit Exchange with Compatibility-based Preferences By Xiang Han; Onur Kesten; M. Utku Ünver
  2. Feature Selection by a Mechanism Design By Xingwei Hu
  3. Public procurement and supplier job creation: Insights from auctions By Srhoj, Stjepan; Dragojević, Melko
  4. Tradeoffs in Hierarchical Voting Systems By Lucas B\"ottcher; Georgia Kernell
  5. Efficiency, Fairness, and Stability in Non-Commercial Peer-to-Peer Ridesharing By Hoon Oh; Yanhan Tang; Zong Zhang; Alexandre Jacquillat; Fei Fang
  6. Algorithmic aspects of core nonemptiness and core stability By Dylan Laplace Mermoud; Michel Grabisch; Peter Sudhölter
  7. Sufficient conditions for a "simple" Second Welfare Theorem with other-regarding preferences By Elena L. Del Mercato; Van Quy Nguyen

  1. By: Xiang Han (Shanghai University of Finance and Economics); Onur Kesten (University of Sydney); M. Utku Ünver (Boston College)
    Abstract: In 56 developing and developed countries, blood component donations by volunteer non-remunerated donors can only meet less than 50% of the demand. In these countries, blood banks rely on replacement donor programs that provide blood to patients in return for donations made by their relatives or friends. These programs appear to be disorganized, non-transparent, and inefficient. We introduce the design of replacement donor programs and blood allocation schemes as a new application of market design. We introduce optimal blood allocation mechanisms that accommodate fairness, efficiency, and other allocation objectives, together with endogenous exchange rates between received and donated blood units beyond the classical one-for-one exchange. Additionally, the mechanisms provide correct incentives for the patients to bring forward as many replacement donors as possible. This framework and the mechanism class also apply to general applications of multi-unit exchange of indivisible goods with compatibility-based preferences beyond blood allocation with different information problems.
    Keywords: Blood transfusion, market design, multi-unit exchange, dichotomous preferences, endogenous pricing
    JEL: D47 C78 I19 D82 D78
    Date: 2021–06–15
  2. By: Xingwei Hu
    Abstract: In constructing an econometric or statistical model, we pick relevant features or variables from many candidates. A coalitional game is set up to study the selection problem where the players are the candidates and the payoff function is a performance measurement in all possible modeling scenarios. Thus, in theory, an irrelevant feature is equivalent to a dummy player in the game, which contributes nothing to all modeling situations. The hypothesis test of zero mean contribution is the rule to decide a feature is irrelevant or not. In our mechanism design, the end goal perfectly matches the expected model performance with the expected sum of individual marginal effects. Within a class of noninformative likelihood among all modeling opportunities, the matching equation results in a specific valuation for each feature. After estimating the valuation and its standard deviation, we drop any candidate feature if its valuation is not significantly different from zero. In the simulation studies, our new approach significantly outperforms several popular methods used in practice, and its accuracy is robust to the choice of the payoff function.
    Date: 2021–10
  3. By: Srhoj, Stjepan; Dragojević, Melko
    Abstract: Public procurement contracts (PPCs) of goods, services and works is about one tenth of global gross domestic product. Much research has been conducted on government spending and its aggregate effects, but evidence is scarce at the micro-level. This study exploits sealed-bid PPC auctions of construction works, discontinuity in bidders' win margin and firms' daily employment variation to provide a causal estimate of winning a PPC on firms' employment. Winning a PPC has a small positive impact on a firm's short-run employment. The study investigates mechanisms and heterogeneity that can explain the initial small magnitudes. No compelling evidence is found in favour of po- litical connections, an information leakage channel or PPC size as explanations for the small magnitude. A investigation of longer period shows the impact phases out in less than a year. The lack of a long-term impact is due to runners-up winning more PPCs and runners-up substituting towards more market revenue in the year after closely los- ing a PPC. Finally, the impacts are concentrated in construction firms that conduct the majority of contracted work in-house. The final estimation shows the effect is about four new employees per PPC with a public cost per job created at €45,200 [€34,200 - €66,200].
