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on Economic Design |
| By: | Andersson, Tommy (Department of Economics, Lund University); Lager, Nils (Stockholm School of Economics); Kessel, Dany (Svenskt Utbildningsteknologi AB) |
| Abstract: | We study school switches in which students who have already been assigned seats request reassignment. Unlike in regular school choice, stability need not be legally binding in such programs, since students’ priority-based claims have already been satisfied upstream. Efficiency then naturally becomes the primary design objective. To quantify the potential legal efficiency gains, we compare Deferred Acceptance (DA) with Top Trading Cycles (TTC) and an efficiency-adjusted DA (EADAM) using Swedish data. TTC and EADAM triple switching rates compared to DA. This difference is driven by the absence of slack in effective capacity and shrinks rapidly when introducing additional seats. |
| Keywords: | School switch; Efficiency; Stability; Matching algorithms; Capacity slack |
| JEL: | C78 D47 D78 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lunewp:2026_004 |
| By: | Seungjin Han; Siyang Xiong |
| Abstract: | We study contracting with imperfect commitment and identify minimal canonical contract spaces that fully characterize equilibrium outcomes under general preferences. Different from previous solutions, our framework accommodates infinite agent type spaces (unlike Bester and Strausz (2001)), non-quasi-linear utilities (unlike Skreta (2006)), and settings where the principal lacks the commitment power typically assumed in information design (unlike Doval and Skreta (2021)). Moreover, our results apply to both single- and multi-principal environments, providing a unified and tractable approach to contracting under limited commitment. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.19884 |
| By: | Mihir Bhattacharya; Ojasvi Khare |
| Abstract: | We study the division of a heterogeneous good between two agents into contiguous bundles, each defined by a starting location and a quantity, in a purely ordinal framework that does not rely on cardinal valuations. We introduce a general class of monotonic preferences representable by indifference curves. We show that an allocation is Pareto efficient and envy-free if and only if it lies in a specific ``balanced region'', implying that an equal split is fair only when it belongs to this region. We further show that no rule can simultaneously satisfy Pareto efficiency, envy-freeness, and strategy-proofness. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.06059 |
| By: | Hamada, Yuhei |
| Abstract: | We identify the conditions under which every economic field (including platforms) is behaviorally equivalent to a pure field. The conditions hold if and only if every searcher either has complete information, or has incomplete information with an infinite attention budget (λ j = ∞) and zero opportunity cost (K j = 0) (Non-Activation Theorem). |
| Keywords: | Platform Economics, Mechanism Design, Search Theory, Information Economics, Matching Theory, Pure Field, Economic Field |
| JEL: | C70 C78 D00 D01 D40 D47 D80 D81 D82 D83 |
| Date: | 2026–04–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128881 |
| By: | Marina Núñez (Universitat de Barcelona, Barcelona Economic Analysis Team); Francisco Robles (Universitat de Barcelona, Barcelona Economic Analysis Team) |
| Abstract: | We revisit the classical tension between stability and marginalism in the package allocation model of Milgrom [2007]. Our main finite-market stability results provide multiple necessary and sufficient conditions for the Banzhaf payoff vector to belong to the core. The key condition is the feasibility of an optimal assignment in which each buyer receives one of his most preferred bundles. Further, we show that the Shapley and Banzhaf payoff vectors coincide if and only if the Banzhaf payoff vector is in the core. We then consider replica economies. We construct a market in which, after finitely many replications, neither the Shapley nor the Banzhaf payoff vector belongs to the core of the replicated game. Strikingly, as the number of replicas tends to infinity, none of those payoff vectors converges to the core. Consequently, they do not converge to a competitive-equilibrium payoff vector in the limit. This stands in contrast to Luo et al. [2024], which shows that, in their setting of assignment games with multiple partnership, both payoff vectors converge to a competitive-equilibrium payoff vector as the number of replicas tends to infinity. |
| Keywords: | Package allocations, core, Banzhaf value, Shapley value |
| JEL: | C71 C78 D44 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:498web |
| By: | Karun Adusumilli; Abhi Vemulapati |
| Abstract: | Incentives in experimental design are often misaligned: experimenters design and finance experiments to seek regulatory approval, while regulators seek to maximize social-welfare. We propose a framework to resolve this conflict, wherein regulators set a minimum expected welfare threshold, and experimenters optimize designs subject to this constraint. It requires no knowledge of experimenters' private preferences or costs and mitigates strategic Bayesian persuasion. Under normal priors, sampling according to the Neyman-allocation is always optimal, independent of the specific objectives. Furthermore, we characterize the optimal stopping-rule. In a numerical study calibrated to historical clinical-trial data, our framework reduces expected sample-sizes by over 48% relative to classical designs that attain the same social-welfare. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.16703 |
| By: | Malte Kornemann (University of Bonn) |
