
on Economic Design 
Issue of 2022‒09‒26
fourteen papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford 
By:  Hiroki Shinozaki 
Abstract:  We consider the problem of allocating a single object to the agents with payments. Agents have preferences that are not necessarily quasilinear. We characterize the class of rules satisfying pairwise strategyproofness and nonimposition by the priority rule. Our characterization result remains valid even if we replace pairwise strategyproofness by either weaker effectively pairwise strategyproofness or stronger group strategyproofness. By exploiting our characterization, we identify the class of rules satisfying both the properties that are in addition (i) onto, (ii) welfare continuous, (iii) minimally fair, (iv) constrained efficient within the class of rules satisfying both the properties, or (v) revenue undominated within the class of rules satisfying the properties, and find the tension between minimal properties of efficiency, fairness, and revenue maximization under pairwise strategyproofness. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:dpr:wpaper:1187&r= 
By:  Naoyuki Kamiyama 
Abstract:  We consider a manytoone variant of the stable matching problem. More concretely, we consider the variant of the stable matching problem where one side has a matroid constraint. Furthermore, we consider the situation where the preference of each agent may contain ties. In this setting, we consider the problem of checking the existence of a strongly stable matching, and finding a strongly stable matching if a strongly stable matching exists. We propose a polynomialtime algorithm for this problem. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2208.11272&r= 
By:  Masaki Aoyagi 
Abstract:  Each agent in a market needs to supplement his skill with a particular skill of another agent to complete his project. A platform matches the agents and allows members of the same match to share their skills. A match is valuable to an agent if he is matched with any agent who possesses a skill complementary to his own skill. When the platform uses the divideandconquer pricing strategy, we study the properties of incentive compatible mechanisms in relation to the reciprocal property of the complementary relationships among different skills, and when the market expands in its size. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:dpr:wpaper:1186&r= 
By:  Yasushi Kawase; Hanna Sumita; Yu Yokoi 
Abstract:  We consider the problem of random assignment of indivisible goods, in which each agent has an ordinal preference and a constraint. Our goal is to characterize the conditions under which there exists a random assignment that simultaneously achieves efficiency and envyfreeness. The probabilistic serial mechanism ensures the existence of such an assignment for the unconstrained setting. In this paper, we consider a more general setting in which each agent can consume a set of items only if the set satisfies her feasibility constraint. Such constraints must be taken into account in student course placements, employee shift assignments, and so on. We demonstrate that an efficient and envyfree assignment may not exist even for the simple case of partition matroid constraints, where the items are categorized and each agent demands one item from each category. We then identify special cases in which an efficient and envyfree assignment always exists. For these cases, the probabilistic serial cannot be naturally extended; therefore, we provide mechanisms to find the desired assignment using various approaches. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2208.07666&r= 
By:  Ville Korpela (Turku School of Economics, University of Turku); Michele Lombardi (University of Liverpool Management School, Liverpool, UK and Department of Economics and Statistics, University of Napoli Federico II); Riccardo D. Saulle (Department of Economics and Management, University of Padova) 
Abstract:  We fully identify the class of social choice functions that are implementable in von Neumann Morgenstern (vNM) stable set (von Neumann and Morgenstern, 1944) by a rights structure. A rights structure formalizes the idea of power distribution in a society. Following Harsanyiâ€™critique (Harsanyi, 1974), we also study implementation problems in vNM stable set that are robust to farsighted reasoning. 
Keywords:  stable set, implementation, rights structure, farsightedness 
JEL:  C71 D02 D71 D82 
Date:  2022–09 
URL:  http://d.repec.org/n?u=RePEc:pad:wpaper:0283&r= 
By:  Ernesto Savaglio; Stefano Vannucci 
Abstract:  Two characterizations of the whole class of strategyproof aggregation rules on rich domains of locally unimodal preorders in finite median joinsemilattices 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 comajority rule and many other inclusive aggregation rules belong to that class. The comajority rule for an odd number of agents is characterized and shown to be equivalent to a CondorcetKemeny median rule. Applications to preference aggregation rules including Arrowian social welfare functions are also considered. The existence of strategyproof anonymous, weakly neutral and unanimityrespecting 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. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2208.12732&r= 
By:  Jacopo Bizzotto; Adrien Vigier 
Abstract:  We study a mechanism design problem addressing simultaneously how students should be grouped and graded. We argue that the effortmaximizing school systems exhibit coarse stratification and more lenient grading at the toptier schools than at the bottomtier schools. Our study contributes to the ongoing policy debate on school tracking. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2208.10894&r= 
By:  Andreas Kleiner 
Abstract:  We study a model of delegation in which a principal takes a multidimensional action and an agent has private information about a multidimensional state of the world. The principal can design any direct mechanism, including stochastic ones. We provide necessary and sufficient conditions for an arbitrary mechanism to maximize the principal's expected payoff. We also discuss simple conditions which ensure that some convex delegation set is optimal. A key step of our analysis shows that a mechanism is incentive compatible if and only if its induced indirect utility is convex and lies below the agent's firstbest payoff. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2208.11835&r= 
By:  Franz Ostrizek; Denis Shishkin 
Abstract:  We study a decisionframing design problem: a principal faces an agent with framedependent preferences and designs an extensive form with a frame at each stage. This allows the principal to circumvent incentive compatibility constraints by inducing dynamically inconsistent choices of the sophisticated agent. We show that a vector of contracts can be implemented if and only if it can be implemented using a canonical extensive form, which has a simple highlowhigh structure using only three stages and the two highest frames, and employs unchosen decoy contracts to deter deviations. We then turn to the study of optimal contracts in the context of the classic monopolistic screening problem and establish the existence of a canonical optimal mechanism, even though our implementability result does not directly apply. In the presence of naive types, the principal can perfectly screen by cognitive type and extract full surplus from naifs. 
