|
on Economic Design |
| By: | Yuichiro Kamada; Fuhito Kojima; Akira Matsushita |
| Abstract: | Fragmentation of matching markets is a ubiquitous problem across countries and across applications. In order to study the implications of fragmentation and possibilities for integration, we first document and discuss a variety of fragmentation cases in practice such as school choice, medical residency matching, and so forth. Using the real-life dataset of daycare matching markets in Japan, we then empirically evaluate the impact of interregional transfer of students by estimating student utility functions under a variety of specifications and then using them for counterfactual simulation. Our simulation compares a fully integrated market and a partially integrated one with a "balancedness" constraint -- for each region, the inflow of students from the other regions must be equal to the outflow to the other areas. We find that partial integration achieves 39.2 to 59.6% of the increase in the child welfare that can be attained under full integration, which is equivalent to a 3.3 to 4.9% reduction of travel time. The percentage decrease in the unmatch rate is 40.0 to 52.8% under partial integration compared to the case of full integration. The results suggest that even in environments where full integration is not a realistic option, partial integration, i.e., integration that respects the balancedness constraint, has a potential to recover a nontrivial portion of the loss from fragmentation. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.19628 |
| By: | Hinata Kurashita; Ryosuke Sakai |
| Abstract: | We study the problem of allocating homogeneous and indivisible objects among agents with money. In particular, we investigate the relationship between egalitarian-equivalence (Pazner and Schmeidler, 1978), as a fairness concept, and efficiency under agents' incentive constraints. As a first result, we characterize the class of mechanisms that satisfy egalitarian-equivalence, strategy-proofness, individual rationality, and no subsidy. Our characterization reveals a strong tension between egalitarian-equivalence and efficiency: under these properties, the mechanisms allocate objects only in limited cases. To address this limitation, we replace strategy-proofness with the weaker incentive property, non-obvious manipulability (Troyan and Morrill, 2020). We show that this relaxation allows us to design mechanisms that achieve efficiency while still ensuring egalitarian-equivalence. Furthermore, upon achieving efficiency, we identify the agent optimal mechanism in the characterized class. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.09152 |
| By: | Yaron Azrieli; Ritesh Jain; Semin Kim |
| Abstract: | We study the design of voting mechanisms in a binary social choice environment where agents' cardinal valuations are independent but not necessarily identically distributed. The mechanism must be anonymous -- the outcome is invariant to permutations of the reported values. We show that if there are two agents then expected welfare is always maximized by an ordinal majority rule, but with three or more agents there are environments in which cardinal mechanisms that take into account preference intensities outperform any ordinal mechanism. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.08055 |
| By: | Simon Finster (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique); Patrick Loiseau (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique); Simon Mauras (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique); Mathieu Molina (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique); Bary Pradelski (MFO - Maison Française d'Oxford - MEAE - Ministère de l'Europe et des Affaires étrangères - CNRS - Centre National de la Recherche Scientifique, LIG - Laboratoire d'Informatique de Grenoble - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes, POLARIS - Performance analysis and optimization of LARge Infrastructures and Systems - Centre Inria de l'Université Grenoble Alpes - Inria - Institut National de Recherche en Informatique et en Automatique - LIG - Laboratoire d'Informatique de Grenoble - Inria - Institut National de Recherche en Informatique et en Automatique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes) |
| Abstract: | We initiate the study of how auction design affects the division of surplus among buyers. We propose a parsimonious measure for equity and apply it to the family of standard auctions for homogeneous goods. Our surplus-equitable mechanism is efficient, Bayesian-Nash incentive compatible, and achieves surplus parity among winners ex-post. The uniform-price auction is equity-optimal if and only if buyers have a pure common value. Against intuition, the pay-as-bid auction is not always preferred in terms of equity if buyers have pure private values. In auctions with price mixing between pay-as-bid and uniform prices, we provide prior-free bounds on the equity-preferred pricing rule under a common regularity condition on signals. |
