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on Economic Design |
| By: | Muntasir Chaudhury (East West University); Szilvia Pápai (Concordia University and CIREQ) |
| Abstract: | We study three basic welfare axioms for school choice mechanisms with a reserve or quota-based affirmative action policy, namely non-wastefulness, respecting the affirmative action policy, and minimal responsiveness, and show that none of the previously proposed mechanisms satisfy all of them. We demonstrate that, together with an essential fairness requirement, these three welfare axioms are compatible by constructing a new mechanism which issues immediate acceptances to minority students for minority reserve seats and otherwise uses deferred acceptance. We analyze compatibilities, tradeoffs and implications concerning the three basic welfare axioms, fairness, and incentive properties. |
| Keywords: | school choice, affirmative action, minority reserves, minimal responsiveness, deferred acceptance, immediate acceptance, fairness, strategyproofness |
| JEL: | C78 D47 D63 D78 |
| Date: | 2024–05–17 |
| URL: | https://d.repec.org/n?u=RePEc:crd:wpaper:25001 |
| By: | Mridu Prabal Goswami |
| Abstract: | We consider an economic environment where a seller wants to sell an indivisible unit of good to a buyer. We show that revenue from any strategy-proof and individually rational mechanism defined on closed intervals of rich single crossing domains considered in \citep{Goswami1}, can be approximated by the revenue from a sequence of strategy-proof and individually rational mechanisms with finite range. Thus while studying optimal mechanisms without loss of generality we can study mechanisms with finite range. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.08342 |
| By: | Bradley J. Ruffle |
| Abstract: | Almost all Canadian and many American universities and colleges participate in cooperative education programs whereby each year co-op students alternate between dedicated for-credit work terms and school terms. Many of these programs use a minimum sums algorithm (MS) to match students to jobs. In this first study of the algorithm, we show that it and all its variations may produce unstable outcomes. We compare experimentally the properties of this algorithm and seemingly improved variations with the deferred acceptance algorithm (DA). While the improved versions of MS sometimes lead to more truthful reporting of preferences and increase the likelihood of a stable assignment, they all fare worse than DA. Our data reveal that the superior outcomes associated with DA are the result of both the algorithm itself and the behavioral responses it elicits. The continued use of MS has large adverse consequences for human capital accumulation and lifetime earnings. |
| Keywords: | experimental economics; two-sided matching; deferred acceptance; mechanism design; co-operative education |
| JEL: | C78 C90 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:mcm:deptwp:2025-02 |
| By: | Nadia Gui\~naz\'u; Pablo Neme; Jorge Oviedo |
| Abstract: | This paper examines equilibria in dynamic two-sided matching games, extending Gale and Shapley's foundational model to a non-cooperative, decentralized, and dynamic framework. We focus on markets where agents have utility functions and commitments vary. Specifically, we analyze a dynamic matching game in which firms make offers to workers in each period, considering three types of commitment: (i) no commitment from either side, (ii) firms' commitment, and (iii) workers' commitment. Our results demonstrate that stable matchings can be supported as stationary equilibria under different commitment scenarios, depending on the strategies adopted by firms and workers. Furthermore, we identify key conditions, such as discount factors, that influence agents' decisions to switch partners, thereby shaping equilibrium outcomes. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.19372 |
| By: | R. Pablo Arribillaga; Agustin G. Bonifacio |
| Abstract: | In the problem of fully allocating an infinitely divisible commodity among agents whose preferences are single-peaked, we show that the uniform rule is the only allocation rule that satisfies efficiency, the equal division guarantee, consistency, and non-obvious manipulability. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.12495 |
| By: | Patrick Lahr; Axel Niemeyer |
| Abstract: | This paper characterizes extreme points of the set of incentive-compatible mechanisms for screening problems with linear utility. Extreme points are exhaustive mechanisms, meaning their menus cannot be scaled and translated to make additional feasibility constraints binding. In problems with one-dimensional types, extreme points admit a tractable description with a tight upper bound on their menu size. In problems with multi-dimensional types, every exhaustive mechanism can be transformed into an extreme point by applying an arbitrarily small perturbation. For mechanisms with a finite menu, this perturbation displaces the menu items into general position. Generic exhaustive mechanisms are extreme points with an uncountable menu. Similar results hold in applications to delegation, veto bargaining, and monopoly problems, where we consider mechanisms that are unique maximizers for specific classes of objective functionals. The proofs involve a novel connection between menus of extreme points and indecomposable convex bodies, first studied by Gale (1954). |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.00649 |
| By: | Yi Liu; Yang Yu |
| Abstract: | This paper explores the problem of mediated communication enhanced by money-burning tactics for commitment power. In our model, the sender has state-independent preferences and can design a communication mechanism that both transmits messages and burns money. We characterize the sender's maximum equilibrium payoff, which has clear geometric interpretations and is linked to two types of robust Bayesian persuasion. We demonstrate that, generically, the money-burning tactic \emph{strictly} improves the sender's payoff for almost all prior beliefs where commitment is valuable for the sender. Furthermore, our communication model directly applies to Web 3.0 communities, clarifying the commitment value within these contexts. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.19431 |