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on Economic Design |
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Issue of 2022‒10‒24
twelve papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Battal Do\u{g}an; Kenzo Imamura; M. Bumin Yenmez |
| Abstract: | We introduce a method to derive from a characterization of institutional choice rules (or priority rules), a characterization of the Gale-Shapley deferred-acceptance (DA) matching rule based on these choice rules. We apply our method to school choice in Chile, where we design choice rules for schools that are uniquely compatible with the School Inclusion Law and derive a set of matching properties, compatible with the law, that characterizes the DA rule based on the designed choice rules. Our method provides a recipe for establishing such results and can help policymakers decide on which allocation rule to use in practice. |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2209.06777&r= |
| By: | Di Feng; Bettina Klaus; Flip Klijn |
| Abstract: | We consider the generalization of the classical Shapley and Scarf housing market model of trading indivisible objects (houses) (Shapley and Scarf, 1974) to so-called multiple-type housing markets (Moulin, 1995). When preferences are separable, the prominent solution for these markets is the coordinate-wise top-trading-cycles (cTTC) mechanism. We first show that on the subdomain of lexicographic preferences, a mechanism is unanimous (or onto), individually rational, strategy-proof, and non-bossy if and only if it is the cTTC mechanism (Theorem 1). Second, using Theorem 1, we obtain a corresponding characterization on the domain of separable preferences (Theorem 2). Finally, we show that on the domain of strict preferences, there is no mechanism satisfying unanimity (or ontoness), individual rationality, strategy-proofness, and non-bossiness (Theorem 3). Our characterization of the cTTC mechanism constitutes the first characterization of an extension of the prominent top-trading-cycles (TTC) mechanism to multiple-type housing markets. |
| Keywords: | multiple-type housing markets, strategy-proofness, non-bossiness, top-trading-cycles (TTC) mechanism, market design |
| JEL: | C78 D47 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1341&r= |
| By: | Sang-Hyun Kim (Yonsei University); Chulyoung Kim (Yonsei University); Jaeok Park (Yonsei University); Jinhyuk Lee (Korea University) |
| Abstract: | We consider a scenario where a single indivisible object is auctioned off to three bidders and among the three bidders there is one bidder whose winning imposes a positive or negative externality on the other two bidders. We theoretically and experimentally compare two standard sealed-bid auction formats, first-price and second-price auctions, under complete information. Using a refinement of undominated Nash equilibria, we analyze equilibrium bids and outcomes in the two auction formats. Our experimental results show that overbidding relative to equilibrium bids is prevalent, especially in second-price auctions, and this leads to higher revenue and lower efficiency in secondprice auctions than in first-price auctions, especially under negative externalities. Our results are consistent with previous experimental findings that bidders tend to overbid more in second-price auctions than in first-price auctions, and they suggest that such a tendency is robust to the introduction of externalities. |
| Keywords: | auctions; externalities; experiments; overbidding; efficiency. |
| JEL: | C91 D44 D62 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2022rwp-199&r= |
| By: | Olivier Bos; Tom Truyts |
| Abstract: | We study the optimal entry fee in a symmetric private value first-price auction with signaling, in which the participation decisions and the auction outcome are used by an outside observer to infer the bidders’ types. We show that this auction has a unique fully separating equilibrium bidding function. When the bidders’ sensibility for the signaling concern is sufficiently strong, the expected revenue maximizing entry fee is the maximal fee that guarantees full participation. The larger is the bidder's sensibility, the higher is the optimal participation. |
| Keywords: | first-price auction, entry, monotonic signalling, social status |
| JEL: | D44 D82 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9900&r= |
| By: | Jason Milionis; Dean Hirsch; Andy Arditi; Pranav Garimidi |