| Keywords: | uniform price, pay-as-bid, mechanism design, equity, auctions, common value |
| Date: | 2025–07–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05225702 |
| By: | Olivier Bos; Nicolas Fugger; Sander Onderstal |
| Abstract: | We investigate profit-share auctions in a procurement context, comparing them with traditional cash auctions to identify which mechanism yields lower expenses for buyers. We also explore whether specifying a high project value in profit-share auction contracts influences supplier bidding behavior. Using theoretical analysis and experimental methods, we observe that profit-share auctions lead to lower buyer expenses compared to traditional cash auctions. Furthermore, we find that the buyer benefits from specifying a high project value in the contract, as this commitment induces more aggressive bidding from the suppliers. While profit-share auctions result in significantly lower buyer expenses than cash auctions, the observed differences are smaller than predicted. This discrepancy is due to (i) more pronounced underbidding in cash auctions and (ii) lower efficiency in profit-share auctions caused by noisy bidding. Our findings suggest that managers can reduce procurement costs by adopting profit-share auctions and strategically committing to a high project value in contracts. However, they should be aware that real-world savings may be smaller than theoretically predicted due to supplier bidding behavior. |
| Keywords: | procurement, profit-share auctions, experiment |
| JEL: | D44 C92 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12071 |
| By: | Abinash Panda; Anup Pramanik; Ragini Saxena |
| Abstract: | We investigate preference domains where every unanimous and locally strategy-proof social choice function (scf) satisfies dictatorship. We identify a condition on domains called connected with two distinct neighbours which is necessary for unanimous and locally strategy-proof scfs to satisfy dictatorship. Further, we show that this condition is sufficient within the class of domains where every unanimous and locally strategy-proof scf satisfies tops-onlyness. While a complete characterization remains open, we make significant progress by showing that on connected with two distinct neighbours domains, unanimity and strategy-proofness (a stronger requirement) guarantee dictatorship. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.00913 |
| By: | Jo\~ao Thereze (Fuqua School of Business, Duke University); Udayan Vaidya (Fuqua School of Business, Duke University) |
| Abstract: | A principal seeks to contract with an agent but must do so through an informed delegate. Although the principal cannot directly mediate the interaction, she can constrain the menus of contracts the delegate may offer. We show that the principal can implement any outcome that is implementable through a direct mechanism satisfying dominant strategy incentive compatibility and ex-post participation for the agent. We apply this result to several settings. First, we show that a government that delegates procurement to a budget-indulgent agency should delegate an interval of screening contracts. Second, we show that a seller can delegate sales to an intermediary without revenue loss, provided she can commit to a return policy. Third, in contrast to centralized mechanism design, we demonstrate that no partnership can be efficiently dissolved in the absence of a mediator. Finally, we discuss when delegated contracting obstructs efficiency, and when choosing the right delegate may help restore it. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.19326 |
| By: | Federico Echenique; Sumit Goel; SangMok Lee |
| Abstract: | We study fairness in the allocation of discrete goods. Exactly fair (envy-free) allocations are impossible, so we discuss notions of approximate fairness. In particular, we focus on allocations in which the swap of two items serves to eliminate any envy, either for the allocated bundles or with respect to a reference bundle. We propose an algorithm that, under some restrictions on agents' preferences, achieves an allocation with ``swap bounded envy.'' |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.09290 |
| By: | Tomás Larroucau; Ignacio A. Rios; Anaïs Fabre; Christopher Neilson |
| Abstract: | We examine whether large-scale information interventions can improve college application outcomes in a centralized admissions system. Using nationwide surveys from Chile, we document widespread information frictions and frequent application mistakes, such as omitting attainable preferred programs or failing to include safety options. To address these frictions, we partnered with the Ministry of Education to implement a large-scale field experiment that provided applicants with personalized information on admission probabilities and program characteristics through customized online platforms. The intervention increased the probability that previously unmatched students received an assignment by 44% and improved placement into higher-ranked programs by 20%. Building on these results, the policy was scaled nationwide, reaching all applicants. The scaled-up version, evaluated via an encouragement design, confirmed substantial gains, including higher admission rates for initially unmatched students and persistent enrollment improvements. Our findings show that low-cost, personalized information policies, when integrated into centralized admissions platforms, can substantially reduce application mistakes and improve student outcomes at scale. The results also highlight how leveraging existing market design infrastructure can enable scalable, cost-effective interventions that enhance efficiency and equity in higher education access. |
