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on Economic Design |
| By: | Frank Yang; Kai Hao Yang |
| Abstract: | We study optimization problems in which a linear functional is maximized over probability measures that are dominated by a given measure according to an integral stochastic order in an arbitrary dimension. We show that the following four properties are equivalent for any such order: (i) the test function cone is closed under pointwise minimum, (ii) the value function is affine, (iii) the solution correspondence has a convex graph with decomposable extreme points, and (iv) every ordered pair of measures admits an order-preserving coupling. As corollaries, we derive the extreme and exposed point properties involving integral stochastic orders such as multidimensional mean-preserving spreads and stochastic dominance. Applying these results, we generalize Blackwell's theorem by completely characterizing the comparisons of experiments that admit two equivalent descriptions -- through instrumental values and through information technologies. We also show that these results immediately yield new insights into information design, mechanism design, and decision theory. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.11448 |
| By: | Yeon-Koo Che (Columbia University [New York]); Julien Grenet (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, IPP - Institut des politiques publiques); Yinghua He (Rice University [Houston]) |
| Abstract: | This chapter surveys the application of matching theory to school choice, motivated by the shift from neighborhood assignment systems to choice-based models. Since educational choice is not mediated by price, the design of allocation mechanisms is critical. The chapter first reviews theoretical contributions, exploring the fundamental trade-offs between efficiency, stability, and strategyproofness, and covers design challenges such as tie-breaking, cardinal welfare, and affirmative action. It then transitions to the empirical landscape, focusing on the central challenge of inferring student preferences from application data, especially under strategic mechanisms. We review various estimation approaches and discuss key insights on parental preferences, market design trade-offs, and the effectiveness of school choice policies. |
| Keywords: | Preference Estimation, Top Trading Cycles, Immediate Acceptance, Deferred Acceptance, Matching Theory, School Choice |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05528233 |
| By: | Oihane Gallo |
| Abstract: | We analyze the problem of locating a public facility on a line in a society where agents have either single-peaked or single-dipped preferences. We focus on the domain introduced by Alcalde-Unzu et al. (2024), in which the type of preference of each agent is public information, but the location of her peak or dip, as well as the rest of the preference are unknown. We characterize all strategy-proof and type-anonymous social choice rules on this domain. The first characterization identifies the additional constraints that type- anonymity imposes on the class of strategy-proof rules described in Alcalde-Unzu et al. (2024). The second one generalizes existing results in a two-step procedure as follows: In the first step, the rule computes the median of the reported peaks together with a fixed set of locations (Moulin, 1980) leading to either a single alternative or a pair of contiguous alternatives. In the second step, applied only when the first step yields a pair, we use a double-quota majority method to select between the two alternatives of the pair (Moulin, 1983). Finally, we establish that these two characterizations are equivalent. |
| Keywords: | anonymity, single-dipped preferences, Single-peaked preferences, social choice rule, strategy-proofness |
| JEL: | D70 D71 D79 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1563 |
| By: | Di Corato, Luca; Moretto, Michele |
| Abstract: | This paper studies a continuous-time regulatory problem in which a firm holds persistent private information about demand and is subject to a flow limited-liability constraint. The regulator regulates prices through a dynamic mechanism that ensures truthful reporting of the evolving type. Limited liability imposes a state-dependent lower bound on the firm’s instantaneous utility, inducing a reflecting boundary in continuation utility and giving rise to a tractable singular-control representation. We derive closed-form expressions for the optimal pricing rule and the associated continuation-utility function, and we characterize the optimal up-front transfer required to induce truthful revelation of the firm’s initial type. The resulting contract is fully explicit and highlights how limited liability shapes information rents and regulatory distortions over time. |
| Keywords: | Environmental Economics and Policy, Financial Economics |
| Date: | 2026–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:396239 |
| By: | Francesco Bilotta; Christoph Carnehl; Justus Preusser |
| Abstract: | A designer relies on an experimenter to provide information to a decision maker, but the experimenter has incentives to persuade rather than merely transmit information. Anticipating this motive, the designer can restrict the set of admissible experiments, but cannot prevent the experimenter from garbling any admissible experiment. We model this situation as delegation over experiments. The optimal delegation set can be obtained by comparing maximally informative experiments among those the experimenter has no incentive to garble. When the experimenter's preferences are $S$-shaped, we fully characterize such experiments as double censorship. Relative to the full delegation outcome, upper censorship, double censorship features an intermediate pooling region, inducing a smaller pooling region for the highest states. We show that the designer strictly benefits from imposing a nontrivial delegation set to constrain the experimenter's ability to persuade while retaining valuable information provision. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.10867 |
| By: | Banerjee, Sreoshi; Trudeau, Christian |
