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on Economic Design |
| By: | Navin Kartik; Elliot Lipnowski; Harry Pei |
| Abstract: | Does electoral replacement ensure that officeholders eventually act in voters’ interests? We study a reputational model of accountability. Voters observe incumbents’ performance and decide whether to replace them. Politicians may be “good” types who always exert effort or opportunists who may shirk. We find that good long-run outcomes are always attainable, though the mechanism and its robustness depend on economic conditions. In environments conducive to incentive provision, some equilibria feature sustained effort, yet others exhibit some long-run shirking. In the complementary case, opportunists are never fully disciplined, but selection dominates: every equilibrium eventually settles on a good politician, yielding permanent effort. |
| JEL: | C73 D72 D78 D82 D83 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35154 |
| By: | Irene Aldridge |
| Abstract: | This paper examines the computational complexity of the \emph{Core Identification Problem} (CIP) in one-sided matching markets governed by the Top Trading Cycles (TTC) algorithm. The central contribution is a formal complexity separation: this paper proves that identifying which agents receive a core allocation is strictly easier than computing the full TTC allocation. Specifically, we show that CIP can be solved in $\bigO{Ln}$ time, where $L$ is the maximum number of preferences reported per agent, by computing the leading eigenvector of a preference-derived Markov transition matrix via randomized SVD\@. For sparse preference profiles ($L = \bigO{1}$, as in the NYC school choice where $L = 12$), this yields an algorithm $\bigO{n}$. This result strictly improves on the $\bigO{n \log n}$ complexity of the full TTC allocation (\cite{SabanSethuraman2013}) and matches the $\Omg{n}$ information-theoretic lower bound, establishing asymptotic optimality. The method inherits all properties of TTC: Pareto efficiency, individual rationality, and strategy-proofness, and is robust to preference noise for sufficiently large~$n$. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.25954 |
| By: | Michael Greinecker; Karolina Vocke |
| Abstract: | We study stability notions for networked many-to-many matching markets with individually insignificant agents in distributional form. Outcomes are formulated as joint distributions over characteristics of agents and contract choices. Characteristics can lie in an arbitrary Polish space. We provide a mechanical method for transferring existence results for finite matching models to large matching models for many stability notions. In particular, we show that tree-stable and pairwise-stable outcomes exist. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.26902 |
| By: | Simon Mackenzie; Mashbat Suzuki |
| Abstract: | The existence of EFX allocations is a fundamental question in fair division. In this paper, we construct a three-agent, eight-good instance with monotone subadditive valuations such that no allocation satisfies $\alpha$-EFX for any $\alpha > \frac{1}{\sqrt[6]{2}} \approx 0.89$. We also provide a closely related three-agent, eight-good instance with submodular (in fact weighted coverage) valuations for which no EFX allocation exists. A key feature of our construction is its symmetry: the agents' valuations are identical up to a relabeling of the goods. Thus, EFX can fail even when agents differ only in how the goods are labeled. This symmetry makes the counterexamples compact and human-verifiable, yielding simple combinatorial obstructions to the existence of EFX. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.06451 |
| By: | Steven J. Brams (New York University, USA); D. Marc Kilgour (Wilfrid Laurier University, Canada); Christian Klamler (University of Graz, Austria) |
| Abstract: | We study two-person fair division when multiple items are indivisible and exactly one item, interpreted as money, is divisible. This setting imposes a natural restriction relative to the classical Adjusted Winner (AW) procedure, in which any item may become the split item. We introduce Adjusted Winner with Money (AWm), an ordered-allocation procedure tailored to this mixed environment. We identify a sufficient condition, Condition C, under which AWm produces an allocation that is both envy-free and equitable without splitting any indivisible item. When Condition C fails, AWm need not achieve full envy-freeness, but it still guarantees envy-freeness for mixed items. We also clarify the relation between AWm and Pareto-optimality. When classical AWwould split the money item, AWm coincides with AW; more generally, however, AWm need not be Pareto-optimal among all allocations that divide only money. Simulations based on Dirichletdistributed valuations indicate that Condition C is frequently satisfied, especially when the divisible item is relatively valuable. To illustrate the procedure, we apply it to the division of property in a real-life divorce case. |
| Keywords: | fair division, allocation of indivisible items, adjusted winner |
| JEL: | D63 C78 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2026-05 |
| By: | Fahn, Matthias (University of Hong Kong); Li, Jin (University of Hong Kong); Sun, Chang (University of Hong Kong) |
