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on Economic Design |
| By: | Anna Bogomolnaia (University of Glasgow, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Hervé Moulin (University of Glasgow, Higher School of Economics [Saint-Pétersbourg]) |
| Abstract: | We divide efficiently a pile of indivisible goods in common property, using cash transfers to ensure fairness among agents with utility linear in money. We compare three cognitively feasible and privacy preserving division rules in terms of the guarantees (worst case utility) they offer to the participants. In the first version of Divide & Choose to n agents, they bid for the role of Divider then everyone bids on the shares of the Divider's partition. In the second version each agent announces a partition and they all bid to select the most efficient one. In the Bid & Sell rule the agents bid for the role of Seller: with two agents the smallest bid defines the Seller who then charges any price constrained only by her winning bid. Both rules reward subadditive utilities and penalise superadditive ones, and B&S more so than both D&C-s. B&S is also better placed to collect a larger share of the surplus when agents play safe. |
| Keywords: | Bid and Sell, Divide &, Choose, worst case, guarantees, safe play |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05139641 |
| By: | Bos, Olivier; Fugger, Nicolas; Onderstal, Sander |
| 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:zbw:zewdip:327106 |
| By: | Mariann Ollár; Antonio Penta |
| Abstract: | We study a framework for robust mechanism design that can accommodate various degrees of robustness with respect to agents' beliefs, which encompasses both the belief-free and Bayesian settings as special cases. For general belief restrictions, we characterize the set of incentive compatible direct mechanisms in general environments with interdependent values. Our main results, which we obtain based on a first-order approach, inform the design of transfers via 'belief-based' terms to attain incentive compatibility. In environments that satisfy a property of generalized independence, our results imply a robust version of revenue equivalence in non-Bayesian settings. Instead, under a notion of comovement between types and beliefs, which extends the idea of correlated information to non-Bayesian settings, we show that any allocation rule can be implemented, even if standard single-crossing and monotonicity conditions do not hold. Yet, unless the environment is Bayesian, information rents typically remain, and they decrease monotonically as the robustness requirements are weakened. |
| Keywords: | belif restrictions, incentive compatibility, interdependent values, moment conditions, robust mechanism design |
| JEL: | D62 D82 D83 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1513 |
| By: | Linnenbrink, Daniel |
| JEL: | C72 D44 D47 D82 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325443 |
| By: | Müge Süer (IWH Halle); Michel Tolksdorf (TU Berlin); Vincent Meisner (HU Berlin); Sokol Tominaj (TU Berlin) |
| Abstract: | Contrary to classical theory, we provide experimental evidence that preference reports in a strategy-proof school-choice mechanism systematically depend on beliefs. We employ a "hard-easy gap" to exogenously vary students' beliefs about their priority rank. As predicted, underconfidence induces more manipulation and thus more justified envy than overconfidence. The effect of priority information on justified envy crucially depends on the initial beliefs and the real priority ranks: while top students always gain, non-top students lose from this information. In total, correcting overconfidence/underconfidence increases/decreases justified envy. Finally, we confirm that additionally providing information on school availability through a dynamic implementation of the mechanism reduces justified envy compared to priority information alone. |
| Keywords: | market design; school choice; overconfidence; strategy-proofness; information; |
| JEL: | C92 D47 |
| Date: | 2025–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:546 |
| By: | Lauber, Arne; March, Christoph; Sahm, Marco |
| JEL: | C72 C91 D72 Z20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325407 |
| By: | Fugger, Nicolas; Gillen, Philippe; Gretschko, Vitali; Kokott, Gian-Marco; Riehm, Tobias |
| Abstract: | We investigate how buyer-supplier communication affects procurement prices, comparing auctions without direct communication to negotiations allowing it. In controlled experiments involving students and procurement professionals, we find communication increases prices, disadvantaging buyers. Negotiation analyses show lower initial offers, negotiation-focused dialogue, and emphasizing competition help reduce prices. Contrary to conventional wisdom, auctions without communication often yield better procurement outcomes, especially in competitive markets. Our results suggest managers should reconsider assumptions about experienced negotiators achieving superior deals and instead favor procurement auctions with limited communication to secure lower prices. |
| Keywords: | Auctions, Negotiations, Procurement, Experiment |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:327107 |
| By: | Dong, Xiaoge (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We study “willful ignorance” - choosing not to learn whether a task is illegal - in a lawmaker-principal-agent game and characterize the penalty policies that implement welfare-maximizing behavior. The model delivers an implementability frontier : which equilibrium behaviors can exist and be selected by penalties. With perfect inquiry, this frontier is aligned with the welfare ordering, so the lawmaker can make the welfare-maximizing behavior both exist and be preferred by all parties. With imperfect inquiry, noise breaks that alignment and produces two failures: inquiry that is socially desirable may be infeasible at any penalty, and inquiry that is socially undesirable may persist because it cannot be switched off. We compare harm-based, compliance-based, and dual-penalty rules: harm-based rules preserve control but tightens feasibility; compliance-based rules relax feasibility but sacrifices control; dual penalty rules recover both levers subject to simple bounds. The framework yields practical guidance for calibrating penalties to harm, inquiry accuracy, and inquiry costs. It also implies that ignorance cannot serve as a shield: the absence of knowing crime in equilibrium is driven by incentives rather than morality, making non-inquiry the true strategic margin of liability design |
| Keywords: | willful ignorance, ostrich instruction, law and economics, asymmetric information. |
| Date: | 2025–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:752 |
| By: | Bouvard, Matthieu; Jullien, Bruno; Martimort, David |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130945 |