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on Economic Design |
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Issue of 2023‒06‒26
ten papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Jacob K Goeree |
| Abstract: | General equilibrium, the cornerstone of modern economics and finance, rests on assumptions many markets do not meet. Spectrum auctions, electricity markets, and cap-and-trade programs for resource rights often feature non-convexities in preferences or production that can cause non-existence of Walrasian equilibrium and render general equilibrium vacuous. Yquilibrium complements general equilibrium with an optimization approach to (non-) convex economies that does not require perfect competition. Yquilibrium coincides with Walrasian equilibrium when the latter exists. Yquilibrium exists even if Walrasian equilibrium ceases to and produces optimal allocations subject to linear, anonymous, and (approximately) utility-clearing prices. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.06256&r=des |
| By: | Atay, Ata; Funck, Sylvain; Mauleon, Ana (Université catholique de Louvain, LIDAM/CORE, Belgium); Vannetelbosch, Vincent (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | We adopt the notion of the farsighted stable set to determine which matchings are stable when agents are farsighted in matching markets with couples. We show that a singleton matching is a farsighted stable set if and only if the matching is stable. Thus, matchings that are stable with myopic agents remain stable when agents become farsighted. Examples of farsighted stable sets containing multiple non-stable matchings are provided for markets with and without stable matchings. For couples markets where the farsighted stable set does not exist, we propose the DEM farsighted stable set to predict the matchings that are stable when agents are farsighted. |
| Keywords: | Matching with couples ; stable sets ; farsighted agents |
| JEL: | C70 C78 D47 |
| Date: | 2023–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2023011&r=des |
| By: | Ortega, Josué; Klein, Thilo |
| Abstract: | How should students be assigned to schools? Two mechanisms have been suggested and implemented around the world: deferred acceptance (DA) and top trading cycles (TTC). These two mechanisms are widely considered excellent choices owing to their outstanding stability and incentive properties. We show theoretically and empirically that both mechanisms perform poorly with regard to two key desiderata such as efficiency and equality, even in large markets. In contrast, the rank-minimizing mechanism is significantly more efficient and egalitarian. It is also Pareto optimal for the students, unlike DA, and generates less justified envy than TTC |
| JEL: | C78 D73 C78 D73 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:qmsrps:202202&r=des |
| By: | Galit Ashkenazi-Golan (LSE - London School of Economics and Political Science); Yevgeny Tsodikovich (Bar-Ilan University [Israël], AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Yannick Viossat (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | A common practice in many auctions is to offer bidders an opportunity to improve their bids, known as a best and final offer stage. This improved bid can depend on new information either about the asset or about the competitors. This paper examines the effects of new information regarding competitors, seeking to determine what information the auctioneer should provide assuming the set of allowable bids is discrete. The rational strategy profile that maximizes the revenue of the auctioneer is the one where each bidder makes the highest possible bid that is lower than his valuation of the item. This strategy profile is an equilibrium for a large enough number of bidders, regardless of the information released. We compare the number of bidders needed for this profile to be an equilibrium under different information structures. We find that it becomes an equilibrium with fewer bidders when less additional information is made available to the bidders regarding the competition. It follows that when the number of bidders is a priori unknown, there are some advantages to the auctioneer not revealing information and conducting a one-stage auction instead. |
| Keywords: | Auctions, Multistage auctions, BAFO, Information utilization |
| Date: | 2023–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04099021&r=des |
| By: | Emilio Guaman; Juan Pablo Torres-Martinez |
| Abstract: | We study the non-monetary exchange of indivisible goods when agents may not know how to compare some of them. Adding incomplete preferences to the Shapley-Scarf housing market model, we introduce two concepts of coalitional stability—the core and the strong core—that differ by the conditions required by a group of agents to block a housing allocation. The core is the set of allocations immune to blocking coalitions that improve the well-being of house-switching members, while the strong core is the set of allocations immune to blocking coalitions that may leave some members with a house incomparable to the original. We show that the core coincides with the set of allocations obtained by applying the Top Trading Cycles algorithm to the transitive completions of agents’ preferences. This result allows us to find a family of core-selecting and group strategy-proof mechanisms. Although the strong core may be an empty set, in the preference domain in which it is non-empty and the incompleteness of preferences is transitive, we show that there are strong-core-selecting and weakly group strategy-proof mechanisms. We also extend these results to housing allocation problems in which existing tenants and newcomers may coexist. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:udc:wpaper:wp547&r=des |
