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on Economic Design |
| By: | Dirk Bergemann; Garrett van Ryzin; Jiaxuan Li |
| Abstract: | This paper introduces the theoretical framework for combining Vickrey-Clarke-Groves (VCG) mechanisms with the Consensus Planning Protocol (CPP) to enable truthful and efficient collaboration between a retailer and vendors to lower joint Cost to Serve. We demonstrate how this integration preserves both dominant-strategy incentive compatibility and efficiency in high-dimensional environments. We further introduce an activity fee design to improve its revenue property for the retailer while maintaining the mechanism's desirable properties. This CPP-VCG framework serves as the theoretical foundation for designing collaborative mechanisms to coordinates distributed, agent-based optimization between retailers and suppliers. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.16695 |
| By: | Andreas Kleiner; Benny Moldovanu; Philipp Strack |
| Abstract: | A key insight is that many, seemingly different, economic problems share a com mon mathematical structure: they all involve the maximization of a functional over sets of monotonic functions that are either majorized by, or majorize, a given func tion. We first present new, simpler proofs for the main characterization results of the extreme points of sets defined by monotonicity and majorization constraints obtained by Kleiner, Moldovanu, and Strack (2021). We then demonstrate how the charac terization results can be fruitfully applied to a broad range of economic applications, from auction and information design to decision problems under risk such as optimal stopping. Finally, we conclude with an overview of recent, related work that extends these characterizations to settings with additional constraints, multidimensional state spaces, and alternative stochastic orders. |
| Keywords: | majorization, extreme points, economic design problems, survey |
| JEL: | C02 D82 D83 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_749 |
| By: | Madjid Eshaghi Gordji; Ali Jabbari; Mohammad Ali Berahman; Esmaiel Abounoori |
| Abstract: | Westudy how a planner can design dynamic interventions to overcome status-quo inertia in living temporal games, where strategic agents control their state (active, sleep, partially dead) on a temporal network. Building on the continuous-time stochastic game framework of our companion paper, we introduce three intervention classes: bounded transfers (price based), structural modifications (edge deletion, addition, or replacement), and information signals. We formalize the notion of inertia depth and prove a threshold theorem: the status quo equilibrium survives all transfer perturbations whose magnitude is below a critical bound that depends on the remaining horizon. A central structural dominance result shows that for any finite transfer budget there exists a family of games where no bounded price intervention can eliminate the inefficient equilibrium, yet a single edge replacement (continuous-flow to discrete-transport) succeeds. We then study private-information subclasses with static types. Using a uniformization reduction, we prove an impossibility result: no direct mechanism can simultaneously satisfy ex post incentive compatibility, ex post budget balance, and history privacy while always implementing an efficient equilibrium. In the same subclass we construct a dynamic pivot mechanism that achieves second-best efficiency with bounded deficit. Finally, we show that replacing continuous-flow edges by discrete-transport edges weakly expands the set of implementable outcomes, highlighting the importance of temporal semantics for mechanism design. Our results extend the static analysis of [5] to continuous time strategic networks and provide a rigorous foundation for subsequent papers on learning and mean-field design. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.19087 |
| By: | Joseph Feffer; Filip Tokarski |
| Abstract: | This paper studies when strategic understanding acquired in one mechanism can be transferred to another. We introduce a framework in which agents' knowledge is represented as a set of payoff comparisons they can make, and use it to formalize what it means to understand that a strategy profile is an equilibrium. We first apply this framework to mechanisms that are strategically equivalent-that is, share the same game form up to relabeling of actions-and show that agents' understanding of equilibrium transfers across such mechanisms once the relevant action correspondences are explained to them. We then define strategic analogy, a weaker notion that allows not only actions but also types to be remapped, and show that understanding of equilibrium transfers across strategically analogous mechanisms once agents recognize how actions and types correspond. Applications include single-item auctions, scoring auctions, and nonlinear pricing with capacity constraints. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.12802 |
| By: | Dongwoo Kim; Kyoo il Kim; Pallavi Pal |
