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on Economic Design |
| By: | Wataru ISHIDA; Yusuke IWASE; Taro KUMANO |
| Abstract: | Matching markets often encounter admissibility issues due to social concerns and regulations that must be respected. A key situation that has not been thoroughly analyzed in the literature involves the market-clearing requirement, which ensures balance in allocations across multiple matching markets, similar to supply-and-demand dynamics. To address these admissibility issues, we introduce the concept of an admissible set for such problems. We propose two solutions. The first solution is the "fairness-guaranteed stable solution." We identify a requirement on admissible sets that is necessary and sufficient for the non-emptiness of this solution. This requirement ensures that an allocation where no agent is assigned any resources is admissible. We then conduct welfare analysis and comparative statics of this solution. The second solution is called "efficiency-guaranteed stability, " which focuses on maximizing efficiency within the constraints of the admissible set. We show that only specific admissible sets allow this solution to be non-empty. |
| Keywords: | Efficiency, Fairness, Matching |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-24-004 |
| By: | Vladimir A. Karamychev (Erasmus University Rotterdam) |
| Abstract: | Aftermarket social welfare is largely determined by a procurement auction design. Auctions select firms for operating aftermarkets, and auctions may also impose restrictions on aftermarket prices the winner can charge. This paper compares aftermarket social welfare generated by first-price and second-price procurement auctions. It reveals that the social welfare ranking depends on the monotonicity properties of the augmented demand elasticity, defined as a product of the demand elasticity and the firm’s relative markup. When the augmented elasticity is price independent, first-price and second-price procurement auctions are welfare-equivalent. When it increases (or decreases) with price, first-price (or second-price) auctions are welfare-superior. |
| Keywords: | Aftermarket, Procurement auctions, Social Welfare, Monopoly |
| JEL: | D44 H57 L12 |
| Date: | 2023–12–22 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20230081 |
| By: | Liu, Tingjun (The University of Hong Kong); Bernhardt, Dan (University of Illinois & University of Warwick) |
| Abstract: | We consider a classical auction setting in which an asset/project is sold to buyers who privately receive signals about expected payoffs, and payoffs are more sensitive to the signal of the bidder who controls the asset. We show that a seller can increase revenues by sometimes allocating cash-flow rights and control to different bidders, e.g., with the highest bidder receiving cash flows and the second-highest receiving control. Separation reduces a bidder’s information rent, which depends on the importance of his private information for the value of his awarded cash flows. As project payoffs are most sensitive to the information of the bidder who controls the project, allocating cash flow to another bidder lowers bidders’ informational advantage. As a result, when signals are close, the seller can increase revenues by splitting rights between the top two bidders. |
| Keywords: | Control and cash flow rights ; separation of rights ; mechanism design ; interdependent valuations JEL Codes: D44 ; D82 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1516 |
| By: | Ahmadzadeh, Amirreza |
| Abstract: | This paper examines a principal-agent model that the princi-pal mandates actions and conducts costly inspections without transfers. The principal prefers lower actions, while the agent prefers higher ac-tions and has private information about his type. The agent is protected by ex-post participation and rejects any action below his private type. The principal faces a trade-off between mandating lower actions and the risk the the agent rejects actions and chooses his outside option. We analyze various levels of the principal’s commitment ability. If the principal can commit to both inspections and actions when no inspec-tion is performed, and if the principal’s fear of ruin is greater than the agent’s, then a deterministic inspection policy is optimal. Additionally, if the principal cannot commit to either inspections or actions, the highest equilibrium payoff does not involve non-deterministic inspec-tion strategies. Finally, if the inspection cost is low and the principal commits to inspecting whenever requested by the agent, the principal can achieve the payoff of the optimal deterministic inspection policy.. |
| Keywords: | Costly state verification; mechanism design; cheap talk; inspection, limited commitment, regulation. |
| JEL: | D82 D86 M48 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129712 |
| By: | L. Elisa Celis; Amit Kumar; Nisheeth K. Vishnoi; Andrew Xu |
| Abstract: | This paper considers the scenario in which there are multiple institutions, each with a limited capacity for candidates, and candidates, each with preferences over the institutions. A central entity evaluates the utility of each candidate to the institutions, and the goal is to select candidates for each institution in a way that maximizes utility while also considering the candidates' preferences. The paper focuses on the setting in which candidates are divided into multiple groups and the observed utilities of candidates in some groups are biased--systematically lower than their true utilities. The first result is that, in these biased settings, prior algorithms can lead to selections with sub-optimal true utility and significant discrepancies in the fraction of candidates from each group that get their preferred choices. Subsequently, an algorithm is presented along with proof that it produces selections that achieve near-optimal group fairness with respect to preferences while also nearly maximizing the true utility under distributional assumptions. Further, extensive empirical validation of these results in real-world and synthetic settings, in which the distributional assumptions may not hold, are presented. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.04897 |
| By: | Jacob D. Leshno; Elaine Shi; Rafael Pass |
| Abstract: | Bitcoin demonstrated the possibility of a financial ledger that operates without the need for a trusted central authority. However, concerns persist regarding its security and considerable energy consumption. We assess the consensus protocols that underpin Bitcoin's functionality, questioning whether they can ensure economically meaningful security while maintaining a permissionless design that allows free entry of operators. We answer this affirmatively by constructing a protocol that guarantees economic security and preserves Bitcoin's permissionless design. This protocol's security does not depend on monetary payments to miners or immense electricity consumption, which our analysis suggests are ineffective. Our framework integrates economic theory with distributed systems theory, and highlights the role of the protocol's user community. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.08951 |