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on Economic Design |
| By: | Benjamin Friedrich; Martin B. Hackmann; Adam Kapor; Sofia J. Moroni; Anne Brink Nandrup |
| Abstract: | This paper presents the first empirical evidence of interdependent values and strategic responses by market participants in a two-sided matching market. We consider the market for medical school programs in Denmark, which uses a centralized assignment mechanism. Leveraging unique administrative data and an information experiment, we show that students and rival programs hold payoff-relevant information that each program could use to admit students with higher persistence rates. Programs respond to these two sources of interdependent values, student self-selection and interdependent program values, by exhibiting ”home bias” towards local applicants. We construct and estimate a novel equilibrium model reflecting this evidence, and find that fully sharing information could significantly increase student persistence and program payoffs, but enabling students to communicate first preferences would leave outcomes unchanged. An alternative model assuming independent private values contradicts the empirical evidence, highlighting the importance of accounting for interdependent values in understanding and designing matching markets. |
| JEL: | D82 I21 L0 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32325&r=des |
| By: | Luca Anderlini (Georgetown University, University of Naples Federico II and CSEF); Gaon Kim (EIEF and LUISS University) |
| Abstract: | We examine “tournament” second-price auctions in which N bidders compete for the right to participate in a second stage and contend against bidder N +1. When the first N bidders are committed so that their bids cannot be changed in the second stage, the analysis yields some unexpected results. The first N bidders consistently bid above their values in equilibrium. When bidder N + 1 is sufficiently stronger than the first N, overbidding leads to an increase in expected revenue in comparison to the standard second-price auction when N is large. |
| Keywords: | Tournament Auctions, Overbidding, Revenue Equivalence. |
| JEL: | C70 C72 C79 |
| Date: | 2024–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:712&r=des |
| By: | Jacob Coreno |
| Abstract: | This paper considers exchange of indivisible objects when agents are endowed with and desire bundles of objects. Agents are assumed to have lexicographic preferences over bundles. We show that Top Trading Cycles (TTC) is characterized by efficiency, the weak endowment lower bound, balancedness, and truncation-proofness. In the classic Shapley--Scarf Economy, TTC is characterized by efficiency, individual rationality, and truncation-proofness. These results strengthen the uniqueness results of Ma (1994) and, more recently, Altunta\c{s} et al. (2023). In a model with variable endowments, TTC is susceptible to various forms of endowment manipulation. However, no rule is core-selecting and hiding-proof. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.04822&r=des |
| By: | Li, Zhi (Xiamen University); Zhang, Da (Tsinghua University); Zhang, Xiliang (Tsinghua University) |
| Abstract: | With a unique opportunity of recruiting hundreds of emissions trading system (ETS) participants in a series of lab-in-the-field experiments, we compare a revenue-neutral consignment auction (CA) with free allocation (grandfathering, GF hereafter) and a uniform price auction (UPA) as alternative permit allocation designs. In our setup, firms first receive their permits for free. Then, under the two auction mechanisms, they need to buy back a share of the permits, either with auction revenues returned to the firms in the primary market (CA) or not returned (UPA), followed by a spot (secondary) market for all mechanisms with the continuous double auction. We find that enforced permit transactions in the primary market induce a higher price, facilitating price discovery with lower volatility and more effective trading in the spot market. Both auctions reduce non-compliance compared with GF, because the auctions reduce both permit hoarding and risky over-selling in the spot market. Both CA and UPA help smaller polluting firms lower their profit risks. CA also helps large, cleaner firms increase profits. Our results provide insights on permit allocation designs when introducing an ETS, especially for developing countries that are pondering the balance between market efficiency and firms’ cost burden. |
| Keywords: | emissions trading; consignment auction; uniform price auction; grandfathering; spot market; price collar |
| JEL: | C92 D44 Q52 Q54 Q58 |
| Date: | 2022–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunefd:2022_010&r=des |