nep-des New Economics Papers
on Economic Design
Issue of 2022‒01‒10
nine papers chosen by
Alex Teytelboym
University of Oxford

  1. Auction hosts: are they really impartial? By Marie BLUM
  2. The three stages of an auction: how do the bid dynamics influence auction prices? Evidence from live art auctions By Marie BLUM; Régis BLAZY
  3. Formation of committees under constraints through random voting rules By Roy, Souvik; Sadhukhan, Soumyarup
  4. Strategy-Proof Aggregation Rules in Median Semilattices with Applications to Preference Aggregation By Ernesto Savaglio; Stefano Vannucci
  5. Aiding applicants: Leveling the playing field within the immediate acceptance mechanism By Basteck, Christian; Mantovani, Marco
  6. Weighted Fairness Notions for Indivisible Items Revisited By Mithun Chakraborty; Erel Segal-Halevi; Warut Suksompong
  7. Yogurts Choose Consumers? Estimation of Random-Utility Models via Two-Sided Matching By Odran Bonnet; Alfred Galichon; Yu-Wei Hsieh; Keith O'Hara; Matt Shum
  8. Discriminatory versus uniform auctions:Evidence from JGB market By Takahiro Hattori; Shogo Takahashi
  9. Distance to Schools and Equal Access in School Choice Systems By Mariana Laverde

