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on Economic Design |
| By: | Daniel Fershtman; Kfir Eliaz; Alexander Frug |
| Abstract: | We study optimal dynamic scheduling of workers to tasks when task completion is privately observed —so that workers can delay the release of finished tasks — and idle time is the only available incentive instrument. We characterize a scheduling rule, and its induced equilibrium, that maximizes expected discounted output. Unless workers are inherently slow, production alternates between efficient phases and delays. Our analysis reveals a trade-off between the quality and the size of the workforce. We also present several extensions, illustrating the versatility of the framework. |
| Keywords: | moral hazard , strategic servers , non-monetary incentives , optimal scheduling , idle time , multi-server systems |
| JEL: | D82 J24 C73 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1928 |
| By: | Dongsoo Shin (Santa Clara University); Roland Strausz (HU Berlin) |
| Abstract: | We study a manufacturer's demand-investment decisions in distribution channels subject to double marginalization. Casting this as a mechanism design problem, we show that demand-enhancing investments strengthen retailers' incentives to exploit market power, forcing manufacturers to concede greater rents. Manufacturers therefore optimally restrict product quality or market coverage. We fully characterize which demand parameters create these perverse incentives: increases benefit manufacturers in segments where they control pricing but harm them in segments with binding incentive constraints. This reveals fundamental limits to demand-side investment in vertical relationships. |
| Keywords: | demand; investment incentives; distribution channels; double marginalization; |
| JEL: | D21 D82 L11 |
| Date: | 2025–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:553 |
| By: | Arlindo Sk\"enderaj |
| Abstract: | I consider an environment in which a decision maker faces uncertainty and privately holds information in the form of a signal about the true state of the world. The decision maker purchases additional information from a data broker before receiving the signal realization. I characterize the data broker's optimal selling mechanism, which involves screening over all possible signals. I allow the space of all signals the data broker can sell to be arbitrarily correlated with the signal the decision maker owns. This plays a key role in designing the optimal menu. In the binary action setting, the data broker extracts the efficient surplus by offering a distinct binary signal for each type. Moreover, this result holds even when the broker does not know the prior distribution over states. In more general environments, I provide conditions on the payoff structure and the decision maker's type space under which the data broker extracts the efficient surplus. I discuss scenarios in which efficient surplus extraction is not possible. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.14103 |
| By: | Herings, P.J.J. (Tilburg University, Center For Economic Research); van Ravenswaaij, Claudia (Tilburg University, Center For Economic Research) |
| Keywords: | Housing matching model; stability; top trading cycle allocation; horizon-K farsightedness |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiucen:e1cbf68a-1c0d-40e3-bbcf-762ef9f28d59 |
| By: | Yash Prajapati |
| Abstract: | This paper examines public goods and evaluates the mechanism through the game theory. Public goods are characterized by nonexclusivity and nonrivalry and this creates fundamental challenges for allocation. We analyze why competitive markets undersupply public goods by deriving the inefficiency formally through Nash equilibrium. The paper evaluates theoretical solutions including Lindahl pricing, Clarke-Groves mechanisms, and voting schemes. The paper will cover their efficiency properties and practical limitations. We show how strategic interaction leads to free-riding behavior using roommates dilemma and other examples. We also cover why a large household lives in messy conditions not because individuals are lazy, but because they are rational players in a Nash equilibrium. We also examine voting mechanisms, the median voter theorem, and recent developments in truth-revealing mechanisms. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.15686 |
| By: | Chiara Fusar Bassini; Jacqueline Adelowo; Priya L. Donti; Lynn H. Kaack |
| Abstract: | In auction markets that are prone to market power abuse, preventive mitigation of bid prices can be applied through automated mitigation procedures (AMP). Despite the widespread application of AMP in US electricity markets, there exists scarce evidence on how firms strategically react to such price-cap-and-penalty regulation: when the price cap rarely leads to penalty mitigation, it is difficult to distinguish whether AMP are an effective deterrent or simply too lax. We investigate their impact on the bids of generation firms, using 2019 data from the New York and New England electricity markets (NYISO, ISO-NE). We employ a regression discontinuity design, which exploits the fact that the price cap with penalty is only activated when a structural index (e.g., congestion, pivotality) exceeds a certain cutoff. By estimating the Local Average Treatment Effect (LATE) of screening activation, we can causally identify successful deterrence of anti-competitive behavior. Around 30-40% of the analyzed bidders per market exhibit a significant strategic response - corresponding to a decrease in maximum bid prices of 4-10 $/MWh to avoid the penalty. However, there is significant heterogeneity between firms, and the regulatory impact on the overall market is not statistically detectable, suggesting lax mitigation thresholds. Using a merit-order simulation, we estimate the welfare impact of more stringent thresholds to lie between 350 and 980 thousand dollars of increased buyer surplus per mitigated hour, with the associated number of mitigated hours being below 33 hours/year. Our results motivate the empirical calibration of mitigation thresholds to improve the efficiency of AMP regulation. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.20812 |