|
on Economic Design |
| By: | Galeotti, A.; Golub, B.; Goyal, S.; Talamas, E.; Tamuz, O. |
| Abstract: | A large differentiated oligopoly yields inefficient market equilibria. An authority with imprecise information about the primitives of the market aims to design tax/subsidy interventions that increase efficiency robustly—i.e., with high probability. We identify a condition on demand that guarantees the existence of such interventions, and we show how to construct them using noisy estimates of demand complementarities and substitutabilities across products. The analysis works by deriving a novel description of the incidence of market interventions in terms of spectral statistics of Slutsky matrices. Our notion of recoverable structure ensures that parts of the spectrum that are useful for the design of interventions are statistically recoverable from noisy demand estimates. |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2456 |
| By: | Jean-Michel Benkert, Armin Schmutzler |
| Abstract: | This paper investigates the value of recommendations for disseminating economic information, with a focus on frictions resulting from preference heterogeneity. We consider Bayesian expected-payoff maximizers who receive non-strategic recommendations by other consumers. The paper provides conditions under which different consumer types accept these recommendations. Moreover, we assess the overall value of a recommendation system and the determinants of that value. Our analysis highlights the importance of disentangling objective information from subjective preferences when designing value-maximizing recommendation systems. |
| Keywords: | recommendations, preference heterogeneity, optimal design |
| JEL: | D02 D47 D83 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2406 |
| By: | Luca Anderlini; GaOn Kim |
| Abstract: | We consider auctions with N+1 bidders. Of these, N are symmetric and N+1 is "sufficiently strong" relative to the others. The auction is a "tournament" in which the first N players bid to win the right to compete with N+1. The bids of the first N players are binding and the highest bidder proceeds to a second-price competition with N+1. When N+1's values converge in distribution to an atom above the upper end of the distribution of the N bidders and the rest of the distribution is drained away from low values sufficiently slowly, the auction's expected revenue is arbitrarily close to the one obtained in a Myerson (1981) optimal auction. The tournament design is "detail free" in the sense that no specific knowledge of the distributions is needed in addition to the fact that bidder N+1 is stronger than the others as required. In particular, no additional information about the value of the atom is needed. This is important since mis-calibrating by a small amount an attempt to implement the optimal auction can lead to large losses in revenue. We provide an interpretation of these results as possibly providing guidelines to a seller on how to strategically "populate" auctions with a single bidder even when only weaker bidders are available. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.11048 |
| By: | Gregory Z. Gutin; Daniel Karapetyan; Philip R. Neary; Alexander Vicker; Anders Yeo |
| Abstract: | A run of the deferred acceptance (DA) algorithm may contain proposals that are sure to be rejected. We introduce the accelerated deferred acceptance algorithm that proceeds in a similar manner to DA but with sure-to-be rejected proposals ruled out. Accelerated deferred acceptance outputs the same stable matching as DA but does so more efficiently: it terminates in weakly fewer rounds, requires weakly fewer proposals, and final pairs match no later. Computational experiments show that these efficiency savings can be strict. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.06865 |
| By: | Antonio Estache; Renaud Foucart; Tomas Serebrisky |
| Abstract: | We review the potential costs and benefits of adding a lottery component to both discretionary negotiated procurement procedures and rule-based auction procedures. We show that adding a lottery component to auctions can increase quality and reduce issues related to limited liability, renegotiations, and bid-rigging. In the case of discretionary negotiated procedures, lotteries anchored in a diversity of randomization options can also reduce corruption risks. These include randomizing between bidders and between decision committee members, or randomizing audits. |
| Keywords: | rules, discretion, procurement, lotteries, corruption, auctions |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/378275 |
| By: | Penghuan Yan |
| Abstract: | Selective contests can impair participants' overall welfare in overcompetitive environments, such as school admissions. This paper models the situation as an optimal contest design problem with binary actions, treating effort costs as societal costs incurred to achieve a desired level of selectivity. We provide a characterization for the feasible set of selection efficiency and societal cost in selective contests by establishing their relationship with feasible equilibrium strategies. We find that selection efficiency and contestants' welfare are complementary, i.e. it is almost impossible to improve one without sacrificing the other. We derive the optimal equilibrium outcome given the feasible set and characterize the corresponding optimal contest design. Our analysis demonstrates that it is always optimal for a contest designer who is sufficiently concerned with societal cost to intentionally introduce randomness into the contest. Furthermore, we show that the designer can optimize any linear payoff function by adjusting a single parameter related to the intensity of randomness, without altering the specific structure of the contest. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.09768 |
| By: | R. Pablo Arribillaga; Jordi Massó; Alejandro Neme |
| Abstract: | We define and study obvious strategy-proofness with respect to a partition of the set of agents. It encompasses strategy-proofness as a special case when the partition is the coarsest one and obvious strategy-proofness when the partition is the finest. For any partition, it falls between these two extremes. We establish two general properties of this new notion and apply it to the simple anonymous voting problem with two alternatives and strict preferences. |
| Keywords: | obvious strategy-proofness, extended majority voting |
| JEL: | D71 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1456 |
| By: | Clinton Gubong Gassi (Université de Franche-Comté, CRESE, UR3190, F-25000 Besançon, France); Frank Steffen (Faculty of Law, Business and Economics, University of Bayreuth, Germany) |
