nep-des New Economics Papers
on Economic Design
Issue of 2023‒03‒27
ten papers chosen by
Alex Teytelboym
University of Oxford

  1. Welfare Distribution in Two-sided Random Matching Markets By Itai Ashlagi; Mark Braverman; Geng Zhao
  2. Reciprocal Preferences in Matching Markets By Timm Opitz; Christoph Schwaiger
  3. For One and All: Individual and Group Fairness in the Allocation of Indivisible Goods By Jonathan Scarlett; Nicholas Teh; Yair Zick
  4. A Tractable Truthful Profit Maximization Mechanism Design with Autonomous Agents By Mina Montazeri; Hamed Kebriaei; Babak N. Araabi
  5. Budget-feasible mechanism design for non-monotone submodular objectives: Offline and online By Amanatidis, Georgios; Kleer, Pieter; Schäfer, Guido
  6. Electronic Foreclosures By Francesco Mazzola
  7. Coordination via Selling Information By Alessandro Bonatti; Munther Dahleh; Thibaut Horel; Amir Nouripour
  8. Strategyproof Social Decision Schemes on Super Condorcet Domains By Felix Brand; Patrick Lederer; Sascha Tausch
  9. Variable Population Manipulations of Reallocation Rules in Economies with Single-Peaked Preferences By Agustin G. Bonifacio
  10. Behavioral Economics in Education Market Design: A Forward-Looking Review By Alex Rees-Jones; Ran Shorrer