| Abstract: | Lately, Non-Fungible Tokens (NFTs), i.e., uniquely discernible assets on a blockchain, have skyrocketed in popularity by addressing a broad audience. However, the typical NFT auctioning procedures are conducted in various, ad hoc ways, while mostly ignoring the context that the blockchain provides. One of the main targets of this work is to shed light on the vastly unexplored design space of NFT Auction Mechanisms, especially in those characteristics that fundamentally differ from traditional and more contemporaneous forms of auctions. We focus on the case that bidders have a valuation for the auctioned NFT, i.e., what we term the single-item NFT auction case. In this setting, we formally define an NFT Auction Mechanism, give the properties that we would ideally like a perfect mechanism to satisfy (broadly known as incentive compatibility and collusion resistance) and prove that it is impossible to have such a perfect mechanism. Even though we cannot have an all-powerful protocol like that, we move on to consider relaxed notions of those properties that we may desire the protocol to satisfy, as a trade-off between implementability and economic guarantees. Specifically, we define the notion of an equilibrium-truthful auction, where neither the seller nor the bidders can improve their utility by acting non-truthfully, so long as the counter-party acts truthfully. We also define asymptotically second-price auctions, in which the seller does not lose asymptotically any revenue in comparison to the theoretically-optimal (static) second-price sealed-bid auction, in the case that the bidders' valuations are drawn independently from some distribution. We showcase why these two are very desirable properties for an auction mechanism to enjoy, and construct the first known NFT Auction Mechanism which provably possesses such formal guarantees. |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2209.11293&r= |
| By: | Federico Fioravanti (Universidad Nacional del Sur/CONICET); Massó Jordi (Universitat Autònoma de Barcelona) |
| Abstract: | We consider the problem of a society that uses a voting rule to select a subset from a given set of objects (candidates, binary issues or alike). We assume that voters’preferences over subsets of objects are separable: Adding an object to a set leads to a better set if and only if the object is good (as a singleton set, the object is better thanthe empty set). A voting rule is strategy-proof if no voter benefits by not revealing its preferences truthfully and it is false-name-proof if no voter gains by submitting severalvotes under other identities. We characterize all voting rules that verify false-nameproofness, strategy-proofness, unanimity, anonymity, and neutrality as either the classof voting by quota one (all voters can be decisive for all objects) or the class of voting by full quota (all voters can veto all objects). |
| Keywords: | False-name-proofness; Strategy-proofness; Separable Preferences |
| JEL: | D71 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:181&r= |
| By: | Meisner, Vincent (TU Berlin) |
| Abstract: | Despite the truthful dominant strategy, participants in strategy-proof mechanisms submit manipulated preferences. In our model, participants dislike rejections and enjoy the confirmation from getting what they declared most desirable. Formally, the payoff from a match decreases in its position in the submitted ranking such that a strategic trade-off between preference intensity and match probability arises. This trade-off can trigger the commonly observed self-selection strategies. We show that misrepresentations can persist for arbitrarily small report-dependent components. However, honesty is guaranteed to be optimal if and only if there is no conflict between the quality and feasibility of a match. |
| Keywords: | market design; matching; school choice; self-regarding preferences; strategy-proof mechanisms; |
| JEL: | D47 D78 D81 D91 |
| Date: | 2021–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:289&r= |
| By: | Malachy James Gavan; Antonio Penta |
| Abstract: | We introduce Safe Implementation, a notion of implementation that adds to the standard requirements the restriction that deviations from the baseline solution concept induce outcomes that are acceptable. The primitives of Safe Implementation therefore include both a Social Choice Correspondence, as standard, and an Acceptability Correspondence, each mapping every state of the world to a subset of allocations. This framework generalizes standard notions of implementation, and can accommodate a variety of considerations, including robustness concerns with respect to mistakes in play, model misspecification, behavioral considerations, state-dependent feasibility restrictions, limited commitment, etc. We provide results both for general solution concepts and for the case in which agents' interaction is modelled by Nash Equilibrium. In the latter case, we identify necessary and sufficient conditions (namely, Comonotonicity and safety-no veto) that restrict the joint behavior of the Social Choice and Acceptability Correspondences. These conditions are more stringent than Maskin's (1978), but coincide with them when the safety requirements are vacuous. We also show that these conditions are quite permissive in important economic applications, such as environments with single-crossing preferences and in problems of efficient allocation of in- divisible goods, but also that Safe Implementation can be very demanding in environments with 'rich' preferences, regardless of the underlying solution concept. |