| By: | Roland Strausz |
| Abstract: | A multi-product monopolist sells sequentially to a buyer who privately learns his valuations. Using big data, the monopolist learns the intertemporal correlation of the buyer’s valuations. Perfect price discrimination is generally unattainable—even when the seller learns the correlation perfectly, has full commitment, and in the limit where the consumption good about which the buyer has ex ante private information becomes insignificant. This impossibility is due to informational externalities which requires information rents for the buyer’s later consumption. These rents induce upward and downward distortions, violating the generalized no distortion at the top principle of dynamic mechanism design. |
| Date: | 2023–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:bdp:dpaper:0016&r=des |
| By: | Suat Evren |
| Abstract: | We show that computing the optimal social surplus requires $\Omega(mn)$ bits of communication between the website and the bidders in a sponsored search auction with $n$ slots on the website and with tick size of $2^{-m}$ in the discrete model, even when bidders are allowed to freely communicate with each other. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.07729&r=des |
| By: | Javier Cembrano; Felix Fischer; Max Klimm |
| Abstract: | We give new bounds for the single-nomination model of impartial selection, a problem proposed by Holzman and Moulin (Econometrica, 2013). A selection mechanism, which may be randomized, selects one individual from a group of $n$ based on nominations among members of the group; a mechanism is impartial if the selection of an individual is independent of nominations cast by that individual, and $\alpha$-optimal if under any circumstance the expected number of nominations received by the selected individual is at least $\alpha$ times that received by any individual. In a many-nominations model, where individuals may cast an arbitrary number of nominations, the so-called permutation mechanism is $1/2$-optimal, and this is best possible. In the single-nomination model, where each individual casts exactly one nomination, the permutation mechanism does better and prior to this work was known to be $67/108$-optimal but no better than $2/3$-optimal. We show that it is in fact $2/3$-optimal for all $n$. This result is obtained via tight bounds on the performance of the mechanism for graphs with maximum degree $\Delta$, for any $\Delta$, which we prove using an adversarial argument. We then show that the permutation mechanism is not best possible; indeed, by combining the permutation mechanism, another mechanism called plurality with runner-up, and some new ideas, $2105/3147$-optimality can be achieved for all $n$. We finally give new upper bounds on $\alpha$ for any $\alpha$-optimal impartial mechanism. They improve on the existing upper bounds for all $n\geq 7$ and imply that no impartial mechanism can be better than $76/105$-optimal for all $n$; they do not preclude the existence of a $(3/4-\varepsilon)$-optimal impartial mechanism for arbitrary $\varepsilon>0$ if $n$ is large. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.09998&r=des |
| By: | Gaurab Aryal (University of Chicago); Maria Florencia Gabrielli (Universidad Nacional de Cuyo/CONICET) |
| Abstract: | Collusion adversely affects procurement cost and efficiency. It is hard to quantify just how prevalent collusion is, but it’s safe to assume that there’s a lot of collusion going on. Detecting collusion from (just) bid data is hard so the extent of the damages can never be known. A natural response would have been to use collusion-proof procurement, yet, such auctions are hardly used. Why? Using California highway procurements data, we estimate the extra cost of implementing a collusion-proof auction to be anywhere between 1.6% to 5%. Even after we factor in the marginal excess burden of taxes needed to finance the expenses, the cost ranges between 2.08% and 6.5%, which is too small to be the answer. Since other than cost there is no obvious answer, this shows that there is a lacuna in the empirical auction literature. |
| Keywords: | Procurements; Collusion-Proof Auction; Local Polynomial Estimator |
| JEL: | C1 C4 C7 D44 L4 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:248&r=des |
| By: | Felix Brandt; Matthias Greger; Erel Segal-Halevi; Warut Suksompong |
| Abstract: | Charity is typically done either by individual donors, who donate money to the charities that they support, or by centralized organizations such as governments or municipalities, which collect the individual contributions and distribute them among a set of charities. On the one hand, individual charity respects the will of the donors but may be inefficient due to a lack of coordination. On the other hand, centralized charity is potentially more efficient but may ignore the will of individual donors. We present a mechanism that combines the advantages of both methods by distributing the contribution of each donor in an efficient way such that no subset of donors has an incentive to redistribute their donations. Assuming Leontief utilities (i.e., each donor is interested in maximizing an individually weighted minimum of all contributions across the charities), our mechanism is group-strategyproof, preference-monotonic, contribution-monotonic, maximizes Nash welfare, and can be computed using convex programming. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.10286&r=des |