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on Economic Design |
| By: | Bettina Klaus; Flip Klijn; Seçkin Özbilen |
| Abstract: | We study hedonic coalition formation problems with friend-oriented preferences; that is, each agent has preferences over his coalitions based on a partition of the set of agents, except himself, into "friends" and "enemies" such that (E) adding an enemy makes him strictly worse off and (F) adding a friend together with a set of enemies makes him strictly better off. Friend-oriented preferences induce a so-called friendship graph where vertices are agents and directed edges point to friends. We show that the partition associated with the strongly connected components (SCC) of the friendship graph is in the strict core. We then prove that the SCC mechanism, which assigns the SCC partition to each hedonic coalition formation problem with friend-oriented preferences, satisfies a strong group incentive compatibility property: group strategy-proofness. Our main result is that on any "rich" subdomain of friend-oriented preferences, the SCC mechanism is the only mechanism that satisfies core stability and strategy-proofness. |
| Keywords: | hedonic coalition formation, (strict) core stability, (group) strategy-proofness, strongly connected components |
| JEL: | C71 C78 D71 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1399&r=des |
| By: | Maryam Bahrani; Pranav Garimidi; Tim Roughgarden |
| Abstract: | The incentive-compatibility properties of blockchain transaction fee mechanisms have been investigated with *passive* block producers that are motivated purely by the net rewards earned at the consensus layer. This paper introduces a model of *active* block producers that have their own private valuations for blocks (representing, for example, additional value derived from the application layer). The block producer surplus in our model can be interpreted as one of the more common colloquial meanings of the term ``MEV.'' The main results of this paper show that transaction fee mechanism design is fundamentally more difficult with active block producers than with passive ones: with active block producers, no non-trivial or approximately welfare-maximizing transaction fee mechanism can be incentive-compatible for both users and block producers. These results can be interpreted as a mathematical justification for the current interest in augmenting transaction fee mechanisms with additional components such as order flow auctions, block producer competition, trusted hardware, or cryptographic techniques. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.01686&r=des |
| By: | Simon Finster |
| Abstract: | I consider a package assignment problem where multiple units of indivisible items are allocated among individuals. The seller specifies allocation preferences as cost savings on packages. I propose a social welfare maximising, sealed-bid auction with a novel cost function graph to express seller preferences. It facilitates the use of linear programming to find anonymous, competitive, package-linear prices. If agents bid truthfully, these prices support a Walrasian equilibrium. I provide necessary and sufficient conditions, and additional sufficient conditions, for the existence of Walrasian equilibria. The auction guarantees fair and transparent pricing and admits preferences over the market concentration. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.14247&r=des |
| By: | Domenico Moramarco (University of Bari - DiEF); Umutcan Salman (Université libre de Bruxelles - ECARES) |
| Abstract: | We introduce a notion of fairness, inspired by the equality of opportunity literature, into many-to-one matching markets endowed with a measure of the quality of a match between two entities in the market. In this framework, fairness considerations are made by a social evaluator based on the match quality distribution. We impose the standard notion of stability as minimal desideratum and study matching that satisfy our notion of fairness and a notion of efficiency based on aggregate match quality. To overcome some of the identified incompatibilities, we propose two alternative approaches. The first one is a linear programming solution to maximize fairness under stability constraints. The second approach weakens fairness and efficiency to define a class of opportunity egalitarian social welfare functions that evaluate stable matchings. We then describe an algorithm to find the stable matching that maximizes social welfare. |
| Keywords: | many-to-one matching, equality of opportunity, rotation, stability |
| JEL: | C78 D63 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:inq:inqwps:ecineq2023-649&r=des |
| By: | Anja Prummer; Francesco Nava |
| Abstract: | A principal allocates a single good to one of several agents whose values are privately and independently distributed, employing an optimal mechanism. The principal shapes the distribution of the agents' values within general classes of constraints. Divisive product designs, which are either highly favored or met with indifference, can simultaneously enhance surplus and diminish information rents by making agents' values more readily discernible. However, such designs also reduce competition among agents. Divisive designs are optimal under various design constraints, as the main drivers of revenue lie in increasing surplus and minimizing information rents, while competition plays a secondary role. |
| Keywords: | Value Design, Mechanism Design, Differentiation |
| JEL: | D82 D46 L15 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2023-05&r=des |
| By: | Saurabh Amin; Patrick Jaillet; Haripriya Pulyassary; Manxi Wu |
| Abstract: | We study a market mechanism that sets edge prices to incentivize strategic agents to organize trips that efficiently share limited network capacity. This market allows agents to form groups to share trips, make decisions on departure times and route choices, and make payments to cover edge prices and other costs. We develop a new approach to analyze the existence and computation of market equilibrium, building on theories of combinatorial auctions and dynamic network flows. Our approach tackles the challenges in market equilibrium characterization arising from: (a) integer and network constraints on the dynamic flow of trips in sharing limited edge capacity; (b) heterogeneous and private preferences of strategic agents. We provide sufficient conditions on the network topology and agents' preferences that ensure the existence and polynomial-time computation of market equilibrium. We identify a particular market equilibrium that achieves maximum utilities for all agents, and is equivalent to the outcome of the classical Vickery Clark Grove mechanism. Finally, we extend our results to general networks with multiple populations and apply them to compute dynamic tolls for efficient carpooling in San Francisco Bay Area. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.03994&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 - 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); Dorothea Kübler (WZB - Wissenschaftszentrum Berlin für Sozialforschung, TU - Technical University of Berlin / 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 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:hal-04157650&r=des |