| Abstract: | The aim of this paper is to identify the multi-winner voting rules that can be con- sidered as extension of the Plurality rule. Multi-winner voting addresses the problem of selecting a fixed-size subset of candidates, called a committee, from a larger set of available candidates based on the voters’ preferences. In the single-winner setting, where each voter provides a strict ranking of the candidates and the goal is to select a unique candidate, Yeh (2008) characterized the Plurality rule as the only voting rule satisfying five independent axioms: anonymity, neutrality, consistency, efficiency, and top-only. In this paper, we demonstrate that a natural extension of these axioms to the multi-winner framework allows us to identify a class of top-k counting rules as multi-winner analogous to the Plurality rule. |
| Keywords: | Multi-winner, voting rules, axioms, Plurality rule, top-k counting rules. |
| JEL: | D71 D72 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:crb:wpaper:2024-18 |
| By: | Michael Junho Lee; Antoine Martin; Robert M. Townsend |
| Abstract: | Trades in today’s financial system are inherently subject to settlement uncertainty. This paper explores tokenization as a potential technological solution. A token system, by enabling programmability of assets, can be designed to eradicate settlement uncertainty. We study the allocations achieved in a decentralized market with either the legacy settlement system or a token system. Tokenization can improve efficiency in markets subject to a limited commitment problem. However, it also materially alters the information environment, which in turn aggravates a hold-up problem. This limits potential gains from resolving settlement uncertainty, particularly for markets that depend on intermediaries. We show that optimal design hinges on joint design of settlement and trading systems, and in particular, that token systems work best when matched with direct trading. |
| Keywords: | tokenization; programmability; settlement uncertainty; asymmetric information |
| JEL: | D47 D82 D86 G29 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98896 |
| By: | Niklas Valentin Lehmann |
| Abstract: | This review article examines the challenge of eliciting truthful information from multiple individuals when such information cannot be verified against an objective truth, a problem known as information elicitation without verification (IEWV). This article reviews over 25 mechanisms designed to incentivize truth-telling in such scenarios, and their effectiveness in empirical studies. The analysis finds that although many mechanisms theoretically ensure truthfulness as a Bayesian Nash Equilibrium, empirical evidence of such mechanisms working in practice is very limited and generally weak. Consequently, more empirical research is needed to validate mechanisms. Given that many mechanisms are very complex and cannot be easily conveyed to research subjects, this review suggests that simpler, more intuitive mechanisms may be easier to test and apply. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.07277 |
| By: | Jack Edwards |
| Abstract: | When eliciting forecasts from a group of experts, it is important to reward predictions so that market participants are incentivized to tell the truth. Existing mechanisms partially accomplish this but remain susceptible to groups of experts colluding to increase their expected reward, meaning that no aggregation of predictions can be fully trusted to represent the true beliefs of forecasters. This paper presents two novel scoring mechanisms which elicit truthful forecasts from any group of experts, even if they can collude or access each other's predictions. The key insight of this approach is a randomization component which maintains strict properness but prevents experts from coordinating dishonest reports in advance. These mechanisms are strictly proper and do not admit expected arbitrage, resolving an open question in the field. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.07046 |
| By: | Correia, Isabel; Melo, Teresa |
| Abstract: | This study addresses a two-echelon network design problem that determines the location and size of new warehouses, the removal of company-owned warehouses, the inventory levels of multiple products at the warehouses, and the assignment of suppliers as well as customers to warehouses over a multi-period planning horizon. A distinctive feature of our problem is that new warehouses operate with modular capacities that can be expanded or reduced over several periods, the latter not necessarily having to be consecutive. Moreover, in every period, the demand of a customer for a given product has to be satisfied by a single warehouse. This problem arises in the context of warehousing-as-a-service, a business scheme that offers flexible conditions for temporary capacity leasing. The associated fixed warehouse lease cost reflects economies of scale in the capacity size and the length of the lease contract. We develop a mixed-integer linear programming formulation and propose a matheuristic to solve this problem, which exploits the structure of the optimal solution of the linear relaxation to successively assign customers to open warehouses and fix other binary variables related to warehouse operation. Additional variable fixing rules are also developed, based on a scheme for managing inventories at warehouses and using the quantities provided by suppliers. Numerical experiments with randomly generated large-sized instances reveal that the proposed matheuristic outperforms a general-purpose solver in 74% of the instances by identifying higher quality solutions in a substantially shorter computing time. |
| Keywords: | network design, temporary warehouse rental, capacity expansion and reduction, mixed integer programming, matheuristic |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:htwlog:303044 |
| By: | Agata Farina; Guillaume Fréchette; Alessandro Ispano; Alessandro Lizzeri; Jacopo Perego |
| Abstract: | We conduct an experimental analysis of selective disclosure in communication. In our model, an informed sender aims to influence a receiver by disclosing verifiable evidence that is selected from a larger pool of available evidence. Our experimental design leverages the rich comparative statics predictions of this model, enabling a systematic test of the relative importance of evidence selection versus evidence concealment in communication. Our findings confirm the key qualitative predictions of the theory, suggesting that selection, rather than concealment, is often the dominant distortion in communication. We also identify deviations from the theory: A minority of senders overcommunicate relative to predictions, while some receivers partially neglect the selective nature of the evidence they observe. |
| JEL: | C92 D83 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32975 |