Keywords:  Implementation, Screening, Framing, ExtensiveForm Decision Problems, Dynamic Inconsistency, Sophistication, Naivete 
JEL:  D42 D82 D90 L12 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_364&r= 
By:  Yao Luo; Hidenori Takahashi 
Abstract:  Procurement projects often involve substantial uncertainty in inputs at the time of contracting. Whether the procurer or contractor assumes such risk depends on the specific contractual agreement. We develop a model of auction contracts where bidders have multidimensional private information. Bidders balance skewed bidding and risk exposure; both efficient and inefficient bidders submit a low bid via skewed bidding. We document evidence of i) riskbalancing behavior through bid portfolio formation and ii) opportunistic behavior via skewed bidding using auction data. Counterfactual experiments suggest the onus of bearing project risk should fall on the procurer (contractor) when project risk is large (small). 
Keywords:  Contract, UnitPrice, FixedPrice, Portfolio, Cost Overrun, Procurement, Scoring Auction 
JEL:  L5 
Date:  2022–09–01 
URL:  http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa732&r= 
By:  Jiarui Gan; Minbiao Han; Jibang Wu; Haifeng Xu 
Abstract:  In the principalagent problem formulated in [Myerson 1982], agents have private information (type) and make private decisions (action), both of which are unobservable to the principal. Myerson pointed out an elegant solution that relies on the revelation principle, which states that without loss of generality optimal coordination mechanisms of this problem can be assumed to be truthful and direct. Consequently, the problem can be solved by a linear program when the support sets of the action and type spaces are finite. In this paper, we extend Myerson's results to the setting where the principal's action space might be infinite and subject to additional design constraints. This generalized principalagent model unifies several important design problems  including contract design, information design, and Bayesian Stackelberg games  and encompasses them as special cases. We present a revelation principle for this general model, based on which a polynomialtime algorithm is derived for computing the optimal coordination mechanism. This algorithm not only implies new efficient algorithms simultaneously for all the aforementioned special cases but also significantly simplifies previous approaches in the literature. 
Date:  2022–09 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2209.01146&r= 
By:  Yuzhi Yang (Vrije Universiteit Amsterdam); Erik Ansink (Vrije Universiteit Amsterdam) 
Abstract:  We propose the river pollution claims problem to distribute a limited pollution budget among agents located along a river. A key distinction with the standard claims problem is that agents are ordered and they are given priority based on their location in this order instead of their identity. We propose two new axioms that are relevant in the context of river pollution and use these to characterize two priority rules. Our characterization results show that Consistency plays an important role since it makes sure that any asymmetric treatment will be transferred across problems. 
Keywords:  Claims Problem, River Pollution, Pollution Permits, Priority Rules 
JEL:  C71 D62 D63 Q25 
Date:  2022–09–01 
URL:  http://d.repec.org/n?u=RePEc:tin:wpaper:20220058&r= 
By:  Broccardo, Eleonora; Hart, Oliver D.; Zingales, Luigi 
Abstract:  We study the relative effectiveness of exit (divestment and boycott) and voice (engagement) strategies in promoting socially desirable outcomes in companies that generate externalities. We show that if the majority of investors are socially responsible, voice achieves the socially desirable outcome, while exit does not. If the majority of investors are purely selfish, exit is a more effective strategy, but neither strategy generally achieves the first best. We also show that individual incentives to join an exit strategy are not aligned with social incentives, and hence exit can lead to a worse outcome than if all individuals are purely selfish. 
Keywords:  Exit,Voice,Social Responsibility,Divestment,Boycott,Engagement 
JEL:  D02 D21 D23 D62 D64 H41 L21 
Date:  2021 
URL:  http://d.repec.org/n?u=RePEc:zbw:cbscwp:302&r= 
By:  Anindya Bhattacharya; Francesco Ciardiello 
Abstract:  In this note we consider situations of (multidimensional) spatial majority voting. We show that under some assumptions usual in this literature, with an even number of voters if the core of the voting situation is singleton (and in the interior of the policy space) then the element in the core is never a Condorcet winner. This is in sharp contrast with what happens with an odd number of voters: in that case, under identical assumptions, it is well known that if the core of the voting situation is nonempty then the single element in the core is the Condorcet winner as well. 
Date:  2022–08 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2208.06849&r= 