| Keywords: | comonotonicity, mechanism design, implementation, robustness, resilience, safe implementation, safety no-veto |
| JEL: | C72 D82 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1363&r= |
| By: | Frédéric Koessler (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marie Laclau (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Tristan Tomala (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, HEC Paris - Ecole des Hautes Etudes Commerciales) |
| Abstract: | We study the interaction between multiple information designers who try to influence the behavior of a set of agents. When each designer can choose information policies from a compact set of statistical experiments with countable support, such games always admit subgame perfect equilibria. When designers produce public information, every equilibrium of the simple game in which the set of messages coincides with the set of states is robust in the sense that it is an equilibrium with larger and possibly infinite and uncountable message sets. The converse is true for a class of Markovian equilibria only. When designers produce information for their own corporation of agents, robust pure strategy equilibria exist and are characterized via an auxiliary normal form game in which the set of strategies of each designer is the set of outcomes induced by Bayes correlated equilibria in her corporation. |
| Keywords: | Statistical experiments,Splitting games,Sharing rules,Information design,Bayesian persuasion |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01791918&r= |
| By: | Frédéric Koessler (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marie Laclau (HEC Paris - Ecole des Hautes Etudes Commerciales, GREGHEC - Groupement de Recherche et d'Etudes en Gestion - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique); Jérôme Renault (TSE-R - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Tristan Tomala (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, HEC Paris - Ecole des Hautes Etudes Commerciales) |
| Abstract: | We analyze information design games between two designers with opposite preferences and a single agent. Before the agent makes a decision, designers repeatedly disclose public information about persistent state parameters. Disclosure continues until no designer wishes to reveal further information. We consider environments with general constraints on feasible information disclosure policies. Our main results characterize equilibrium payoffs and strategies of this long information design game and compare them with the equilibrium outcomes of games where designers move only at a single predetermined period. When information disclosure policies are unconstrained, we show that at equilibrium in the long game, information is revealed right away in a single period; otherwise, the number of periods in which information is disclosed might be unbounded. As an application, we study a competition in product demonstration and show that more information is revealed if each designer could disclose information at a predetermined period. The format that provides the buyer with most information is the sequential game where the last mover is the ex-ante favorite seller. |
| Keywords: | Bayesian persuasion,Concavification,Convexification,Information design,Mertens Zamir solution,Product demonstration,Splitting games,Statistical experiments,Stochastic games |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-02400053&r= |
| By: | Anuj Bhowmik (Indian Statistical Institute, Kolkata); Japneet Kaur (Indira Gandhi Institute of Development Research) |
| Abstract: | The paper establishes an equivalence theorem (which states that an allocation is a club equilibrium allocation if and only if it is robustly efficient) in a setting where individuals not only trade private goods but can choose to become members of a finite number of clubs, where each club is defined by the external characteristics of its participants and the project in which they are involved. Here competitive equilibrium allocations are characterized using the veto power of the set of all agents, i.e. rather than considering the blocking power of multiple coalitions, we only take the coalition comprising all agents and study its blocking power in a group of economies attained by slightly modifying each agent's initial endowment. |
| Keywords: | Club goods, Robustly efficient allocations, core-Walras equivalence, Walrasian equilibria |
| JEL: | D50 D51 D60 D61 D71 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2022-014&r= |
| By: | Vladimir Danilov |
| Abstract: | The paper studies complementary choice functions, i.e. monotonic and consistent choice functions. Such choice functions were introduced and used in the work \cite{RY} for investigation of matchings with complementary contracts. Three (universal) ways of constructing such functions are given: through pre-topologies, as direct images of completely complementary (or pre-ordered) choice functions, and with the help of supermodular set-functions. |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2209.06514&r= |