| Abstract: | We examine the implications of extending the queueing and scheduling problems from the single-server to the multiple-server cases. In particular, we discuss three assumptions on job divisibility: jobs can be assumed to be indivisible (must be processed continuously on a single server), discretely divisible (a job can be divided in a series of unit-length tasks that can be processed simultaneously on multiple servers) or continuously divisible (a job can be divided in intervals as small as desired). We examine if the corresponding optimistic and pessimistic cost functions (in which we assume that a group is served first and last, respectively) satisfy the properties of convexity/concavity and 2-additivity. Our results show that with multiple servers, while all properties hold under continuous divisibility, they largely fail otherwise. In particular, 2-additivity does not carry over, and pessimistic functions are no longer concave. Optimistic functions retain the convexity property in most cases. These negative results indicate that multi-server problems require fundamentally new analytical approaches, as single-server techniques do not generalize. We also establish that the anticore of the optimistic function is always a non-empty subset of the core of the pessimistic function, providing bounds even when classical properties fail. |
| Keywords: | waiting line, scheduling, queueing, (in)divisible jobs, multi-server, cooperative game, cost sharing |
| JEL: | C7 C71 D3 D6 |
| Date: | 2026–02–14 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128053 |
| By: | Bento, Antonio M.; Koch, Nicolas; Marmarelis, Zissis E. |
| Abstract: | Recent natural gas price surges prompted the adoption of various policies, such as a natural gas price cap, aimed at preserving climate goals and preventing increases in wholesale electricity prices. However, it is unclear whether such policies are effective. Here, we take advantage of the unexpected spike in natural gas prices around the time of the Russian invasion into Ukraine to estimate the effects of such a spike on coal generation, carbon emissions, and wholesale electricity prices, highlighting its heterogeneous impacts in 13 EU countries that still rely on both coal and gas for electricity production. We use these estimates to show that the effectiveness of the gas price cap is limited, and instead propose an emergency response mechanism that would simultaneously safeguard the EU's climate policy and protect households from excessive fluctuation in natural gas prices. The proposed mechanism introduces an emergency auction reserve price within the existing EU Emissions Trading System, triggered automatically under predefined rules whenever gas prices reach unusually high levels. Revenues generated by the reserve price would be used to provide relief to consumers. Our results demonstrate that a modest emergency reserve price could serve as an effective response mechanism and that this approach overcomes key shortcomings of the widely used natural gas price cap. |
| Keywords: | European energy crisis, excessive natural gas prices, wholesale electricity prices, emission trading, decarbonization |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:337665 |
| By: | Haruvy, Ernan; Heinrich, Timo; Walker, Matthew J. |
| Abstract: | This paper studies hold-ups in markets where sellers may impose undisclosed surcharges. While prior work has examined price transparency’s role in market outcomes, the distinct effect of a transparency norm—separate from a fairness norm—remains unestablished. We formulate a simple model that separates these norms and characterizes their equilibrium implications across different market settings. The model shows that price competition yields higher buyer surplus than ultimatum bargaining and that this surplus increases with transparency concerns but decreases with fairness concerns because of softened competition. Compulsory surcharges cannot be higher in bargaining, as sellers prefer a higher price to a higher surcharge as long as it does not change the buyer’s probability of acceptance. Experimental results confirm the transparency norm’s influence: Total prices are lower with price competition, and surcharges are lower with ultimatum bargaining. Additionally, surcharges rise when pricing is outside of the seller’s control. Estimates of the behavioral parameters reveal that sellers weigh transparency at least as heavily as fairness. The results imply that firms fearing hold-ups should still procure goods and services in competitive market structures. |
| Keywords: | surcharge, transparent pricing, fairness, social norm, hold-up, procurement |
| JEL: | C91 D47 D82 L14 M55 |
| Date: | 2026–01–05 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127601 |
| By: | Pamela Giustinelli (University of Padova); Edwin Leuven (University of Oslo) |
| Abstract: | We study belief accuracy in a centralized higher-education admissions system using Norwegian data that combine a large pre-admission expectations survey with administrative records on offers, enrollment, and completion. Program-specific cutoffs provide a fuzzy regression discontinuity design that identifies objective counterfactual outcomes at the admission margin and allows direct comparison with subjective, state-contingent beliefs (first-choice access versus the relevant second-choice offer state). We find that enrollment forecast errors are driven mainly by mistaken beliefs about offer probabilities, while beliefs about enrollment conditional on an offer are comparatively accurate. For completion, the dominant error is persistence optimism: applicants substantially overestimate completion conditional on enrollment under both access states. Applicants also overstate first-minus-second returns for both enrollment and completion. These errors are economically meaningful for choices: in a partial-equilibrium counterfactual exercise, correcting beliefs implies large declines in the predicted probability of keeping the currently ranked first choice on top. |
| Keywords: | subjective probabilities, objective ex post returns, returns to enrollment, higher education |
| JEL: | C21 C83 D84 I26 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:hka:wpaper:2026-002 |
| By: | Haeringer, Guillaume; Nguyen, Lan; placido, Latitia; Ravaioli, Silvio |
