nep-des New Economics Papers
on Economic Design
Issue of 2022‒09‒12
five papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Stable Matching with Mistaken Agents By Georgy Artemov; Yeon-Koo Che; YingHua He
  2. Regret-Free Truth-Telling Voting Rules By R. Pablo Arribillaga; Agustín G. Bonifacio; Marcelo A. Fernandez
  3. Monotone Comparative Statics for Equilibrium Problems By Alfred Galichon; Larry Samuelson; Lucas Vernet
  4. Preferences and performance in simultaneous first-price auctions: a structural analysis By Gentry, Matthew; Komarova, Tatiana; Schiraldi, Pasquale
  5. Experimental Auctions with Securities By Zachary Breig; Allan Hernández-Chanto; Declan Hunt

  1. By: Georgy Artemov; Yeon-Koo Che; YingHua He
    Abstract: Motivated by growing evidence of agents' mistakes in strategically simple environments, we propose a solution concept -- robust equilibrium -- that requires only an asymptotically optimal behavior. We use it to study large random matching markets operated by the applicant-proposing Deferred Acceptance (DA). Although truth-telling is a dominant strategy, almost all applicants may be non-truthful in robust equilibrium; however, the outcome must be arbitrarily close to the stable matching. Our results imply that one can assume truthful agents to study DA outcomes, theoretically or counterfactually. However, to estimate the preferences of mistaken agents, one should assume stable matching but not truth-telling.
    Date: 2022–07
  2. By: R. Pablo Arribillaga (Universidad Nacional de San Luis/CONICET); Agustín G. Bonifacio (Universidad Nacional de San Luis/CONICET); Marcelo A. Fernandez (Johns Hopkins University)
    Abstract: We study the implications of regret-free truth-telling for voting rules. Regretfreeness, a weakening of strategy-proofness, provides incentives to report preferences truthfully if agents want to avoid regret. We first show that for tops-only rules regret-freeness is equivalent to strategy-proofness. Then, we focus on three families of (non-tops-only) voting methods: maxmin, scoring, and Condorcet consistent ones. We show positive and negative results for both neutral and anonymous versions of maxmin and scoring rules. We also show that Condorcet consistent rules that satisfy a mild monotonicity requirement are not regret-free, and neither are successive elimination rules. Furthermore, we provide full characterizations for the case of three alternatives and two agents.
    Keywords: Strategy-proofness, Regret-freeness, Voting Rules, Social Choice
    JEL: D71
    Date: 2022–08
  3. By: Alfred Galichon; Larry Samuelson; Lucas Vernet
    Abstract: We introduce a notion of substitutability for correspondences and establish a monotone comparative static result, unifying results such as the inverse isotonicity of M-matrices, Berry, Gandhi and Haile's identification of demand systems, monotone comparative statics, and results on the structure of the core of matching games without transfers (Gale and Shapley) and with transfers (Demange and Gale). More specifically, we introduce the notions of 'unified gross substitutes' and 'nonreversingness' and show that if Q is a supply correspondence defined on a set of prices P which is a sublattice of R^N, and Q satisfies these two properties, then the set of prices yielding supply vector q is increasing (in the strong set order) in q; and it is a sublattice of P.
    Date: 2022–07
  4. By: Gentry, Matthew; Komarova, Tatiana; Schiraldi, Pasquale
    Abstract: Motivated by the prevalence of simultaneous bidding across a wide range of auction markets, we develop and estimate a model of strategic interaction in simultaneous first-price auctions when objects are heterogeneous and bidders have non-additive preferences over combinations. We establish non-parametric identification of primitives in this model under standard exclusion restrictions, providing a basis for both estimation and testing of preferences over combinations. We then apply our model to data on Michigan Department of Transportation (MDOT) highway procurement auctions, quantifying the magnitude of cost synergies and evaluating the performance of the simultaneous first-price mechanism in the MDOT marketplace.
    Keywords: auctions; complementarities; identification; ES/N000056/1
    JEL: D44
    Date: 2022–07–04
  5. By: Zachary Breig (School of Economics, University of Queensland, Brisbane, Australia); Allan Hernández-Chanto (School of Economics, University of Queensland, Brisbane, Australia); Declan Hunt (Reserve Bank of Australia)
    Abstract: We experimentally implement security-bid auctions, which are used around the world to sell projects that generate large future cash flows that are stochastic. Buyers make bids with debt and equity, linking payments to the project’s ex-post revenue. Contrary to the theoretical predictions, we find that debt auctions generate more revenue than equity auctions. This is explained by overbidding in debt auctions. Furthermore, we find that second-price equity auctions generate slightly more surplus than other treatments and that noisy bidding has differential effects depending on the format. We also implement informal auctions and find that buyers use equity more often than theory predicts and that sellers successfully choose dominant bids.
    Keywords: auctions; experiment; securities; debt; equity; risk preferences
    JEL: C70 C90 D44 D47
    Date: 2022–08

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