  1. By: Marie BLUM (LaRGE Research Center, Université de Strasbourg)
    Abstract: This study explores the impacts i) of marketing strategies implemented by auction houses and ii) of auctioneers’ way of conducting auctions, on auction sale outcomes: the probability of sale, the final purchase price and the final price in percentage of the mean pre-sale estimated price. Using video recordings of art auction sales and a hand-collected database of 1101 auctioned artworks, we find firstly that the organizational and promotional work carried out by auction houses have an impact on different sale outcomes and secondly that the auctioneer’s behavior seems to be decisive, especially the usage of humor. In this paper, we provide the first examination of the influence of professional auctioneers on auction prices. This research brings a more comprehensive understanding of bidders’ behavior, the tactics through which auction houses and auctioneers affect outcomes, and the functioning of real-world auction markets. Moreover, the findings of this study yield useful managerial insights for marketers.
    Keywords: auctioneer, auction house, strategy, art market, prices.
    Date: 2021
  2. By: Marie BLUM (LaRGE Research Center, Université de Strasbourg); Régis BLAZY (LaRGE Research Center, Université de Strasbourg)
    Abstract: This research examines whether and how the bid dynamics influence the final price, using a unique hand-collected database gathering bid dynamics of artworks auctioned live by a human auctioneer. Specifically, we study the degree of aggressiveness of bids and the pace of the auction resulting from the succession of bids, at the three main stages of an auction. We first find that bid dynamics are not neutral towards final auction prices. In line with our theoretical framework, this result confirms the importance of bidders’ “fuzzy” reserve prices which explains why bidders adopt strategic behaviors. We then find that the auction price particularly benefits from the presence of “motivated” bidders, i.e. bidders who bid aggressively (high and quickly) to win the auction and do not seek for a bargain, especially at the beginning and end of the auction. At the end however, this positive impact of aggressive bidding may be attenuated by a despondency effect affecting some bidders. Moreover, we find that early arousal, which also contributes to provide valuable information on the artwork’s common value, boosts the price. Lastly, we show that ultimate duels between bidders increase final prices. Overall, this paper proposes a primer conceptual framework of bidders’ fuzzy reserves. This investigation contributes to the understanding of bidding behaviors by offering an easily understandable insight into bid dynamics, and by analyzing the case of live auctions of hedonic products that have received few attention until now.
    Keywords: bid dynamics, auction price, fuzzy reserve prices, auction phases, live auctions, art market.
    JEL: Z11 D44
    Date: 2021
  3. By: Roy, Souvik; Sadhukhan, Soumyarup
    Abstract: We consider the problem of choosing a committee from a set of available candidates through a randomized social choice function when there are bounds on the size (the number of members) of the committee to be formed. We show that for any (non-vacuous) restriction on the size of the committee, a random social choice function (RSCF) is onto and strategy-proof if and only if it is a range-restricted random dictatorial rule. Next, we consider the situation where an “undesirable committee” can be chosen with positive probability only if everyone in the society wants it as his best committee. We call this property strong unanimity. We characterize all strongly unanimous and strategy-proof RSCFs when there is exactly one undesirable committee. A common situation where a single committee is undesirable is one where the null committee is not allowed to be formed. We further show that there is no RSCF satisfying strong unanimity and strategy-proofness when there are more than one undesirable committees. Finally, we extend all our results when strategy-proofness is strengthened with group strategy-proofness.
    Keywords: Committee Formation; Random Social Choice Function; Strategy-proofness; Ontoness; Strong unanimity; Group strategy-proofness
    JEL: D71 D82
    Date: 2021–11–30
  4. By: Ernesto Savaglio; Stefano Vannucci
    Abstract: Two characterizations of the whole class of strategy-proof aggregation rules on rich domains of locally unimodal preorders in finite median join-semilattices are provided. In particular, it is shown that such a class consists precisely of generalized weak sponsorship rules induced by certain families of order filters of the coalition poset. It follows that the co-majority rule and many other inclusive aggregation rules belong to that class. The co-majority rule for an odd number of agents is characterized and shown to be equivalent to a Condorcet-Kemeny rule. Applications to preference aggregation rules including Arrowian social welfare functions are also considered. The existence of strategy-proof anonymous neutral and unanimity-respecting social welfare functions which are defined on arbitrary profiles of total preorders and satisfy a suitably relaxed independence condition is shown to follow from our characterizations.
    Keywords: Strategy-proofness, single peakedness, median join-semilattice, social welfare function
    JEL: D71
    Date: 2021–12
  5. By: Basteck, Christian; Mantovani, Marco
    Abstract: In school choice problems, the widely used manipulable Immediate Acceptance mechanism (IA) disadvantages unsophisticated applicants, but may ex-ante Pareto dominate any strategy-proof alternative. In these cases, it may be preferable to aid applicants within IA, rather than to abandon it. In a laboratory experiment, we first document a substantial gap in strategy choices and outcomes between subjects of higher and lower cognitive ability under IA. We then test whether disclosing information on past applications levels the playing field. The treatment is effective in partially reducing the gap between applicants of above- and below-median cognitive ability and in curbing ability segregation across schools, but may leave the least able applicants further behind.
    Keywords: laboratory experiment,school choice,immediate acceptance,strategy-proofness,cognitive ability,mechanism design
    JEL: C78 C91 D82 I24
    Date: 2021
  6. By: Mithun Chakraborty; Erel Segal-Halevi; Warut Suksompong
    Abstract: We revisit the setting of fairly allocating indivisible items when agents have different weights representing their entitlements. First, we propose a parameterized family of relaxations for weighted envy-freeness and the same for weighted proportionality; the parameters indicate whether smaller-weight or larger-weight agents should be given a higher priority. We show that each notion in these families can always be satisfied, but any two cannot necessarily be fulfilled simultaneously. We then introduce an intuitive weighted generalization of maximin share fairness and establish the optimal approximation of it that can be guaranteed. Furthermore, we characterize the implication relations between the various weighted fairness notions introduced in this and prior work, and relate them to the lower and upper quota axioms from apportionment.
    Date: 2021–12
  7. By: Odran Bonnet; Alfred Galichon; Yu-Wei Hsieh; Keith O'Hara; Matt Shum
    Abstract: The problem of demand inversion - a crucial step in the estimation of random utility discrete-choice models - is equivalent to the determination of stable outcomes in two-sided matching models. This equivalence applies to random utility models that are not necessarily additive, smooth, nor even invertible. Based on this equivalence, algorithms for the determination of stable matchings provide effective computational methods for estimating these models. For non-invertible models, the identified set of utility vectors is a lattice, and the matching algorithms recover sharp upper and lower bounds on the utilities. Our matching approach facilitates estimation of models that were previously difficult to estimate, such as the pure characteristics model. An empirical application to voting data from the 1999 European Parliament elections illustrates the good performance of our matching-based demand inversion algorithms in practice.
    Date: 2021–11
  8. By: Takahiro Hattori (Corresponding author. Project Assistant Professor, University of Tokyo and Visiting Scholar, Policy Research Institute, Ministry of Finance, Japan); Shogo Takahashi (Visiting Scholar, Policy Research Institute, Ministry of Finance, Japan)
    Abstract: In 2007, the Japanese government changed the format of auctions for 30-year Japanese government bonds (JGB) from uniform to discriminatory. We examine data before and after this change to assess whether this has lowered the borrowing costs of the Japanese government, in the largest government bond market in the world. As Ausubel et al. (2014) described, the general revenue ranking of uniform and discriminatory auctions is an empirical question. Our empirical result shows that this policy change lowered borrowing costs. We also show that a discriminatory auction lowers the borrowing costs when the value of the bidders to JGB tends to be symmetric, which is consistent with the prediction of Ausubel et al. (2014).
    Keywords: Discriminatory auction, Uniform auction, Markup, When-issued markets, Japanese government bond, government costs
    JEL: C57 D82 G18 G28
    Date: 2021–11
  9. By: Mariana Laverde (Yale University)
    Abstract: This paper studies the limits of school choice policies in the presence of residential segregation. Using data from the Boston Public Schools choice system, I show that white prekindergarteners are assigned to higher-achieving schools than minority students, and that cross-race school achievement gaps under choice are no lower than would be generated by a neighborhood assignment rule. To understand why choicebased assignments do not reduce gaps in school achievement, I use data on applicants’ rank-order choices to estimate preferences over schools, and consider a series of counterfactual assignments. I find that half of the gap in school achievement between white and Black or Hispanic students is explained by minorities’ longer travel distance to high-performing schools. Differences in demand parameters explain a smaller fraction of the gap, while algorithm rules have no effect.
    Keywords: Boston Public Schools, residential segregation, school achievement, achievement gaps
    JEL: I21 J15 J61
    Date: 2022–01

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