| Abstract: | This paper extends the incomplete model of Haile and Tamer (2003) from static English auctions to sequential English auctions. Because bidders may wait for future opportunities, the static condition that bidders do not let rivals win at beatable prices need not hold. We replace it with a dynamic opportunity-cost restriction, yielding nonparametric valuation bounds without solving a dynamic equilibrium. Sharp bounds are also characterized. We propose a novel moment-condition inversion estimator that pools auctions with heterogeneous bidder counts, mitigating finite-sample instability of order statistics approaches and admitting analytical standard errors and smooth confidence intervals. Applications to Korean wholesale used-car auctions and Cars and Bids online auctions deliver informative bounds. Counterfactual analyses show that the option to wait lowers first-period revenue by 8--11% in the Korean market, that increasing effective competition from 8 to 20 serious bidders in Cars and Bids raises seller revenue by 40--65%, and that maximin reserve prices vary substantially across vehicle clusters. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.14400 |
| By: | Jesse Rothstein (University of California, Berkeley); Ini Umosen (Ithaka S+R); Christopher R. Walters (University of Chicago) |
| Abstract: | We study the prospects for changes in school priorities to reduce income segregation in a context of centralized school assignment, accounting for behavioral responses to school offers. Promoting integration is a central objective for large urban school districts in the US, and reforms to school assignment priorities are a prominent means of pursuing this goal. Such efforts may be constrained by students' decisions to exit the public school system in response to less-preferred school offers. Using data on kindergarten applicants to the Oakland Unified SchoolDistrict (OUSD), we show that offers of spots at first-choice schools boost the likelihood that applicants remain in OUSD. Nevertheless, simulations show that policy reforms giving priority for low-income students at high-income schools can substantially reduce segregation with minimal impacts on retention in the district. |
| JEL: | I21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfi:wpaper:2026-38 |
| By: | Aleksei Adadurov; Sergey Barseghyan; Anton Chtepine; Antero Eloranta; Andrei Sebyakin; Arsenii Valitov |
| Abstract: | Ethereum block builders run sealed auctions among searchers, but nothing in the protocol forces a builder to honor the auction outcome after observing submitted bundles. This paper studies the commitment problem. We model a builder who defects with probability $\varepsilon$ and, upon defection, replicates a type-specific fraction $\gamma(\tau)$ of the winning MEV opportunity. Searchers anticipate this behavior and choose between a risky first-price bid and a safe deterrence bid that makes frontrunning unprofitable. The resulting equilibrium is piecewise, with the cost of imperfect commitment depending jointly on replicability and competition. Using the \texttt{libmev} dataset, we estimate $\gamma(\tau)$ from right-tail bribe plateaus and decompose observed auction revenue against the surplus a defecting builder could capture. The results show sharp heterogeneity across MEV types: sandwich opportunities are already highly competitive, while naked arbitrage and liquidations leave substantially more surplus exposed to builder defection. Credible MEV auctions, therefore, require not only an auction format, but also constraints on the builder's ability to use observed bid and payload information ex post. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.22667 |
| By: | Haris Aziz; Patrick Lederer; Jeremy Vollen |
| Abstract: | In approval-based budget division, the task is to allocate a divisible resource to the candidates based on the voters' approval preferences over the candidates. For this setting, Brandl et al. [2021] have shown that no distribution rule can be strategyproof, efficient, and fair at the same time. In this paper, we aim to circumvent this impossibility theorem by focusing on approximate strategyproofness. To this end, we analyze the incentive ratio of distribution rules, which quantifies the maximum multiplicative utility gain of a voter by manipulating. While it turns out that several classical rules have a large incentive ratio, we prove that the Nash product rule ($\mathsf{NASH}$) has an incentive ratio of $2$, thereby demonstrating that we can bypass the impossibility of Brandl et al. by relaxing strategyproofness. Moreover, we show that an incentive ratio of $2$ is optimal subject to some of the fairness and efficiency properties of $\mathsf{NASH}$, and that the positive result for the Nash product rule even holds when voters may report arbitrary concave utility functions. Finally, we complement our results with an experimental analysis. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.11736 |
| By: | Atila Abdulkadiroglu (Duke University); Parag A. Pathak (Massachusetts Institute of Technology); Christopher R. Walters (University of Chicago) |
| Abstract: | We examine two approaches to improving urban school systems: changing who gets to go to existing schools (reallocation) and restructuring school portfolios through closures and reconstitution (resource augmentation). Using data from New York City high schools, we estimate models of school effects allowing for both vertical school quality differences and horizontal student-specific match effects. While sophisticated reallocation policies that optimize student-school matches can generate modest educational gains, they are constrained by limited seats at highly effective schools. Simple resource-augmentation policies targeting replacement of low-performing schools achieve comparable improvements with less systemic disruption. Analysis ofNYC's school closures reveals that basic graduation rate metrics effectively identify struggling schools, suggesting complex value-added models may be unnecessary for targeting closure decisions. Our findings indicate that capacity constraints, rather than poor school matching. |
| JEL: | I21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfi:wpaper:2026-39 |