|
on Economic Design |
| By: | Derek Neal; Joseph Root |
| Abstract: | Research on centralized school assignment mechanisms often focuses on whether parents who participate in specific mechanisms are likely to truthfully report their preferences or engage in various costly strategic behaviors. However, a growing literature suggests that parents may not know enough about the school options available to them to form complete preference rankings. We develop a simple model that explains why it is not surprising that many participants in school assignment mechanisms possess limited information about the schools available to them. We then discuss policies that could improve both the information that participants bring to school assignment mechanisms and the quality of the schools in their choice sets. |
| JEL: | I20 I28 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32378&r=des |
| By: | Alexander L. Brown; Daniel G. Stephenson; Rodrigo A. Velez |
| Abstract: | This paper experimentally evaluates four mechanisms intended to achieve the Uniform outcome in rationing problems (Sprumont, 1991). Our benchmark is the dominant-strategy, direct-revelation mechanism of the Uniform rule. A strategically equivalent mechanism that provides non-binding feedback during the reporting period greatly improves performance. A sequential revelation mechanism produces modest improvements despite not possessing dominant strategies. A novel, obviously strategy-proof mechanism, devised by Arribillaga et al. (2023), does not improve performance. We characterize each alternative to the direct mechanism, finding general lessons about the advantages of real-time feedback and sequentiality of play as well as the potential shortcomings of an obviously strategy-proof mechanism. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.11883&r=des |
| By: | Cemil Selcuk |
| Abstract: | This note pursues two primary objectives. First, we analyze the outcomes of an all-pay auction within a store where buyers with and without financial constraints arrive at varying rates, and where buyer types are private information. Second, we investigate the selection of an auction format (comprising first-price, second-price, and all-pay formats) in a competitive search setting, where sellers try to attract customers. Our results indicate that if the budget constraint is not too restrictive, the all-pay rule emerges as the preferred selling format in the unique symmetric equilibrium. This is thanks to its ability to prompt buyers to submit lower bids, thereby generally avoiding budget constraints, while allowing the seller to collect all bids. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.08762&r=des |
| By: | Günnur Ege Bilgin |
| Abstract: | I analyze a canonical many-to-one matching market within a decentralized search model with frictions, where a finite number of firms and workers meet randomly until the market clears. I compare the stable matchings of the underlying market and equilibrium outcomes when time is nearly costless. In contrast to the case where each firm has just a single vacancy, I show that stable matchings are not obtained as easily. In particular, there may be no Markovian equilibrium that uniformly implements either the worker- or the firm-optimal stable matching in every subgame. The challenge results from the firms’ ability to withhold capacity strategically. Yet, this is not the case for markets with vertical preferences on one side, and I construct the equilibrium strategy profile that leads to the unique stable matching almost surely. Moreover, multiple vacancies enable firms to implicitly collude and achieve unstable but firm-preferred matchings, even under Markovian equilibria. Finally, I identify one sufficient condition on preferences to rule out such opportunities. |
| Keywords: | many-to-one matching, decentralized matching, stability |
| JEL: | C78 D83 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_541&r=des |
| By: | Adam Kapor |
| Abstract: | Transparency vs. opacity is an important dimension of college admission policy. Colleges may gain useful information from a holistic review of applicants’ materials, but in doing so may contribute to uncertainty that discourages potential applicants with poor information. This paper investigates the impacts of admissions transparency in the context of Texas’ Top Ten Percent Plan, using survey and administrative data from Texas and a model of college applications, admissions, enrollment, grades, and persistence. I estimate that two thirds of the plan’s 9.1 point impact on top-decile students’ probability of attending a flagship university was due to information rather than mechanical effects. Students induced to enroll are more likely to come from low- income high schools, and academically outperform the students that they displace. These effects would be larger if complemented by financial-aid information, and are driven by transparency, not misalignment between the rules used for automatic and discretionary admissions. |
| JEL: | I21 I23 I24 I26 I28 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32372&r=des |
| By: | E. Jason Baron; Richard Lombardo; Joseph P. Ryan; Jeongsoo Suh; Quitze Valenzuela-Stookey |
| Abstract: | In many market-design applications, a new mechanism is introduced to reform an existing institution. Compared to the design of a mechanism in isolation, the presence of a status-quo system introduces both challenges and opportunities for the designer. We study this problem in the context of reforming the mechanism used to assign Child Protective Services (CPS) investigators to reported cases of child maltreatment in the U.S. CPS investigators make the consequential decision of whether to place a child in foster care when their safety at home is in question. We develop a design framework built on two sets of results: (i) an identification strategy that leverages the status-quo random assignment of investigators—along with administrative data on previous assignments and outcomes—to estimate investigator performance; and (ii) mechanism-design results allowing us to elicit investigators’ preferences and efficiently allocate cases. This alternative mechanism can be implemented by setting personalized non-linear rates at which each investigator can exchange various types of cases. In a policy simulation, we show that this mechanism reduces the number of investigators’ false positives (children placed in foster care who would have been safe in their homes) by 10% while also decreasing false negatives (children left at home who are subsequently maltreated) and overall foster care placements. Importantly, the mechanism is designed so that no investigator is made worse-off relative to the status quo. We show that a naive approach which ignores investigator preference heterogeneity would generate substantial welfare losses for investigators, with potential adverse effects on investigator recruitment and turnover. |
| JEL: | D82 H75 J13 J45 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32369&r=des |
| By: | Mario Ghossoub; Giulio Principi; Ruodu Wang |
| Abstract: | The classical theory of efficient allocations of an aggregate endowment in a pure-exchange economy has hitherto primarily focused on the Pareto-efficiency of allocations, under the implicit assumption that transfers between agents are frictionless, and hence costless to the economy. In this paper, we argue that certain transfers cause frictions that result in costs to the economy. We show that these frictional costs are tantamount to a form of subadditivity of the cost of transferring endowments between agents. We suggest an axiomatic study of allocation mechanisms, that is, the mechanisms that transform feasible allocations into other feasible allocations, in the presence of such transfer costs. Among other results, we provide an axiomatic characterization of those allocation mechanisms that admit representations as robust (worst-case) linear allocation mechanisms, as well as those mechanisms that admit representations as worst-case conditional expectations. We call the latter Robust Conditional Mean Allocation mechanisms, and we relate our results to the literature on (decentralized) risk sharing within a pool of agents. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.10900&r=des |
| By: | Bahel, Eric; Gómez-Rúa, María; Vidal-Puga, Juan |
| Abstract: | We study cost-sharing rules in network problems where agents seek to ship quantities of some good to their respective locations, and the cost on each arc is linear in the flow crossing it. In this context, Core Selection requires that each subgroup of agents pay a joint cost share that is not higher than its stand-alone cost. We prove that the demander rule, under which each agent pays the cost of her shortest path for each unit she demands, is the unique cost-sharing rule satisfying both Core Selection and Merge Proofness. The Merge Proofness axiom prevents distinct nodes from reducing their joint cost share by merging into a single node. An alternative characterization of the demander rule is obtained by combining Core Selection and Cost Solidarity. The Cost Solidarity axiom says that each agent's cost share should be weakly increasing in the cost matrix. |
| Keywords: | Shortest path games, cost sharing, core, merge proofness, solidarity |
| JEL: | C71 D85 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120606&r=des |