  1. By: Itai Ashlagi; Mark Braverman; Geng Zhao
    Abstract: We study the welfare structure in two-sided large random matching markets. In the model, each agent has a latent personal score for every agent on the other side of the market and her preferences follow a logit model based on these scores. Under a contiguity condition, we provide a tight description of stable outcomes. First, we identify an intrinsic fitness for each agent that represents her relative competitiveness in the market, independent of the realized stable outcome. The intrinsic fitness values correspond to scaling coefficients needed to make a latent mutual matrix bi-stochastic, where the latent scores can be interpreted as a-priori probabilities of a pair being matched. Second, in every stable (or even approximately stable) matching, the welfare or the ranks of the agents on each side of the market, when scaled by their intrinsic fitness, have an approximately exponential empirical distribution. Moreover, the average welfare of agents on one side of the market is sufficient to determine the average on the other side. Overall, each agent's welfare is determined by a global parameter, her intrinsic fitness, and an extrinsic factor with exponential distribution across the population.
    Date: 2023–02
  2. By: Timm Opitz (Max Planck Institute for Innovation and Competition, LMU Munich); Christoph Schwaiger (LMU Munich)
    Abstract: Agents with reciprocal preferences prefer to be matched to a partner who also likes to collaborate with them. In this paper, we introduce and formalize reciprocal preferences, apply them to matching markets, and analyze the implications for mechanism design. Formally, the preferences of an agent can depend on the preferences of potential partners and there is incomplete information about the partners’ preferences. We find that there is no stable mechanism in standard two-sided markets. Observing the final allocation of the mechanism enables agents to learn about each other's preferences, leading to instability. However, in a school choice setting with one side of the market being non-strategic, modified versions of the deferred acceptance mechanism can achieve stability. These results provide insights into non-standard preferences in matching markets, and their implications for efficient information and mechanism design.
    Keywords: market design; matching; reciprocal preferences; non-standard preferences; gale-shapley deferred acceptance mechanism; incomplete information;
    JEL: C78 D47 D82 D83 D91
    Date: 2023–02–20
  3. By: Jonathan Scarlett; Nicholas Teh; Yair Zick
    Abstract: Fair allocation of indivisible goods is a well-explored problem. Traditionally, research focused on individual fairness - are individual agents satisfied with their allotted share? - and group fairness - are groups of agents treated fairly? In this paper, we explore the coexistence of individual envy-freeness (i-EF) and its group counterpart, group weighted envy-freeness (g-WEF), in the allocation of indivisible goods. We propose several polynomial-time algorithms that provably achieve i-EF and g-WEF simultaneously in various degrees of approximation under three different conditions on the agents' (i) when agents have identical additive valuation functions, i-EFX and i-WEF1 can be achieved simultaneously; (ii) when agents within a group share a common valuation function, an allocation satisfying both i-EF1 and g-WEF1 exists; and (iii) when agents' valuations for goods within a group differ, we show that while maintaining i-EF1, we can achieve a 1/3-approximation to ex-ante g-WEF1. Our results thus provide a first step towards connecting individual and group fairness in the allocation of indivisible goods, in hopes of its useful application to domains requiring the reconciliation of diversity with individual demands.
    Date: 2023–02
  4. By: Mina Montazeri; Hamed Kebriaei; Babak N. Araabi
    Abstract: Task allocation is a crucial process in modern systems, but it is often challenged by incomplete information about the utilities of participating agents. In this paper, we propose a new profit maximization mechanism for the task allocation problem, where the task publisher seeks an optimal incentive function to maximize its own profit and simultaneously ensure the truthful announcing of the agent's private information (type) and its participation in the task, while an autonomous agent aims at maximizing its own utility function by deciding on its participation level and announced type. Our mechanism stands out from the classical contract theory-based truthful mechanisms as it empowers agents to make their own decisions about their level of involvement, making it more practical for many real-world task allocation scenarios. It has been proven that by considering a linear form of incentive function consisting of two decision functions for the task publisher the mechanism's goals are met. The proposed truthful mechanism is initially modeled as a non-convex functional optimization with the double continuum of constraints, nevertheless, we demonstrate that by deriving an equivalent form of the incentive constraints, it can be reformulated as a tractable convex optimal control problem. Further, we propose a numerical algorithm to obtain the solution.
    Date: 2023–02
  5. By: Amanatidis, Georgios; Kleer, Pieter (Tilburg University, School of Economics and Management); Schäfer, Guido
    Date: 2022
  6. By: Francesco Mazzola
    Abstract: This paper investigates how auction bidding formats affect U.S. mortgage foreclosure sales. Exploiting a staggered adoption of electronic bidding acrossadjoined counties in a “stacked” difference-in-differences design, I show that foreclosure auction success increases by 27%, and price discounts contract by42%. The effects are stronger in areas with more remote courthouses, and for properties in better conditions. Buyer composition of electronic foreclosureauctions shifts towards local non-professionals, who are less likely to buy-to-let and flip acquired properties ex-post. This evidence suggests that technologicalmodernizations in real estate markets can lead to better matching, deepen liquidity and foster financial inclusion.
    Keywords: Credit Market; Electronic Marketplace; Mortgage Foreclosures; Online Auction
    JEL: R3
    Date: 2022–01–01
  7. By: Alessandro Bonatti; Munther Dahleh; Thibaut Horel; Amir Nouripour
    Abstract: We consider games of incomplete information in which the players' payoffs depend both on a privately observed type and an unknown but common "state of nature". External to the game, a data provider knows the state of nature and sells information to the players, thus solving a joint information and mechanism design problem: deciding which information to sell while eliciting the player' types and collecting payments. We restrict ourselves to a general class of symmetric games with quadratic payoffs that includes games of both strategic substitutes (e.g. Cournot competition) and strategic complements (e.g. Bertrand competition, Keynesian beauty contest). By to the Revelation Principle, the sellers' problem reduces to designing a mechanism that truthfully elicits the player' types and sends action recommendations that constitute a Bayes Correlated Equilibrium of the game. We fully characterize the class of all such Gaussian mechanisms (where the joint distribution of actions and private signals is a multivariate normal distribution) as well as the welfare- and revenue- optimal mechanisms within this class. For games of strategic complements, the optimal mechanisms maximally correlate the players' actions, and conversely maximally anticorrelate them for games of strategic substitutes. In both cases, for sufficiently large uncertainty over the players' types, the recommendations are deterministic (and linear) conditional on the state and the type reports, but they are not fully revealing.
    Date: 2023–02
  8. By: Felix Brand; Patrick Lederer; Sascha Tausch
    Abstract: One of the central economic paradigms in multi-agent systems is that agents should not be better off by acting dishonestly. In the context of collective decision-making, this axiom is known as strategyproofness and turns out to be rather prohibitive, even when allowing for randomization. In particular, Gibbard's random dictatorship theorem shows that only rather unattractive social decision schemes (SDSs) satisfy strategyproofness on the full domain of preferences. In this paper, we obtain more positive results by investigating strategyproof SDSs on the Condorcet domain, which consists of all preference profiles that admit a Condorcet winner. In more detail, we show that, if the number of voters $n$ is odd, every strategyproof and non-imposing SDS on the Condorcet domain can be represented as a mixture of dictatorial SDSs and the Condorcet rule (which chooses the Condorcet winner with probability $1$). Moreover, we prove that the Condorcet domain is a maximal connected domain that allows for attractive strategyproof SDSs if $n$ is odd as only random dictatorships are strategyproof and non-imposing on any sufficiently connected superset of it. We also derive analogous results for even $n$ by slightly extending the Condorcet domain. Finally, we also characterize the set of group-strategyproof and non-imposing SDSs on the Condorcet domain and its supersets. These characterizations strengthen Gibbard's random dictatorship theorem and establish that the Condorcet domain is essentially a maximal domain that allows for attractive strategyproof SDSs.
    Date: 2023–02
  9. By: Agustin G. Bonifacio (UNSL/CONICET)
    Abstract: In a one-commodity economy with single-peaked preferences and individual endowments, we study different ways in which reallocation rules can be strategically distorted by affecting the set of active agents. We introduce and characterize the family of monotonic reallocation rules and show that each rule in this class is withdrawal-proof and endowments-merging-proof, at least one is endowments-splittingproof and that no such rule is pre-delivery-prof.
    Keywords: single-peakedness, withdrawal-proofness, endowments-merging-proofness, endowments-splitting-proofness, pre-delivery-proofness.
    JEL: D63 D71 D82
    Date: 2023–03
  10. By: Alex Rees-Jones; Ran Shorrer
    Abstract: The rational-choice framework for modeling matching markets has been tremendously useful in guiding the design of school-assignment systems. Despite this success, a large body of work documents deviations from the predictions of this framework that appear influenced by behavioral-economic phenomena. We review these findings and the body of behavioral theories that have been presented as possible explanations. Motivated by this literature, we lay out paths for behavioral economists to be directly useful to education market design.
    JEL: D47 D9
    Date: 2023–02

This nep-des issue is ©2023 by 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.