| Abstract: | I examine when robustly beneficial information can be provided to a receiver who also learns from misspecified background sources that are outside the provider’s control. In contrast to information provision for rational receivers, any source can be harmful under certain misspecifications of background sources. I show that the key aspect of the background environment enabling robustly beneficial design is the receiver’s perception rather than the true structure. For any background source structure and design of the provided source, there exists a misspecification under which harm occurs. Consequently, even complete knowledge of the true structure is insufficient and knowledge of the receiver’s perception is necessary. Under complete knowledge of the perception, I demonstrate how to design an information source that is robustly non-harmful and often strictly beneficial, regardless of the true background sources. |
| Keywords: | Misspecified learning, value of information, robust information design |
| JEL: | D80 D83 D90 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:411 |
| By: | Yuki Ono; Fumio Ohtake; Nobuyuki Hanaki |
| Abstract: | We study a voluntary contribution mechanism (VCM) with intragroup competition, in which individuals’ marginal returns depend on their contribution rank within the group. By systematically varying the strength of rank-based incentives, we derive theoretical predictions and test them in a laboratory experiment. We find that intragroup competition significantly increases contributions, but the response is highly nonlinear: contributions increase sharply once incentives become sufficiently strong to support an efficient equilibrium, but further increases in incentive intensity generate only modest additional effects. These findings highlight how incentive design shapes cooperation and provide new insights into the effects of relative performance incentives in public goods environments. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1313 |
| By: | Artyom Jelnov (Ariel University); Maxim Senkov (Department of Actuarial, Financial and Economic Mathematics. Universitat de Barcelona and BEAT) |
| Abstract: | In a political-agency model, an incumbent can initiate a restrictive policy in response to a crisis state of the world. Both the opposition and the citizen value the incumbent's policy matching the state; however, they are uncertain about the incumbent's true motives. If the incumbent is of the dictatorial type, a restrictive policy that is not protested by both the opposition and the citizen leads to the start of authoritarian rule. We show that when the incumbent is relatively unlikely to be dictatorial, the presence of radical opposition, protesting the restrictive policy regardless circumstances, can reduce voter welfare: it eliminates the efficient state-matching equilibrium, since the opposition never fully reveals dictatorial incumbents. Conversely, when the incumbent is relatively likely to be dictatorial, a high probability of radical opposition can increase voter welfare by deterring the dictatorial type from implementing the restrictive policy. |
| Keywords: | democratic backsliding, autocratization, emergency powers, populist radical parties |
| JEL: | D72 D82 D83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:495web |
| By: | Bingyao Liu; Yao Luo |
| Abstract: | Capacity constraints are central to oligopoly competition in many industries, yet existing multiproduct Bertrand theory does not characterize equilibrium when capacity binds across markets. We establish existence and uniqueness of Bertrand–Nash equilibrium in a multimarket, multiproduct oligopoly under multinomial logit demand, with both linear and convex costs. Capacity creates cross-market spillovers: pricing in one market affects the shadow value of capacity in others. Methodologically, we extend the aggregative-games framework to a nested fixed-point structure separating across-market capacity allocation from within-market pricing, using tools from nonsmooth analysis to handle kinks from binding constraints. The framework yields new insights for merger analysis: binding capacity dampens merger-induced price increases through shadow-cost relief, while post-merger reallocation of scarce capacity can raise consumer surplus. However, the merged firm's privately optimal reallocation generally differs from the social optimum, creating a role for merger remedies. |
| Keywords: | Differentiated Products; Capacity Constraints; Mergers; Aggregative Games; Cross-Market Spillovers; Equilibrium Uniqueness |
| JEL: | L13 D24 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-821 |
| By: | Yuhang Wu; Assaf Zeevi |
| Abstract: | On a platform with many sellers, should a pricing algorithm explicitly model competitors' prices when learning demand? Classical learning arguments suggest an affirmative answer: ignoring competitors induces model misspecification and inefficiency. In contrast, recent work on algorithmic collusion suggests that strategic obliviousness -- deliberately ignoring competitor prices -- may facilitate collusive outcomes and improve profits. We study this modeling choice in a stylized competitive market with unknown noisy demand, in which multiple sellers repeatedly set prices and estimate demand via iterated least squares, and either incorporate competitors' prices into their demand models (informed) or ignore them (oblivious). We first show that, relative to a monopolist, an oblivious seller in a competitive market must explore more aggressively to compensate for the loss of dynamic competitor information. Building on this insight, we characterize market dynamics when all sellers are oblivious and show that prices converge to the competitive outcome under sufficient exploration, while a continuum of pseudo-equilibria arises when exploration decays. Analyzing the resulting price trajectories, we uncover an excursion phenomenon that gives rise to transient collusive patterns that dissipate as learning progresses. In markets with both oblivious and informed sellers, the informed strictly out-earn the oblivious. Read as a strategy game, the modeling choice has a unique Nash equilibrium: the all-informed market, in which prices converge to the competitive outcome efficiently. Overall, our results indicate that collusive patterns are not robust and are not sustained by oblivious modeling; therefore, incorporating competitor information, together with sufficient price exploration, remains a reliable strategy for sellers in competitive markets. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.05363 |