| Abstract: | We study how different framings of otherwise equivalent information affect school choice under uncertainty. In an online experiment, subjects repeatedly submitted rank-ordered lists of schools knowing only a probability distribution over their own score. Admission depended solely on whether the score exceeded exogenous school cutoffs. Across rounds, subjects varied in “type” (advantaged/disadvantaged score distributions) and faced one of four information treatments: a control (score distribution only), ex-ante admission probabilities, simulated ex-post composition statistics, and composition statistics based on actual choices of prior participants. We find that information framing has large and heterogeneous effects. Advantaged students react strongly to both ex-ante and ex-post information, becoming more cautious under probability information and more ambitious under composition information; disadvantaged students respond more weakly and only under specific cutoff environments. Ex-ante information significantly reduces segregation between advantaged and disadvantaged types. Our results highlight that the impact of information depends critically on student type and market competitiveness, implying that effective information policies must be carefully tailored to their intended beneficiaries. |
| Keywords: | School choice, Uncertainty, Information, Segregation |
| JEL: | C78 D78 I24 |
| Date: | 2026–01–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127870 |
| By: | Nobuya FUKUGAWA |
| Abstract: | This study examines the commercialization of design rights owned by Japan’s public technology centers, Kohsetsushi, focusing on the factors associated with their subsequent implementation by firms. This study conceptualizes commercialization as a translation process in which protected designs are converted into executable specifications and realized through firm implementation. Using an unbalanced panel of Kohsetsushi, the empirical analysis incorporates regional industrial conditions and treats consultation activity as a key explanatory factor. Because consultation may be endogenous to local demand conditions, this study applies a two-stage control-function approach that first relates consultation intensity to organizational resources and local industrial conditions and then estimates its association with implementation outcomes. The results indicate that consultation is positively associated with subsequent implementation in many industries, although the strength of this association varies across sectors. They also show that industrial agglomeration matters: denser ecosystems tend to raise baseline implementation capacity but often weaken the marginal association of consultation, likely because firms can rely on alternative coordination and problem-solving channels. These findings suggest that public support for design right commercialization is likely to be more effective when consultation capacity is allocated selectively and organized through functional specialization. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26021 |
| By: | Sam Babichenko |
| Abstract: | In strategic environments with private information, evaluating a change in policy requires predicting how the equilibrium responds -- but when actions reshape opponents' signals, each agent's optimal response depends on an infinite hierarchy of beliefs about beliefs that has resisted exact analysis for four decades. We provide the first exact equilibrium characterization of finite-player continuous-time LQG games with endogenous signals. Conditioning on primitive Brownian shocks rather than the physical state -- a dynamic analogue of Harsanyi's common-prior construction -- collapses the belief hierarchy onto deterministic two-time kernels, reducing Nash equilibrium to a deterministic fixed point with no truncation and no large-population limit. The characterization yields an explicit information wedge $\mathcal{V}^i_t$ -- a deterministic Volterra process -- that prices the marginal value of shifting opponents' posteriors. The wedge vanishes precisely when signals are exogenous to controls, formally delineating the boundary where strategic belief manipulation matters, and provides a closed-form mapping from information primitives to equilibrium outcomes. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.12140 |
| By: | Thomas Graeber; Shakked Noy; Christopher Roth |
| Abstract: | Information often spreads and influences beliefs regardless of its reliability.We show that this occurs in part because indicators of reliability are disproportionately lost in the process of word-of-mouth transmission. We conduct controlled experiments where participants listen to economic forecasts and pass them on through voice messages. Other participants listen either to original or transmitted audio recordings and report incentivized beliefs. Across various transmitter incentive schemes, a claim’s reliability is lost in transmission more than twice as much as the claim itself. Reliable and unreliable information, once filtered through transmission, impact listener beliefs similarly, substantially reducing the efficiency of downstream decisions. Mechanism experiments show that reliability is lost not because it is perceived as less relevant or harder to transmit, but because it is less likely to come to mind during transmission. Evidence from experiments, a large corpus of everyday conversations, and economic TV news demonstrate that reliability information is less likely to be cued during transmission and that attempts to retrieve it face greater interference in memory. |
| Keywords: | Information transmission, word-of-mouth, reliability, memory |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:489 |
| By: | Benjamin Davies |
| Abstract: | A forward-looking agent observes signals of a state that follows a Gaussian AR(1) process. He chooses the signals' precisions sequentially, balancing their marginal cost and informativeness. I characterize his optimal learning strategy, and analyze his steady-state posterior beliefs and welfare. Higher persistence can tighten or loosen these beliefs, but always lowers welfare due to endogenously higher information costs. In contrast, higher patience raises welfare because the agent receives more information from his past selves. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.11453 |