|
on Economic Design |
|
Issue of 2023‒02‒20
eighteen papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Atay, Ata; Mauleon, Ana (Université catholique de Louvain, LIDAM/CORE, Belgium); Vannetelbosch, Vincent (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | We consider priority-based school choice problems with farsighted students. We show that a singleton set consisting of the matching obtained from the Top Trading Cycles (TTC) mechanism is a farsighted stable set. However, the matching obtained from the Deferred Acceptance (DA) mechanism may not belong to any farsighted stable set. Hence, the TTC mechanism provides an assignment that is not only Pareto efficient but also farsightedly stable. Moreover, looking forward three steps ahead is already sufficient for stabilizing the matching obtained from the TTC. |
| Keywords: | School choice ; top trading cycle ; stable sets ; farsighted students |
| JEL: | C70 C78 |
| Date: | 2022–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2022025&r=des |
| By: | Julien Combe (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique); Olivier Tercieux (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); Camille Terrier (UNIL - Université de Lausanne = University of Lausanne, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, CEPR - Center for Economic Policy Research - CEPR, CESifo - CESifo) |
| Abstract: | To assign teachers to schools, a modified version of the well-known deferred acceptance mechanism has been proposed in the literature and is used in practice. We show that this mechanism fails to be fair and efficient for both teachers and schools. We identify a class of strategy-proof mechanisms that cannot be improved upon in terms of both efficiency and fairness. Using a rich dataset on teachers' applications in France, we estimate teachers preferences and perform a counterfactual analysis. The results show that these mechanisms perform much better than the modified version of deferred acceptance. For instance, the number of teachers moving from their positions more than triples under our mechanism. |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-03917996&r=des |
| By: | Isa E. Hafalir; Fuhito Kojima; M. Bumin Yenmez; Koji Yokote |
| Abstract: | We provide optimal solutions to an institution that has dual goals of diversity and meritocracy when choosing from a set of applications. For example, in college admissions, administrators may want to admit a diverse class in addition to choosing students with the highest qualifications. We provide a class of choice rules that maximize merit subject to attaining a diversity level. Using this class, we find all subsets of applications on the diversity-merit Pareto frontier. In addition, we provide two novel characterizations of matroids. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.00237&r=des |
| By: | Atay, Ata; Mauleon, Ana (Université catholique de Louvain, LIDAM/CORE, Belgium); Vannetelbosch, Vincent (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | We consider priority-based matching problems with limited farsightedness. We show that, once agents are sufficiently farsighted, the matching obtained from the Top Trading Cycles (TTC) algorithm becomes stable: a singleton set consisting of the TTC matching is a horizon-k vNM stable set if the degree of farsightedness is greater than three times the number of agents in the largest cycle of the TTC. On the contrary, the matching obtained from the Deferred Acceptance (DA) algorithm may not belong to any horizon-k vNM stable set for k large enough. |
| Keywords: | Priority-based matching ; top trading cycle ; stable sets ; limited farsightedness |
| JEL: | C70 C78 D47 D61 |
| Date: | 2022–12–12 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2022028&r=des |
| By: | Aranyak Mehta; Andres Perlroth |
| Abstract: | Advertisers in online ad auctions are increasingly using auto-bidding mechanisms to bid into auctions instead of directly bidding their value manually. One prominent auto-bidding format is the target cost-per-acquisition (tCPA) which maximizes the volume of conversions subject to a return-of-investment constraint. From an auction theoretic perspective however, this trend seems to go against foundational results that postulate that for profit-maximizing bidders, it is optimal to use a classic bidding system like marginal CPA (mCPA) bidding rather than using strategies like tCPA. In this paper we rationalize the adoption of such seemingly sub-optimal bidding within the canonical quasi-linear framework. The crux of the argument lies in the notion of *commitment*. We consider a multi-stage game where first the auctioneer declares the auction rules; then bidders select either the tCPA or mCPA bidding format and then, if the auctioneer lacks commitment, it can revisit the rules of the auction (e.g., may readjust reserve prices depending on the observed bids). Our main result is that so long as a bidder believes that the auctioneer lacks commitment to follow the rule of the declared auction then the bidder will make a higher profit by choosing the tCPA format over the mCPA format. We then explore the commitment consequences for the auctioneer. In a simplified version of the model where there is only one bidder, we show that the tCPA subgame admits a *credible* equilibrium while the mCPA format does not. That is, when the bidder chooses the tCPA format the auctioneer can credibly implement the auction rules announced at the beginning of the game. We also show that, under some mild conditions, the auctioneer's revenue is larger when the bidder uses the tCPA format rather than mCPA. We further quantify the value for the auctioneer to be able to commit to the declared auction rules. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.07312&r=des |
