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on Economic Design |
| By: | Yoav Kolumbus; Joe Halpern; \'Eva Tardos |
| Abstract: | In repeated games, such as auctions, players typically use learning algorithms to choose their actions. The use of such autonomous learning agents has become widespread on online platforms. In this paper, we explore the impact of players incorporating monetary transfers into their agents' algorithms, aiming to incentivize behavior in their favor. Our focus is on understanding when players have incentives to make use of monetary transfers, how these payments affect learning dynamics, and what the implications are for welfare and its distribution among the players. We propose a simple game-theoretic model to capture such scenarios. Our results on general games show that in a broad class of games, players benefit from letting their learning agents make payments to other learners during the game dynamics, and that in many cases, this kind of behavior improves welfare for all players. Our results on first- and second-price auctions show that in equilibria of the ``payment policy game, '' the agents' dynamics can reach strong collusive outcomes with low revenue for the auctioneer. These results highlight a challenge for mechanism design in systems where automated learning agents can benefit from interacting with their peers outside the boundaries of the mechanism. |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2405.20880&r= |
| By: | Aram Grigoryan (University of California); Markus Möller (University of Bonn) |
| Abstract: | In centralized mechanisms and platforms, participants do not fully observe each others' type reports. Hence, if there is a deviation from the promised mechanism, participants may be unable to detect it. We formalize a notion of auditabilty that captures how easy or hard it is to detect deviations from a mechanism. We find a stark contrast between the auditabilities of prominent mechanisms. We also provide tight characterizations of maximally auditable classes of allocation mechanisms. |
| Keywords: | Auditability, Allocation Mechanisms |
| JEL: | D47 D80 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:308&r= |
| By: | Ehrhart, Karl-Martin; Eicke, Anselm; Hirth, Lion; Ocker, Fabian; Ott, Marion; Schlecht, Ingmar; Wang, Runxi |
| Abstract: | This paper discusses a capacity-based redispatch mechanism in which awarded market participants are compensated for their availability for redispatch, rather than activation. The rationale is to develop a market design that prevents so-called 'inc-dec gaming' when including flexible consumers with a market-based approach. We conduct a game-theoretical analysis of a capacity-based redispatch mechanism. Our analysis reveals that despite its intention, the capacity-based redispatch is prone to undesirable behavior of market participants. The reason is that the availability payment incentivizes participants to change their energy consumption (generation) behavior. However, this also applies to undesired participants who increase the redispatch requirement through participation. Under certain assumptions, the additional redispatch potential equals the additional redispatch demand it creates. Consequently, the mechanism does not resolve network constraints, while causing costs for the compensation payments. Furthermore, we study three alternative implementation options, none of which resolves the underlying problem. It follows from our analysis that a mechanism can only be promising if it is capable to distinguish between the potential participants to exclude the undesirable ones. |
| Keywords: | Energy market, Congestion management, Capacity-based redispatch, Game theory, Auctions |
| JEL: | D43 D44 L13 Q41 Q48 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:298003&r= |
| By: | Marco Bornstein; Amrit Singh Bedi; Abdirisak Mohamed; Furong Huang |
| Abstract: | Standard federated learning (FL) approaches are vulnerable to the free-rider dilemma: participating agents can contribute little to nothing yet receive a well-trained aggregated model. While prior mechanisms attempt to solve the free-rider dilemma, none have addressed the issue of truthfulness. In practice, adversarial agents can provide false information to the server in order to cheat its way out of contributing to federated training. In an effort to make free-riding-averse federated mechanisms truthful, and consequently less prone to breaking down in practice, we propose FACT. FACT is the first federated mechanism that: (1) eliminates federated free riding by using a penalty system, (2) ensures agents provide truthful information by creating a competitive environment, and (3) encourages agent participation by offering better performance than training alone. Empirically, FACT avoids free-riding when agents are untruthful, and reduces agent loss by over 4x. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.13879&r= |
| By: | Michela Carlana; Enrico Miglino; Michela M. Tincani |
| Abstract: | Affirmative action and preferential admission policies play a crucial role in fostering social mobility by bolstering the prospects of disadvantaged groups. In this paper, we analyze the long-term effects of a Chilean policy (PACE) that targets students in underprivileged schools, offering guaranteed admission to selective colleges to those graduating in the top 15 percent of their high school class. Leveraging both the randomized expansion of PACE and the admission discontinuity, our analysis reveals that PACE yields positive labor market effects for the average targeted student, especially women, driven by the selectivity of the attended colleges. However, for marginally eligible students, higher dropout rates and negative labor market outcomes emerge, suggesting PACE may induce a mismatch between their skills and the academic rigor of selective programs. Finally, we find that students in the bottom 85 percent of their schools experience positive effects on labor market outcomes. We identify equilibrium effects on local labor markets as a potential mechanism. The results suggest that there is a limit to how far preferential admissions can go while delivering on their promises. |
| JEL: | I24 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32525&r= |
| By: | Antonio Estache; Renaud Foucart; Konstantinos Georgalos |
| Abstract: | In a laboratory experiment, we find that subjects do not exhibit preference for control when the alternative is a random dictatorship, a lottery implementing either their choice or the choice of someone else with equal probability. In contrast, we replicate Owens et al. (2014)’s result that they do so when the alternative is to have the choice of someone else implemented with certainty. This implies that the introduction of random dictatorships in discrete procedures such as those used for the allocation of some public procurement contracts does not necessarily involve aloss of perceived autonomy. |
| Keywords: | control, lotteries, random dictatorship, procurement |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/374605&r= |