nep-des New Economics Papers
on Economic Design
Issue of 2021‒10‒18
eight papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. The net effect of advice on strategy-proof mechanisms: An experiment for the Vickrey auction By Takehito Masuda; Ryo Mikami; Toyotaka Sakai; Shigehiro Serizawa; Takuma Wakayama
  2. Subsidy and Taxation in All-Pay Auctions under Incomplete By Yizhaq Minchuk; Aner Sela
  3. Nash Convergence of Mean-Based Learning Algorithms in First Price Auctions By Xiaotie Deng; Xinyan Hu; Tao Lin; Weiqiang Zheng
  4. Generalized Cumulative Offer Processes By Inacio Bo; Jorgen Kratz; Makoto Shimoji
  5. Maskin Meets Abreu and Matsushima By Yi-Chun Chen; Takashi Kunimoto; Yifei Sun; Siyang Xiong
  6. A Mechanism Design Approach to Allocating Travel Funds By Michael A. Jones
  7. Stability and Efficiency of Random Serial Dictatorship By Suhas Vijaykumar
  8. Farsighted Rationality in Hedonic Games By Demeze-Jouatsa, Ghislain-Herman; Karos, Dominik

  1. By: Takehito Masuda; Ryo Mikami; Toyotaka Sakai; Shigehiro Serizawa; Takuma Wakayama
    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.”
    Date: 2020–12
  2. By: Yizhaq Minchuk (Department of Industrial Engineering and Management, Shamoon College of Engineering, Beer-Sheva 84100, Israel.); Aner Sela (BGU)
    Keywords: All-pay auctions, subsidy, taxation
    JEL: C72 D44 H25
    Date: 2021
  3. By: Xiaotie Deng; Xinyan Hu; Tao Lin; Weiqiang Zheng
    Abstract: We consider repeated first price auctions where each bidder, having a deterministic type, learns to bid using a mean-based learning algorithm. We completely characterize the Nash convergence property of the bidding dynamics in two senses: (1) time-average: the fraction of rounds where bidders play a Nash equilibrium approaches to 1 in the limit; (2) last-iterate: the mixed strategy profile of bidders approaches to a Nash equilibrium in the limit. Specifically, the results depend on the number of bidders with the highest value: - If the number is at least three, the bidding dynamics almost surely converges to a Nash equilibrium of the auction, both in time-average and in last-iterate. - If the number is two, the bidding dynamics almost surely converges to a Nash equilibrium in time-average but not necessarily in last-iterate. - If the number is one, the bidding dynamics may not converge to a Nash equilibrium in time-average nor in last-iterate. Our discovery opens up new possibilities in the study of convergence dynamics of learning algorithms.
    Date: 2021–10
  4. By: Inacio Bo; Jorgen Kratz; Makoto Shimoji
    Abstract: In the context of the matching-with-contracts model, we generalize the cumulative offer process to allow for arbitrary subsets of doctors to make proposals in each round. We show that, under a condition on the hospitals' choice functions, the outcome of this generalized cumulative offer process is independent of the sets of doctors making proposals in each round. The flexibility of the resulting model allows it to be used to describe different dynamic processes and their final outcomes
    Keywords: Matching with contracts, cumulative offer mechanism, asynchrony, order independence.
    JEL: C78 D44 D47
    Date: 2021–10
  5. By: Yi-Chun Chen; Takashi Kunimoto; Yifei Sun; Siyang Xiong
    Abstract: The theory of full implementation has been criticized for using integer/modulo games which admit no equilibrium (Jackson (1992)). To address the critique, we revisit the classical Nash implementation problem due to Maskin (1999) but allow for the use of lotteries and monetary transfers as in Abreu and Matsushima (1992, 1994). We unify the two well-established but somewhat orthogonal approaches in full implementation theory. We show that Maskin monotonicity is a necessary and sufficient condition for (exact) mixed-strategy Nash implementation by a finite mechanism. In contrast to previous papers, our approach possesses the following features: finite mechanisms (with no integer or modulo game) are used; mixed strategies are handled explicitly; neither undesirable outcomes nor transfers occur in equilibrium; the size of transfers can be made arbitrarily small; and our mechanism is robust to information perturbations. Finally, our result can be extended to infinite/continuous settings and ordinal settings.
    Date: 2021–10
  6. By: Michael A. Jones
    Abstract: I explain how faculty members could exploit a method to allocate travel funds and how to use game theory to design a method that cannot be manipulated.
    Date: 2021–10
  7. By: Suhas Vijaykumar
    Abstract: This paper establishes non-asymptotic convergence of the cutoffs in Random serial dictatorship in an environment with many students, many schools, and arbitrary student preferences. Convergence is shown to hold when the number of schools, $m$, and the number of students, $n$, satisfy the relation $m \ln m \ll n$, and we provide an example showing that this result is sharp. We differ significantly from prior work in the mechanism design literature in our use of analytic tools from randomized algorithms and discrete probability, which allow us to show concentration of the RSD lottery probabilities and cutoffs even against adversarial student preferences.
    Date: 2021–10
  8. By: Demeze-Jouatsa, Ghislain-Herman (Center for Mathematical Economics, Bielefeld University); Karos, Dominik (Center for Mathematical Economics, Bielefeld University)
    Abstract: We consider a hedonic coalition formation game in which at each possible partition any new coalition can decide the probability with which to form and leave the current partition. These probabilities are commonly known so that farsighted players can decide whether or not to support a coalition's move: they know which future partition, and hence payoffs, will be reached with what probability. We show that if coalitions make mistakes with positive probability, i.e., if they choose probabilities that are always above some $\varepsilon>0$, then there is a behavior profile in which no coalition has a profitable one-shot deviation.
    Keywords: abstract games, hedonic games, farsighted stability, coalition stable equilibrium
    Date: 2021–10–05

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