| By: | Shraman Banerjee (Department Of Economics, Shiv Nadar University); Swagata Bhattacharjee (Department Of Economics, Ashoka University) |
| Abstract: | In single object auctions with asymmetric bidders, the Myerson Optimal auction is difficult to implement because of its informational requirements, complexity, and a possible discouragement effect on the bidders. This paper experimentally studies the performance of a "Simple" auction (Hartline and Roughgarden, 2009) vis-a-vis Optimal auction. We find that Simple auction revenue- approximates Optimal auction better than what the theory predicts: under weak asymmetry the revenue difference is not statistically significant. We explore the bidding behavior and show that the high type bidders get discouraged in Optimal auction. We also explore the role of cognitive ability in the bidding behavior. |
| Keywords: | Optimal Auction, Simple Auction, Asymmetric Bidders, Experiment. |
| JEL: | D44 C90 |
| Date: | 2023–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:alr:wpaper:2023-01&r=des |
| By: | Daniil Larionov; Hien Pham; Takuro Yamashita; Shuguang Zhu |
| Abstract: | We study mechanism design with flexible but costly information acquisition. There is a principal and four or more agents, sharing a common prior over the set of payoff-relevant states. The principal proposes a mechanism to the agents who can then acquire information about the state of the world by privately designing a signal device. As long as it is costless for each agent to acquire a signal that is independent from the state, we show that there exists a mechanism which allows the principal to implement any social choice rule at zero information acquisition cost to the agents. |
| Keywords: | Mechanism Desgin, Implementation, First Best, Information Acquisition |
| JEL: | D82 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_377&r=des |
| By: | Hitoshi Matsushima (Department of Economics, University of Tokyo) |
| Abstract: | We investigate the implementation of social choice functions with asymmetric information concerning the state from an epistemological perspective. Although agents are either selfish or honest, they do not expect other participants to be honest. However, an honest agent may exist not among participants but in their higher-order beliefs. We assume that “all agents are selfish†never happens to be common knowledge. We show a positive result in general asymmetric information environments, demonstrating that with a minor restriction on signal correlation called information diversity, any incentive-compatible social choice function, whether ethical or nonethical, is uniquely implementable in the Bayesian Nash equilibrium. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf549&r=des |
| By: | Farzad Pourbabaee; Federico Echenique |
| Abstract: | We study mechanism design for public-good provision under a noisy privacy-preserving transformation of individual agents' reported preferences. The setting is a standard binary model with transfers and quasi-linear utility. Agents report their preferences for the public good, which are randomly ``flipped, '' so that any individual report may be explained away as the outcome of noise. We study mechanisms that seek to preserve the public decisions made in the presence of noise (noise sensitivity), pursue efficiency, and mitigate the effect of noise on revenue. The paper analyzes the trade-offs between these competing considerations. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.06967&r=des |
| By: | Julien Grenet (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); Yinghua He (Rice University [Houston], 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); Dorothea Kübler (WZB - Wissenschaftszentrum Berlin für Sozialforschung, TU - Technische Universität Berlin) |
| Abstract: | We document quasi-experimental evidence against the common assumption in the matching literature that agents have full information on their own preferences. In Germany's university admissions, the first stages of the Gale-Shapley algorithm are implemented in real time, allowing for multiple offers per student. We demonstrate that nonexploding early offers are accepted more often than later offers, despite not being more desirable. These results, together with survey evidence and a theoretical model, are consistent with students' costly discovery of preferences. A novel dynamic multioffer mechanism that batches early offers improves matching efficiency by informing students of offer availability before preference discovery. |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-03761513&r=des |
| By: | Alfred Galichon (NYU - New York University [New York] - NYU - NYU System, CIMS - Courant Institute of Mathematical Sciences [New York] - NYU - New York University [New York] - NYU - NYU System, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We show the role that an important equation first studied by Fritz John plays in mechanism design. Dedicated to Nicholas Yannelis on his 65th birthday. |
| Keywords: | Implementability, Mechanism design, John's equation, Kevin Roberts' theorem |
| Date: | 2021–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03936146&r=des |
