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on Economic Design |
| By: | Pauline Corblet; Jeremy Fox; Alfred Galichon |
| Abstract: | We introduce a model of dynamic matching with transferable utility, extending the static model of Shapley and Shubik (1971). Forward-looking agents have individual states that evolve with current matches. Each period, a matching market with market-clearing prices takes place. We prove the existence of an equilibrium with time-varying distributions of agent types and show it is the solution to a social planner's problem. We also prove that a stationary equilibrium exists. We introduce econometric shocks to account for unobserved heterogeneity in match formation. We propose two algorithms to compute a stationary equilibrium. We adapt both algorithms for estimation. We estimate a model of accumulation of job-specific human capital using data on Swedish engineers. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.02737 |
| 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: | incentive compatibility , moment conditions , interdependent values , belif restrictions , robust mechanism design |
| JEL: | D62 D82 D83 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1918 |
| By: | Tonghui Qi |
| Abstract: | Many auction datasets with reserve prices do not include bids that fall below the reserve. This paper establishes nonparametric identification results in first- and second-price auctions when transaction prices are truncated by a binding reserve price under a range of information structures. In the simplest case-where the number of potential bidders is fixed and known across all auctions-if only the transaction price is observed, the bidders' private-value distribution is identified in second-price auctions but not in first-price auctions. Identification in first-price auctions can be achieved if either the number of active bidders (those whose bids exceed the reserve) or the number of auctions with no sales (all bids below the reserve) is observed. When the number of potential bidders varies across auctions and is unknown, the bidders' private-value distribution is identified in first-price auctions but not in second-price auctions, provided that both the transaction price and the number of active bidders are observed. Finally, I extend these results to auctions with entry costs, which face a similar truncation issue when data on potential bidders who do not enter are missing. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.04464 |
| By: | Anand Chopra; Malachy James Gavan; Antonio Penta |
| Abstract: | Safe Implementation (Gavan and Penta, 2025) combines standard implementation with the requirement that the implementing mechanism is such that, if up to k agents deviate from the relevant solution concept, the outcomes that are induced are still ‘acceptable’ at every state of the world. In this paper, we study Safe Implementation of social choice correspondences in mixed Nash Equilibrium. We identify a condition, Set-Comonotonicity, which is both necessary and (under mild domain restrictions) almost sufficient for this implementation notion. |
| Keywords: | Implementation, mechanism design, robustness, safe implementation, mixed implementation, Set-Comonotonicity |
| JEL: | C72 D82 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1911 |
| By: | Leandro Arozamena; Juan José Ganuza; Federico Weinschelbaum |
| Abstract: | A sponsor –e.g. a government agency– uses a procurement auction to select a supplier who will be in charge of the execution of a contract. That contract is incomplete: it may be renegotiated once the auction's winner has been chosen. We examine a setting where one firm may bribe the agent in charge of monitoring contract execution so that the former is treated preferentially if renegotiation actually occurs. If a bribe is accepted, the corrupt firm will be more aggressive at the initial auction and thus win with a larger probability. We show that the equilibrium probability of corruption is larger when the initial contract is less complete, when the corrupt firm's cost is more likely to be similar to her rivals', and when it faces fewer competitors. |
| Keywords: | Auctions , procurement , corruption , renegotiation , cost overruns |
| JEL: | C72 D44 D82 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1906 |
| By: | Nathan Hancart |
| Abstract: | I provide a sufficient condition under which a principal does not benefit from committing to a mechanism in economic models represented by a maximisation problem under constraints. These problems include mechanism design, principal-agent models or sender-receiver games. In principal-agent problems, this condition holds if the agent has a finite strategy space and the principal's value function is continuous in the mechanism. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.07994 |
| By: | Ritesh Jain; Michele Lombardi; Antonio Penta |
| Abstract: | We put forward a notion of implementation for Social Choice Functions (SCF) that is robust with respect to the solution concept used to model agents’ strategic interaction. Formally, we define implementation in Interim Correlated Rationalizability and its Refinements (ICRR implementation) as implementation in Interim Correlated Rationalizability (ICR), with the extra requirement that it be achieved by a mechanism in which all selections from ICR have the best-reply property. We provide a tight characterization in terms of a novel notion of monotonicity, Iterative Interim Monotonicity (IIM). Our condition relates the possibility of ICRR-implementation with a specific way in which the SCF is constrained by agents’ preference reversals. We provide several alternative formulations of IIM, that clarify both its connection with various parts of the literature (such as Oury and Tercieux (2012)’s Interim Rationalizable Monotonicity, and others), and the source of IIM’s ability to overcome several limitations of the previous conditions in the literature. |