| Abstract: | We study how AI affects compensation and job design when performance depends on workers’ non-contractible effort. In a principal–agent model with limited liability, AI reduces effort costs but disproportionately lowers the cost of achieving satisfactory performance. This raises the incentive cost of sustaining high effort and can induce firms to replace high-wage, high-effort good jobs with low-wage, low-effort bad jobs, even when good jobs create more total surplus. As a result, AI can lower wages, reduce worker welfare, and even depress profits. If workers can adopt AI unilaterally, adoption occurs even when the resulting equilibrium harms both parties; when adoption requires worker cooperation, resistance is strongest where AI erodes rents embodied in good jobs. In a search-and-matching extension, endogenous outside options amplify these forces, reinforcing a bad-job economy and potentially reducing employment. |
| Keywords: | artificial intelligence, agency costs, job design, labor contracts, limited liability, incentives, search and matching |
| JEL: | D86 J41 O33 L23 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18574 |
| By: | Ian Fligler |
| Abstract: | In strategic games such as the prisoner's dilemma, allowing players to make binding offers of utility transfers before play has been shown to alter incentives and potentially support cooperative outcomes. These preplay exchange mechanisms reshape payoffs by transferring utility while being contingent on actions; however, they typically require side payments that can reduce individual benefits relative to joint cooperation. In this paper, we extend the analysis to a finite $n$-player prisoner's dilemma with ordered strategy sets, defined such that any restriction of strategies by any subset of players still yields a prisoner's dilemma. To achieve a robust cooperative outcome that resists group deviations, we introduce a novel class of mechanisms: $\textit{losing contracts}$. Unlike transfer-based preplay mechanisms, losing contracts require players to irrevocably reduce their own utility if they defect, thereby aligning individual incentives with cooperation without inter-player payments. With appropriately chosen loss amounts, losing contracts induce joint cooperation as the unique strong Nash equilibrium in the modified game and in every restricted game within it, ensuring that cooperative incentives persist even under possible external constraints on strategy sets. We show that our contracts can be constructively defined, reducing the preplay stage to a simple and binary decision for each player: whether to sign the contract or not. Furthermore, if the losing contract is only executed when all players sign, signing is a strictly dominant strategy for all. Finally, we extend these results to certain public goods games. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.22563 |
| By: | Hessel Oosterbeek (University of Amsterdam); Tina Rozsos (Vrije Universiteit Amsterdam); Bas van der Klaauw (Vrije Universiteit Amsterdam) |
| Abstract: | Close to 20% of secondary school students in Amsterdam - and elsewhere - transfer between secondary schools at some point, even when initially placed in their most-preferred school. School switching is costly for the students involved and disrupts the learning environment of their former and new classmates. Using data from the Amsterdam secondary-school match linked to administrative registers, we show that switching can be predicted by hard-to-rationalize initial school choices. Over 60% of switchers can be correctly identified at the admission stage. Simulations indicate that encouraging predicted switchers to adjust their preference ranking of schools could reduce the switching rate by almost 15%. |
| Keywords: | secondary education, school choice, school switching, admission lottery |
| JEL: | C35 C53 I21 |
| Date: | 2025–11–27 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20250066 |
| By: | Zhiming Feng |
| Abstract: | This paper develops a decomposition methodology for common agency games in which each principal's payoff depends on her own outcome and the agent's type, but not on rivals' outcomes. The key step reduces each principal's best-response problem to a standard screening problem defined over the agent's indirect utility -- the upper envelope of her payoff over rivals' offerings. Individually best-responding mechanisms then assemble into a pure-menu perfect Bayesian equilibrium when a compatibility condition (utility-preserving recombination) ensures aligned tie-breaking across principals. Under a non-indifference condition, the decomposition recovers all equilibria except those sustained by menu items that no type of the agent actually selects but which nevertheless discipline the rival's screening problem. When principals' payoffs depend on the full allocation profile, the decomposition adapts only under substantive regularity conditions on the agent's off-path choice behavior, one of which coincides with Luce's choice axiom. I apply the methodology to two settings. In a quadratic-loss delegation model, equilibria feature one principal offering a finite menu of discrete ``regimes'' while the other receives piecewise full delegation within each regime. In a competitive bundling duopoly under intrinsic common agency, the decomposition yields equilibria exhibiting market splitting, in which firms specialize in complementary bundles, and asymmetric equilibria with a take-it-or-leave-it base contract paired with a nested or tree menu of upgrades. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.23971 |