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on Economic Design |
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Issue of 2023‒05‒01
five papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Mac Donald Diana E. |
| Abstract: | This paper studies the two-sided dynamic matching problem that occurs in the US foster care system. In this market, foster parents and foster children can form reversible matches, which may separate, continue in their reversible state, or transition to permanency via adoption. I first present an empirical analysis that yields four new facts. Thereafter, I develop a two-sided search and matching model used to rationalize the empirical facts and carry out predictions regarding match quality. Interestingly, I find that match separation plays a crucial role in adoption by influencing the incentives of foster parents to adopt. Due to the presence of a financial penalty on adoption, parents accept the penalty in exchange for eliminating the likelihood that the child separates from the match in the future. Moreover, I show that the adoption penalty not only exacerbates the intrinsic disadvantage (being less preferred by foster parents) faced by children with a disability, but it also creates incentives for high-quality matches to not transit to adoption. |
| Keywords: | Search;Matching;Foster Care;Adoption |
| JEL: | C78 D83 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2023-01&r=des |
| By: | Rui Yao; Shlomo Bekhor |
| Abstract: | This paper proposes a general equilibrium model for multi-passenger ridesharing systems, in which interactions between ridesharing drivers, passengers, platforms, and transportation networks are endogenously captured. Stable matching is modeled as an equilibrium problem in which no ridesharing driver or passenger can reduce ridesharing disutility by unilaterally switching to another matching sequence. This paper is one of the first studies that explicitly integrates the ridesharing platform multi-passenger matching problem into the model. By integrating matching sequence with hyper-network, ridesharing-passenger transfers are avoided in a multi-passenger ridesharing system. Moreover, the matching stability between the ridesharing drivers and passengers is extended to address the multi-OD multi-passenger case in terms of matching sequence. The paper provides a proof for the existence of the proposed general equilibrium. A sequence-bush algorithm is developed for solving the multi-passenger ridesharing equilibrium problem. This algorithm is capable to handle complex ridesharing constraints implicitly. Results illustrate that the proposed sequence-bush algorithm outperforms general-purpose solver, and provides insights into the equilibrium of the joint stable matching and route choice problem. Numerical experiments indicate that ridesharing trips are typically longer than average trip lengths. Sensitivity analysis suggests that a properly designed ridesharing unit price is necessary to achieve network benefits, and travelers with relatively lower values of time are more likely to participate in ridesharing. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2303.16595&r=des |
| By: | Chulyoung Kim (Yonsei University); Sang-Hyun Kim (Yonsei University); Jinhyuk Lee (Korea University); Jaeok Park (Yonsei University) |
| Abstract: | We consider a simple auction setting where there are three bidders and one of the bidders creates positive or negative externalities on the other two bidders. We theoretically and experimentally compare two auction formats, the first-price auction (FPA) and the second-price auction (SPA), in our setting. 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 the SPA, and this leads to higher revenues and lower efficiency in the SPA than in the FPA, especially under negative externalities. With incomplete information, we observe similar tendencies, while we obtain no evidence for learning effects. |
| Keywords: | auctions; externalities; experiments; overbidding; efficiency.; auctions; externalities; experiments; overbidding; efficiency. |
| JEL: | C91 D44 D62 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2023rwp-214&r=des |
| By: | Adrien Coiffard (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier); Raphaële Préget (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier); Mabel Tidball (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier) |
| Abstract: | Reverse auctions are used in various fields by public or corporate buyers to purchase goods and services from multiple sellers at the best price. Unlike in selling auctions, in reverse auctions a budget constraint rather than a target quantity is often announced by the auctioneer. However, in auction theory no optimal bidding strategy has yet been found in the case when a budget constraint is announced. Here we compare the two auction formats in an online experiment with 329 participants. We use the strategy method to obtain participants' bidding strategies from which we run exhaustive simulations of auction outcomes. This innovative methodology allows to overcome the issue of randomness of the auction outcome related to bidders' values. When each bidder has a single unit to sell, from the buyer's perspective, we find that, on average, the budget-constrained auction format outperforms the target-constrained auction format. |
| Keywords: | Reverse auctions, Online experiments, Strategy Method, Budget constraint, Target constraint. |
| Date: | 2023–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04055743&r=des |
| By: | Jay Pil Choi (Michigan State University [East Lansing] - Michigan State University System); Doh-Shin Jeon (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - 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) |
| Abstract: | We investigate how platform market power affects platforms' design choices in ad-funded two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and to extract surplus on the advertising side. We consider design choices affecting both sides in opposite ways and compare private incentives with social incentives. Platforms' design biases depend crucially on whether they can charge any price on the consumer side. We apply the framework to technology adoption, privacy, and ad load choices. Our results provide a rationale for a tougher competition policy to curb market power of ad-funded platforms with free services. |
| Date: | 2022–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04018490&r=des |