| JEL: | C79 D82 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1893 |
| By: | Eugene Lim; Tzeh Yuan Neoh; Nicholas Teh |
| Abstract: | We study a sequential decision-making model where a set of items is repeatedly matched to the same set of agents over multiple rounds. The objective is to determine a sequence of matchings that either maximizes the utility of the least advantaged agent at the end of all rounds (optimal) or at the end of every individual round (anytime optimal). We investigate the computational challenges associated with finding (anytime) optimal outcomes and demonstrate that these problems are generally computationally intractable. However, we provide approximation algorithms, fixed-parameter tractable algorithms, and identify several special cases whereby the problem(s) can be solved efficiently. Along the way, we also establish characterizations of Pareto-optimal/maximum matchings, which may be of independent interest to works in matching theory and house allocation. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.04624 |
| By: | Jinho Cha; Justin Yoo; Eunchan Daniel Cha; Emily Yoo; Caedon Geoffrey; Hyoshin Song |
| Abstract: | Decentralized coordination and digital contracting are becoming critical in complex industrial ecosystems, yet existing approaches often rely on ad hoc heuristics or purely technical blockchain implementations without a rigorous economic foundation. This study develops a mechanism design framework for smart contract-based resource allocation that explicitly embeds efficiency and fairness in decentralized coordination. We establish the existence and uniqueness of contract equilibria, extending classical results in mechanism design, and introduce a decentralized price adjustment algorithm with provable convergence guarantees that can be implemented in real time. To evaluate performance, we combine extensive synthetic benchmarks with a proof-of-concept real-world dataset (MovieLens). The synthetic tests probe robustness under fee volatility, participation shocks, and dynamic demand, while the MovieLens case study illustrates how the mechanism can balance efficiency and fairness in realistic allocation environments. Results demonstrate that the proposed mechanism achieves substantial improvements in both efficiency and equity while remaining resilient to abrupt perturbations, confirming its stability beyond steady state analysis. The findings highlight broad managerial and policy relevance for supply chains, logistics, energy markets, healthcare resource allocation, and public infrastructure, where transparent and auditable coordination is increasingly critical. By combining theoretical rigor with empirical validation, the study shows how digital contracts can serve not only as technical artifacts but also as institutional instruments for transparency, accountability, and resilience in high-stakes resource allocation. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.05504 |
| By: | Maria Haydee Fonseca-Mairena (Department of Economics and Management, Catholic University of the Maule Region, Talca, Chile); Matteo Triossi (Venice School of Management, Università Ca' Foscari Venice) |
| Abstract: | We study the connection between cores and strategy-proofness in environments with externalities. With this objective in mind, we present a new concept of the core that relies on agents' expectations about their peers' reactions to group deviations. It encompasses several core consistent solutions previously proposed in the literature for environments with externalities. It allows us to prove that essentially single-valued cores are necessary and sufficient for strategy-proof, efficient, and individually rational mechanisms. |
| Keywords: | Allocation problems, Core, Expectations, Externalities, Strategy-proofness. |
| JEL: | C71 C72 C78 D62 D78 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:vnm:wpdman:217 |
| By: | Maria Titova; Kun Zhang |
| Abstract: | This paper studies a game in which an informed sender with state-independent preferences uses verifiable messages to convince a receiver to choose an action from a finite set. We characterize the equilibrium outcomes of the game and compare them with commitment outcomes in information design. We provide conditions under which a commitment outcome is an equilibrium outcome and identify environments in which the sender does not benefit from commitment power. Our findings offer insights into the interchangeability of verifiability and commitment in applied settings. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.08251 |
| By: | Walter Bossert; Salvador Barberà |
| Abstract: | In his 1958 classic, The Theory of Committees and Elections, Duncan Black proposed the following lexicographic rule: for any set of feasible alternatives, and any pro- file of voters' goodness relations, choose the strong Condorcet winner if it exists, and select the set of Borda winners otherwise. We provide what we think is the first axiomatic characterization of this rule. We do so through the intermediary study of the generalized social welfare functions that underlie the rule's choices, and the use of axioms that emphasize what is common and what is different in the spirit of the amply debated proposals made by these two 18th-century authors. |