| JEL: | C93 D47 D83 I0 I23 I28 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34164 |
| By: | Bruno Baránek; Leon Musolff; Vitezslav Titl |
| Abstract: | We develop a method for detecting cartels in multistage auctions. Our approach allows a firm to be collusive when facing members of its cartel yet competitive when facing others. Intuitively, as initial bids are shaded, close initial bids not only imply similar costs but also provide an incentive to undercut. We detect firm pairs that ignore this incentive when facing each other. Our algorithm predicts Ukraine’s Antimonopoly Committee’s sanctions: firm pairs classified as collusive are 8.98 times more likely (standard error 2.65 times) to be sanctioned. It also uncovers additional collusion: 1, 857 collusive firms participate in 15.57% of auctions, increasing costs by 1.95%. |
| Keywords: | public procurement, collusion, online markets |
| JEL: | H57 D44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12073 |
| By: | Christoph Carnehl; Anton Sobolev; Konrad Stahl; André Stenzel |
| Abstract: | We study information design in a vertically differentiated market. Two firms offer products of ex-ante unknown qualities. A third party designs a system to publicly disclose information. More precise information guides consumers toward their preferred product but increases expected product differentiation, allowing firms to raise prices. Full disclosure of the product ranking alone suffices to maximize industry profits. Consumer surplus is maximized, however, whenever no information about the product ranking is disclosed, as the benefit of competitive pricing always dominates the loss from suboptimal choices. The provision of public information on product quality becomes questionable. |
| Keywords: | Information Design, Vertical Product Differentiation, Quality Rankings, Competition |
| JEL: | D43 D82 L13 L15 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_700 |
| By: | Xin Dong; Jose Ventura; Vikash V. Gayah |
| Abstract: | Ride-hailing platforms (e.g., Uber, Lyft) have transformed urban mobility by enabling ride-sharing, which holds considerable promise for reducing both travel costs and total vehicle miles traveled (VMT). However, the fragmentation of these platforms impedes system-wide efficiency by restricting ride-matching to intra-platform requests. Cross-platform collaboration could unlock substantial efficiency gains, but its realization hinges on fair and sustainable profit allocation mechanisms that can align the incentives of competing platforms. This study introduces a graph-theoretic framework that embeds profit-aware constraints into network optimization, facilitating equitable and efficient cross-platform ride-sharing. Within this framework, we evaluate three allocation schemes -- equal-profit-based, market-share-based, and Shapley-value-based -- through large-scale simulations. Results show that the Shapley-value-based mechanism consistently outperforms the alternatives across six key metrics. Notably, system efficiency and rider service quality improve with increasing demand, reflecting clear economies of scale. The observed economies of scale, along with their diminishing returns, can be understood with the structural evolution of rider-request graphs, where super-linear edge growth expands feasible matches and sub-linear degree scaling limits per-rider connectivity. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.19192 |
| By: | Jorge Arenas M. |
| Abstract: | In this paper, I analyze pricing problems of a monopolistic platform that offers matching services to agents with heterogeneous preferences in multi-sided markets. First, I extend the Marx and Schummer (2021) model to multi-sided markets and show that its main result holds: the allocation of the price level across the sides of the market is not affected by the size imbalance across these sides. I then use preference simulations to address the price level problem in two-sided markets. I find that the optimal price level depends positively on: (i) the size of the market when it is balanced; and (ii) the imbalance of the market when it is unbalanced. The simulations also yield important implications for the relationship between the percentage of unmatched agents and market size and imbalance. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1033 |
| By: | Wesley H. Holliday |