| By: | Alfred Galichon (NYU - New York University [New York] - NYU - NYU System, CIMS - Courant Institute of Mathematical Sciences [New York] - NYU - New York University [New York] - NYU - NYU System, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Larry Samuelson (Yale University [New Haven]); Lucas Vernet (Centre de recherche de la Banque de France - Banque de France, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| 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 : P ⇒ 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 equilibrium prices Q −1 (q) associated with a vector of quantities q ∈ Q is increasing (in the strong set order) in q; and it is a sublattice of P . |
| Date: | 2022–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03936102&r=des |
| By: | Alfred Galichon (CIMS - Courant Institute of Mathematical Sciences [New York] - NYU - New York University [New York] - NYU - NYU System, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Larry Samuelson (Yale University [New Haven]); Lucas Vernet (Centre de recherche de la Banque de France - Banque de France, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Galichon, Samuelson and Vernet (2022) introduced a class of problems, equilibrium flow problems, that nests several classical economic models such as bipartite matching models, minimum-cost flow problems and hedonic pricing models. We establish conditions for the existence of equilibrium prices in the equilibrium flow problem, in the process generalizing Hall's [2] theorem. |
| Date: | 2022–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03936063&r=des |
| By: | Gustavo Bergantiños (ECOSOT, Universidade de Vigo); Juan D. Moreno-Ternero (Department of Economics, Universidad Pablo de Olavide) |
| Abstract: | We study the problem of sharing the revenues from broadcasting sports leagues among participating clubs. First, we characterize the set of rules satisfying two basic axioms: anonymity and additivity. Then, we decentralize the problem letting clubs vote for rules. No majority equilibrium exists when they are allowed to vote for any rule within the characterized set. Nevertheless, if the set is restricted in a meaningful and plausible way (just replacing anonymity by equal treatment of equals) majority equilibrium does exist. |
| Keywords: | Resource allocation, broadcasting problems, voting, majority, anonymity. |
| JEL: | D63 C71 Z20 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:23.02&r=des |
| By: | Erel Segal-Halevi; Warut Suksompong |
| Abstract: | Cake cutting is a classic fair division problem, with the cake serving as a metaphor for a heterogeneous divisible resource. Recently, it was shown that for any number of players with arbitrary preferences over a cake, it is possible to partition the players into groups of any desired size and divide the cake among the groups so that each group receives a single contiguous piece and every player is envy-free. For two groups, we characterize the group sizes for which such an assignment can be computed by a finite algorithm, showing that the task is possible exactly when one of the groups is a singleton. We also establish an analogous existence result for chore division, and show that the result does not hold for a mixed cake. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.09061&r=des |
| By: | Jon X. Eguia (Michigan State U.); Nicole Immorlica (Microsoft); Steven P. Lalley (U. Chicago); Katrina Ligett (Hebrew U.); Glen Weyl (Microsoft); Dimitrios Xefteris (U. Cyprus) |
| Abstract: | Consider the following collective choice problem: a group of budget constrained agents must choose one of several alternatives. Is there a budget balanced mechanism that: i) does not depend on the specific characteristics of the group, ii) does not require unaffordable transfers, and iii) implements utilitarianism if the agents' preferences are quasilinear and their private information? We study the following procedure: every agent can express any intensity of support or opposition to each alternative, by transferring to the rest of the agents wealth equal to the square of the intensity expressed; and the outcome is determined by the sums of the expressed intensities. We prove that as the group grows large, in every equilibrium of this quadratic-transfers mechanism, each agent's transfer converges to zero, and the probability that the efficient outcome is chosen converges to one. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.06206&r=des |
| By: | Christopher P. Chambers; Federico Echenique; Nicolas S. Lambert |
| Abstract: | We provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that is widely applicable to modern theories of choice under uncertainty. Key is to allow for a monetary environment, in which an objective notion of monotonicity is meaningful. In such environments, we show that subjective expected utility, as well as variational preferences, and other parametrizations of utilities over uncertain acts are recoverable. We also consider utility recovery in a statistical model with noise and random deviations from utility maximization. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.11492&r=des |
| By: | Alfred Galichon (NYU - New York University [New York] - NYU - NYU System, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Bernard Salanié (Columbia University [New York]) |
| Abstract: | In this paper we propose two simple methods to estimate models of matching with transferable and separable utility introduced in Galichon and Salanié (2022). The first method is a minimum distance estimator that relies on the generalized entropy of matching. The second relies on a reformulation of the more special but popular Choo and Siow (2006) model; it uses generalized linear models (GLMs) with two-way fixed effects. |
| Keywords: | Matching, Marriage, Assignment, Estimations comparison |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03936122&r=des |