| Keywords: | Black’s voting rule, Borda count, Social choice correspondences, strong Condorcet winners |
| JEL: | D71 D72 D63 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1515 |
| By: | Li, Bingbing (Center for Mathematical Economics, Bielefeld University); Förster, Manuel (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | In our principal-agent model, the principal can repeatedly delegate authority to an agent with uncertain preferences or take the decisions himself. The principal learns the state at the end of each period and then updates his belief about the agent’s bias based on the decision implemented if he delegated authority. We demonstrate that equilibria are characterized by an “imitation” interval of agent types (biases) who mimic less biased types in order to be retained. Interestingly, the principal generally benefits from the agent’s imitation compared to a benchmark. Furthermore, comparative statics reveal that, surprisingly, the principal may be worse off with better information. Finally, an extension to finitely many periods shows that the imitation interval gradually shifts, such that agent types within the interval imitate less biased types. |
| Keywords: | Delegation, preference uncertainty, private information, dynamic game, organizational design |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:753 |
| By: | Andrea Di Giovan Paolo; Jose Higueras |
| Abstract: | We study information disclosure in competitive markets with adverse selection. Sellers privately observe product quality, with higher quality entailing higher production costs, while buyers trade at the market-clearing price after observing a public signal. Because sellers' participation in trade conveys information about quality, the designer faces endogenous constraints in the set of posteriors that she can induce. We reformulate the designer's problem as a martingale optimal transport exercise with an additional condition that rules out further information transmission through sellers' participation decisions, and characterize the optimal signals. When the designer maximizes trade volume, the solution features negative-assortative matching of inefficient and efficient sellers. When the objective is a weighted combination of price and surplus, optimal signals preserve this structure as long as the weight on the price is high enough, otherwise they fully reveal low-quality types while pooling middle types with high-quality sellers. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.01413 |
| By: | Xiyuan Ren; Zhenglei Ji; Joseph Y. J. Chow |
| Abstract: | Early evaluations of NYC's congestion pricing program indicate overall improvements in vehicle speed and transit ridership. However, its distributional impacts remain understudied, as does the design of compensatory transit strategies to mitigate potential welfare losses. This study identifies population segments and regions most affected by congestion pricing, and evaluates how welfare losses can be compensated through transit improvements. We estimate joint mode and destination models using aggregated synthetic trips in New York and New Jersey and calibrate toll-related parameters with traffic counts reported by the MTA. The results show that the program leads to an accessibility-related welfare loss of approximately $240 million per year, which is considerably lower than the gains from toll revenues: the gross revenue estimated by our models ($1.077 billion per year) and the net revenue projected by the MTA ($450 million per year). However, these benefits gains conceal significant disparities. Welfare losses are concentrated in Upper Manhattan, Brooklyn, and Hudson County, NJ, particularly among travelers less able to shift to transit or alternative destinations. For NYC residents, compensating aggregate welfare loss requires a 0.48-minute reduction in transit wait time or a $135.59 million annual fare subsidy. Ensuring accessibility gains for all populations and counties (Pareto improving) requires a 1-2 minute reduction in wait time combined with an annual subsidy of about $100-300 million. For New Jersey residents, achieving aggregate welfare gains primarily through fare discounts (requiring $108.53 million per year) is more feasible and efficient; however, uniform discounts should be replaced by targeted mechanisms such as origin-based fare reductions or commuter pass bundles. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.06416 |
| By: | Yotam Gafni |
| Abstract: | Transaction Fee Mechanisms (TFMs) study auction design in the Blockchain context, and emphasize robustness against miner and user collusion, moreso than traditional auction theory. \cite{chung2023foundations} introduce the notion of a mechanism being $c$-Side-Contract-Proof ($c$-SCP), i.e., robust to a collusion of the miner and $c$ users. Later work \cite{chung2024collusion, welfareIncreasingCollusion} shows a gap between the $1$-SCP and $2$-SCP classes. We show that the class of $2$-SCP mechanisms equals that of any $c$-SCP with $c\geq 2$, under a relatively minor assumption of consistent tie-breaking. In essence, this implies that any mechanism vulnerable to collusion, is also vulnerable to a small collusion. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.05986 |