| Abstract: | Proponents of Condorcet voting face the question of what to do in the rare case when no Condorcet winner exists. Recent work provides compelling arguments for the rule that should be applied in three-candidate elections, but already with four candidates, many rules appear reasonable. In this paper, we consider a recent proposal of a simple Condorcet voting method for Final Four political elections. Our question is what normative principles could support this simple form of Condorcet voting. When there is no Condorcet winner, one natural principle is to pick the candidate who is closest to being a Condorcet winner. Yet there are multiple plausible ways to define closeness, leading to different results. Here we take the following approach: identify a relatively uncontroversial sufficient condition for one candidate to be closer than another to being a Condorcet winner; then use other principles to help settle who wins in cases when that condition alone does not. We prove that our principles uniquely characterize the simple Condorcet voting method for Final Four elections. This analysis also points to a new way of extending the method to elections with five or more candidates that is simpler than an extension previously considered. The new proposal is to elect the candidate with the most head-to-head wins, and if multiple candidates tie for the most wins, then elect the one who has the smallest head-to-head loss. We provide additional principles sufficient to characterize this simple method for Final Five elections. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.17095 |
| By: | José Ignacio Cuesta; Pietro Tebaldi |
| Abstract: | A common approach to markets with adverse selection is to regulate competition to minimize inefficiencies, while preserving consumer choice among firms. We study the role of procurement auctions—leading to sole provision by the winning firm—as an alternative market design. Relative to regulated competition, auctions affect product variety, quality, markups, and remove cream-skimming incentives. We develop a framework to study this comparison and apply it to individual health insurance in the US. We find that procurement auctions would increase consumer welfare in most markets, mainly by limiting inefficiencies from adverse selection and market power, and by increasing quality. |
| JEL: | H42 I13 L13 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34141 |
| By: | Florian Brandl; Andrew Mackenzie |
| Abstract: | A perfectly divisible cake is to be divided among a group of agents. Each agent is entitled to a share between zero and one, and these entitlements are compatible in that they sum to one. The mediator does not know the preferences of the agents, but can query the agents to make cuts and appraise slices in order to learn. We prove that if one of the entitlements is irrational, then the mediator must use a protocol that involves an arbitrarily large number of queries in order to construct an allocation that respects the entitlements regardless of preferences. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.09004 |
| By: | Maxwell Rosenthal |
| Abstract: | This paper develops a data-driven approach to Bayesian persuasion. The receiver is privately informed about the prior distribution of the state of the world, the sender knows the receiver's preferences but does not know the distribution of the state variable, and the sender's payoffs depend on the receiver's action but not on the state. Prior to interacting with the receiver, the sender observes the distribution of actions taken by a population of decision makers who share the receiver's preferences in best response to an unobserved distribution of messages generated by an unknown and potentially heterogeneous signal. The sender views any prior that rationalizes this data as plausible and seeks a signal that maximizes her worst-case payoff against the set of all such distributions. We show positively that the two-state many-action problem has a saddle point and negatively that the two-action many-state problem does not. In the former case, we identify adversarial priors and optimal signals. In the latter, we characterize the set of robustly optimal Blackwell experiments. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.03203 |
| By: | Mikhail Drugov; Dmitry Ryvkin |
| Abstract: | We characterize robust tournament design -- the prize scheme that maximizes the lowest effort in a rank-order tournament where the distribution of noise is unknown, except for an upper bound, $\bar{H}$, on its Shannon entropy. The robust tournament scheme awards positive prizes to all ranks except the last, with a distinct top prize. Asymptotically, the prizes follow the harmonic number sequence and induce an exponential distribution of noise with rate parameter $e^{-\bar{H}}$. The robust prize scheme is highly unequal, especially in small tournaments, but becomes more equitable as the number of participants grows, with the Gini coefficient approaching $1/2$. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.16348 |