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on Economic Design |
| By: | Tobias Lehmann (University of Lausanne); Camille Terrier (Queen Mary University London); Rafael Lalive (University of Lausanne) |
| Abstract: | Congestion is a widespread phenomenon in two-sided markets, but evidence on its costs and benefits is limited. Using data from an online dating platform, we document a large excess demand, or congestion, for some women. By exploiting exogenous variation in the number of men and women using the platform, we show that congestion slows down matching time for men. Congestion benefits women who screen men’s profiles quickly, by increasing their choice set. This asymmetry implies that policies aimed at reducing congestion can harm the side of the market that benefits from congestion. |
| Keywords: | Congestion, two-sided markets, online platforms |
| JEL: | D4 D47 D62 D83 |
| Date: | 2023–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:964&r=des |
| By: | Guillermo Angeris; Tarun Chitra; Theo Diamandis; Alex Evans; Kshitij Kulkarni |
| Abstract: | Constant function market makers (CFMMs) are the most popular type of decentralized trading venue for cryptocurrency tokens. In this paper, we give a very general geometric framework (or 'axioms') which encompass and generalize many of the known results for CFMMs in the literature, without requiring strong conditions such as differentiability or homogeneity. One particular consequence of this framework is that every CFMM has a (unique) canonical trading function that is nondecreasing, concave, and homogeneous, showing that many results known only for homogeneous trading functions are actually fully general. We also show that CFMMs satisfy a number of intuitive and geometric composition rules, and give a new proof, via conic duality, of the equivalence of the portfolio value function and the trading function. Many results are extended to the general setting where the CFMM is not assumed to be path-independent, but only one trade is allowed. Finally, we show that all 'path-independent' CFMMs have a simple geometric description that does not depend on any notion of a 'trading history'. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.08066&r=des |
| By: | Babina, Tania; Barkai, Simcha; Jeffers, Jessica; Karger, Ezra; Volkova, Ekaterina |
| Abstract: | We hand-collect and standardize information describing all 3, 055 antitrust lawsuits brought by the Department of Justice (DOJ) between 1971 and 2018. Using restricted establishment-level microdata from the U.S. Census, we compare the economic outcomes of a non-tradable industry in states targeted by DOJ antitrust lawsuits to outcomes of the same industry in other states that were not targeted. We document that DOJ antitrust enforcement actions permanently increase employment by 5.4% and business formation by 4.1%. Using an event-study design, we find (1) a sharp increase in payroll that exceeds the increase in employment, meaning that DOJ antitrust enforcement increases average wages, (2) an economically smaller increase in sales that is statistically insignificant, and (3) a precise increase in the labor share. While we cannot separately measure the quantity and price of output, the increase in production inputs (employment), together with a proportionally smaller increase in sales, strongly suggests that these DOJ antitrust enforcement actions increase the quantity of output and simultaneously decrease the price of output. Our results show that government antitrust enforcement leads to persistently higher levels of economic activity in targeted industries. |
| Keywords: | antitrust enforcement, economic activity, employment, business formation |
| JEL: | L4 E24 K21 J21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cbscwp:332&r=des |
| By: | Ms. Natasha X Che; Alexander Copestake; Davide Furceri; Tammaro Terracciano |
| Abstract: | We examine fluctuations in crypto markets and their relationships to global equity markets and US monetary policy. We identify a single price component—which we label the “crypto factor”—that explains 80% of variation in crypto prices, and show that its increasing correlation with equity markets coincided with the entry of institutional investors into crypto markets. We also document that, as for equities, US Fed tightening reduces the crypto factor through the risk-taking channel—in contrast to claims that crypto assets provide a hedge against market risk. Finally, we show that a stylized heterogeneous-agent model with time-varying aggregate risk aversion can explain our empirical findings, and highlights possible spillovers from crypto to equity markets if the participation of institutional investors ever became large. |
| Keywords: | US Monetary Policy; Cryptoassets; Stock Markets. |
| Date: | 2023–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/163&r=des |
| By: | Christophe Gouel; Qingyin Ma; John Stachurski |
| Abstract: | Monetary conditions are frequently cited as a significant factor influencing fluctuations in commodity prices. However, the precise channels of transmission are less well identified. In this paper, we develop a unified theory to study the impact of interest rates on commodity prices and the underlying mechanisms. To that end, we extend the competitive storage model to accommodate stochastically evolving interest rates, and establish general conditions under which (i) a unique rational expectations equilibrium exists and can be efficiently computed, and (ii) interest rates are negatively correlated with commodity prices. As an application, we quantify the impact of interest rates on commodity prices through the speculative channel, namely, the role of speculators in the physical market whose incentive to hold inventories is influenced by interest rate movements. Our findings demonstrate that real interest rates have nontrivial and persistent negative effect on commodity prices, and the magnitude of the impact varies substantially under different market supply and interest rate regimes. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.07577&r=des |
| By: | Martin Brown (Study Center Gerzensee); Jan Schmitz (Radboud University); Christian Zehnder (University of Lausanne) |
| Abstract: | We report data from a laboratory experiment studying the behavioral mechanisms which contribute to the increase in strategic defaults during an economic crisis. In our experiment, subjects can default on an outstanding loan, but moral constraints and social norm enforcement may provide incentives to repay. We exogenously vary the state of the economy: In the weak economy more borrowers are forced to default than in the strong. Our data reveal two main effects of an economic contraction: First, weak economic conditions seem to soften moral constraints as solvent debtors strategically default more often. Second, weak economic conditions undermine social norm enforcement. The decrease in norm enforcement, however, is not caused by a break-down of the repayment norm itself, but rather is a consequence of the additional informational uncertainty in weak economic conditions. In a weak economy peers are reluctant to sanction, because the risk of harming innocent debtors is higher. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:szg:worpap:2303&r=des |