    Keywords: public procurement,auction,firms,jobs,employment
    JEL: H57 D44 D22 M51
    Date: 2021
  4. By: Lucas B\"ottcher; Georgia Kernell
    Abstract: Condorcet's jury theorem states that the correct outcome is reached in direct majority voting systems with sufficiently large electorates as long as each voter's independent probability of voting for that outcome is greater than 0.5. Yet, in situations where direct voting systems are infeasible, such as due to high implementation and infrastructure costs, hierarchical voting systems provide a reasonable alternative. We study differences in outcome precision between hierarchical and direct voting systems for varying group sizes, abstention rates, and voter competencies. Using asymptotic expansions of the derivative of the reliability function (or Banzhaf number), we first prove that indirect systems differ most from their direct counterparts when group size and number are equal to each other, and therefore to $\sqrt{N_{\rm d}}$, where $N_{\rm d}$ is the total number of voters in the direct system. In multitier systems, we prove that this difference is maximized when group size equals $\sqrt[n]{N_{\rm d}}$, where $n$ is the number of hierarchical levels. Second, we show that while direct majority rule always outperforms hierarchical voting for homogeneous electorates that vote with certainty, as group numbers and size increase, hierarchical majority voting gains in its ability to represent all eligible voters. Furthermore, when voter abstention and competency are correlated within groups, hierarchical systems often outperform direct voting, which we show by using a generating function approach that is able to analytically characterize heterogeneous voting systems.
    Date: 2021–10
  5. By: Hoon Oh; Yanhan Tang; Zong Zhang; Alexandre Jacquillat; Fei Fang
    Abstract: Unlike commercial ridesharing, non-commercial peer-to-peer (P2P) ridesharing has been subject to limited research -- although it can promote viable solutions in non-urban communities. This paper focuses on the core problem in P2P ridesharing: the matching of riders and drivers. We elevate users' preferences as a first-order concern and introduce novel notions of fairness and stability in P2P ridesharing. We propose algorithms for efficient matching while considering user-centric factors, including users' preferred departure time, fairness, and stability. Results suggest that fair and stable solutions can be obtained in reasonable computational times and can improve baseline outcomes based on system-wide efficiency exclusively.
    Date: 2021–10
  6. By: Dylan Laplace Mermoud (Centre d'Economie de la Sorbonne); Michel Grabisch (Centre d'Economie de la Sorbonne); Peter Sudhölter (University of Southern Denmark, Department of Business and Economics)
    Abstract: In 1944, Von Neumann and Morgenstern developed the concept of stable sets as a solution for coalitional games. Fifteen years later, Gillies popularized the concept of the core, which is a convex polytope when nonempty. In the next decade, Bondareva and Shapley formulated independently a theorem describing a necessary and sufficient condition for the non emptiness of the core, using the mathematical objects of minimal balanced collections. We start our investigations of the core by implementing Peleg's (1965) inductive method for generating the minimal balanced collections as a computer program, and then, an algorithm that checks if a game admits a nonempty core or not. In 2020, Grabisch and Sudhölter formulated a theorem describing a necessary and sufficient condition for a game to admit a stable core, using several mathematical objects and concepts such as nested balancedness, balanced subsets which generalized balanced collections, exact and vital coalitions, etc. In order to reformulate the aforementioned theorem as an algorithm, a set of coalitions has to be found that, among other conditions, determines the core of the game. We study core stability, geometric properties of the core, and in particular, such core determining sets of coalitions. Furthermore, we describe a procedure for checking whether a subset of a given set is balanced. Finally, we implement the algorithm as a computer program that allows to check if an arbitrary balanced game admits a stable core or not
    Keywords: core; stable sets; balanced collections; core stability; cooperative game
    JEL: C71
    Date: 2021–07
  7. By: Elena L. Del Mercato (Centre d'Economie de la Sorbonne, Paris School of Economics); Van Quy Nguyen (Centre d'Economie de la Sorbonne)
    Abstract: We consider a pure exchange economy with consumption externalities in preferences. Using the notion of competitive equilibrium à la Nash, we point out that a simple condition for restoring the Second Welfare Theorem is that the set of Pareto optimal allocations is included in that of internal Pareto optimal allocations. We provide the Social Redistribution assumption to ensure such inclusion. This assumption is weaker than other relevant assumptions that have been studied in the literature. We then introduce the differential counterpart of Social Redistribution, called Directional Social Redistribution. This assumption entails an interesting consequence that relates social marginal utilities and supporting prices at a Pareto optimal allocation. Finally, we show that, for Bergson-Samuelson utility functions, Directional Social Redistribution is ensured by a specific property of the Jacobian matrix, which has a natural interpretation in terms of externalities
    Keywords: Other-regarding preferences; competitive equilibrium à la Nash; second welfare theorem; social redistribution
    JEL: D11 D50 D62
    Date: 2021–07

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