nep-des New Economics Papers
on Economic Design
Issue of 2023‒01‒30
three papers chosen by
Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford

  1. A Common-Value Auction with State-Dependent Participation By Stephan Lauermann; Asher Wolinsky
  2. Interim Rationalizable (and Bayes-Nash) Implementation of Functions: A full Characterization By R Jain; M Lombardi
  3. Everyone Likes to Be Liked: Experimental Evidence from Matching Markets By Opitz, Timm

  1. By: Stephan Lauermann (University of Bonn, Department of Economics); Asher Wolinsky (Northwestern University, Department of Economics)
    Abstract: This paper analyzes a common-value, first-price auction with state-dependent participation. The number of bidders, which is unobservable to them, depends on the true value. For participation patterns with many bidders in each state, the bidding equilibrium may be of a “pooling” type – with high probability, the winning bid is the same across states and is below the ex-ante expected value – or of a “partially revealing“ type – with no significant atoms in the winning bid distribution and an expected winning bid increasing in the true value. Which of these forms will arise is determined by the likelihood ratio at the top of the signal distribution and the participation across states. We fully characterize this relation and show how the participation pattern determines the extent of information aggregation by the price.
    Date: 2021–07
  2. By: R Jain (Institute of Economics, Academia Sinica, Taipei, Taiwan); M Lombardi (University of Liverpool Management School)
    Abstract: Interim Rationalizable Monotonicity, due to Oury and Tercieux (2012), fullycharacterizes the class of social choice functions that are implementable in in-terim correlated rationalizable (and Bayes-Nash equilibrium) strategies.
    JEL: C79 D82
    Date: 2022–05
  3. By: Opitz, Timm (MPI-IC Munich and LMU Munich)
    Abstract: Matching markets can be unstable when individuals prefer to be matched to a partner who also wants to be matched with them. Through a pre-registered and theory-guided laboratory experiment, we provide evidence that such reciprocal preferences exist, significantly decrease stability in matching markets, and are driven both by belief-based and preference-based motives. Participants expect partners who want to be matched with them to be more cooperative, and are more altruistic themselves. This leads to higher cooperation and larger profits when participants can consider each other's preferences.
    Keywords: experiment; market design; matching; reciprocal preferences; incomplete information; Gale-Shapley deferred acceptance mechanism
    JEL: C78 C91 C92 D82 D83 D91
    Date: 2023–01–03

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