nep-des New Economics Papers
on Economic Design
Issue of 2023‒01‒02
seven papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. Respecting priorities versus respecting preferences in school choice: When is there a trade-off ? By Estelle Cantillon; Li Chen; Juan Sebastian Pereyra Barreiro
  2. A Case for Tiered School Systems By Jacopo Bizzotto; Adrien Vigier
  3. Deferred Acceptance with News Utility By Bnaya Dreyfuss; Ofer Glicksohn; Ori Heffetz; Assaf Romm
  4. Strategyproofness and Proportionality in Party-Approval Multiwinner Elections By Th\'eo Delemazure; Tom Demeulemeester; Manuel Eberl; Jonas Israel; Patrick Lederer
  5. When can lotteries improve public procurement processes? By Antonio Estache; Renaud Foucart; Tomas Serebrisky
  6. Nash implementation by stochastic mechanisms: a simple full characterization By Siyang Xiong
  7. Asymmetric majority pillage games By Kerber, Manfred; Rowat, Colin; Yoshihara, Naoki

  1. By: Estelle Cantillon; Li Chen; Juan Sebastian Pereyra Barreiro
    Abstract: A classic trade-off that school districts face when deciding which matching algorithm to use is that it is not possible to always respect both priorities and preferences. The student-proposing deferred acceptance algorithm (DA) respects priorities but can lead to inefficient allocations. The top trading cycle algorithm (TTC) respects preferences but may violate priorities. We identify a new condition on school choice markets under which DA is efficient and there is a unique allocation that respects priorities. Our condition generalizes earlier conditions by placing restrictions on how preferences and priorities relate to one another only on the parts that are relevant for the assignment. We discuss how our condition sheds light on existing empirical findings. We show through simulations that our condition significantly expands the range of known environments for which DA is efficient.
    Keywords: Matching; envyfreeness; efficiency; priorities; preferences; matching algorithms
    JEL: C78 D47 D78 D82
    Date: 2022–12
  2. By: Jacopo Bizzotto (Oslo Business School, Oslo Metropolitan University); Adrien Vigier (University of Oxford)
    Abstract: We study a mechanism design problem addressing simultaneously how students should be grouped and graded. We argue that the effort-maximizing school systems exhibit coarse stratification and more lenient grading at the top-tier schools than at the bottom-tier schools. Our study contributes to the ongoing policy debate on school tracking.
    Date: 2022–08–23
  3. By: Bnaya Dreyfuss; Ofer Glicksohn; Ori Heffetz; Assaf Romm
    Abstract: Can incorporating expectations-based-reference-dependence (EBRD) considerations reduce seemingly dominated choices in the Deferred Acceptance (DA) mechanism? We run two experiments (total N = 500) where participants are randomly assigned into one of four DA variants—{static, dynamic} × {student proposing, student receiving}—and play ten simulated large-market school-assignment problems. While a standard, reference-independent model predicts the same straightforward behavior across all problems and variants, a news-utility EBRD model predicts stark differences across variants and problems. As the EBRD model predicts, we find that (i) across variants, dynamic student receiving leads to significantly fewer deviations from straightforward behavior, (ii) across problems, deviations increase with competitiveness, and (iii) within specific problems, the specific deviations predicted by the EBRD model are indeed those commonly observed in the data.
    JEL: D47 D82 D84 D91
    Date: 2022–11
  4. By: Th\'eo Delemazure; Tom Demeulemeester; Manuel Eberl; Jonas Israel; Patrick Lederer
    Abstract: In party-approval multiwinner elections the goal is to allocate the seats of a fixed-size committee to parties based on the approval ballots of the voters over the parties. In particular, each voter can approve multiple parties and each party can be assigned multiple seats. Two central requirements in this setting are proportional representation and strategyproofness. Intuitively, proportional representation requires that every sufficiently large group of voters with similar preferences is represented in the committee. Strategyproofness demands that no voter can benefit by misreporting her true preferences. We show that these two axioms are incompatible for anonymous party-approval multiwinner voting rules, thus proving a far-reaching impossibility theorem. The proof of this result is obtained by formulating the problem in propositional logic and then letting a SAT solver show that the formula is unsatisfiable. Additionally, we demonstrate how to circumvent this impossibility by considering a weakening of strategy\-proofness which requires that only voters who do not approve any elected party cannot manipulate. While most common voting rules fail even this weak notion of strategyproofness, we characterize Chamberlin--Courant approval voting within the class of Thiele rules based on this strategyproofness notion.
    Date: 2022–11
  5. By: Antonio Estache; Renaud Foucart; Tomas Serebrisky
    Abstract: We study the feasibility, challenges, and potential benefits of adding a lottery component to standard negotiated and rule-based procurement procedures. For negotiated procedures, we introduce a “discrete lottery†in which local bureaucrats negotiate with a small number of selected bidders and a lottery decides who is awarded the contract. We show that the discrete lottery performs better than a standard negotiated procedure when the pool of firms to choose from is large and corruption is high. For rule-based auction procedures, we introduce a “third-price lottery†in which the two highest bidders are selected with equal probability and the project is contracted at a price corresponding to the third highest bid. We show that the third-price lottery reduces the risks from limited liability and renegotiation. It performs better than a standard second-price or ascending auction when the suppliers’ pool size, the risk of cost overrun, delays and non-delivery of the project are high. The choice between a second-price auction, a third price lottery and a lottery amongst all bidders also depends on the weight placed on producer surplus, including for instance the desire to increase the participation of local SMEs in public sector services markets.
    Keywords: rules, discretion, procurement, lotteries, corruption, auctions
    JEL: D44 D73 H57
    Date: 2022
  6. By: Siyang Xiong
    Abstract: We study Nash implementation by stochastic mechanisms, and provide a surprisingly simple full characterization, which is in sharp contrast to the classical, albeit complicated, full characterization in Moore and Repullo (1990).
    Date: 2022–11
  7. By: Kerber, Manfred; Rowat, Colin; Yoshihara, Naoki
    Abstract: We study pillage games (Jordan in J Econ Theory 131.1:26-44, 2006, “Pillage and property”), which model unstructured power contests. To enable empirical tests of pillage game theory, we relax a symmetry assumption that agents’ intrinsic contributions to a coalition’s power is identical. We characterise the core for all n. In the three-agent game: (i) only eight configurations are possible for the core, which contains at most six allocations; (ii) for each core configuration, the stable set is either unique or fails to exist; (iii) the linear power function creates a tension between a stable set’s existence and the interiority of its allocations, so that only special cases contain strictly interior allocations. Our analysis suggests that non-linear power functions may offer better empirical tests of pillage game theory.
    Keywords: power contests, core, stable sets
    JEL: C71 D51 P14
    Date: 2022–10

This nep-des issue is ©2023 by Guillaume Haeringer and Alex Teytelboym. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.