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on Economic Design |
| By: | Joshua S. Gans; Scott Duke Kominers |
| Abstract: | Matching markets allocate scarce opportunities using performance metrics that agents can game. When does making a metric less gameable actually reduce gaming? We show that the answer hinges on how the market converts evaluations into stakes. Where evaluations assign prices — wages, credit terms, score-indexed payments — partially purifying the metric raises gaming precisely when gameable variation dominates it: the market's trust in the metric then rises faster than its exposure to gaming falls. By contrast, where evaluations assign positions — fixed seats allocated by rank — purification never backfires: ranking cancels trust from the incentive, leaving a rank price that deflates with the metric's dispersion, so mean gaming falls monotonically. We solve both markets in closed form under a first-order equilibrium concept; transfers microfound the first regime, rank tournaments the second. A prize-curvature index then determines when gaming improves rather than harms sorting, and when perfecting the metric is itself sorting-suboptimal. |
| JEL: | C78 D47 D83 I23 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35363 |
| By: | Eilat, Ran; Eliaz, Kfir |
| Abstract: | We incorporate negative reciprocity into strategic information transmission and study how a receiver’s response to perceived manipulation shapes equilibrium outcomes. We examine both an information-design environment, in which the sender can commit to an information structure, and a cheap-talk environment, in which commitment is not possible. In each setting, the receiver's behavior or preferences shift adversarially against the sender as the sender's strategy becomes less accurate. We analyze and solve these communication games in the presence of negative reciprocity, even when it generates endogenous preferences, and we characterize the novel ways in which classical results are altered. Our findings link information design to behavioral economics highlighting the implications of design-dependent preferences. |
| Keywords: | Strategic communication; Negative reciprocity; Endogenous preferences |
| JEL: | D83 D91 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21360 |
| By: | Tsuyoshi Adachi (Faculty of Political Science and Economics, Waseda University); Zheng Lin (Graduate School of Economics, Waseda University) |
| Abstract: | We study fair and strategy-proof allocation of a scarce homogeneous good when demand is rationed by costs borne by agents and not transferred to the designer (e.g., waiting time, effort, or burned payments). Because such costs are pure losses, the designer must preserve fairness and incentive compatibility while controlling cost dissipation. We introduce Ascending-Price Sequential Selling (APSS), a procedurally disciplined class of rules in which a common price rises, agents exit at their values, and marginal sales depend only on the public record of past exit prices and are shared equally among currently active agents. Our main result shows that APSS is exactly characterized by resource-non-wasteful strategy-proofness, ex-post no-envy, and no complementarity among equals. Every APSS rule admits an obviously strategy-proof exit-game implementation. Within APSS—and hence within the axiomatic class—we evaluate ex-post worst-case welfare (utility net of costs), identify a simple harmonic rule that achieves an explicit harmonic-number guarantee, and prove that no APSS rule can guarantee more. We also extend the APSS construction to a convex domain of preferences. |
| Keywords: | Mechanism Design; Strategy-Proofness; Fair Allocation; No-Envy; Pure Costs (Money Burning); Ascending-Price Mechanisms; Worst-Case Welfare Guarantees (Competitive Ratio); Obviously Strategy-Proof (OSP) |
| JEL: | D45 D47 D63 D82 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2609 |
| By: | Tomoya KAZUMURA |
| Abstract: | We examine the compatibility of efficiency and strategy-proofness in a pack- age assignment model with transfers where preferences may not be quasi-linear. A preference relation is essentially quasi-linear if it is quasi-linear over the set of (consumption) bundles that are at least as desirable as receiving no object and paying nothing, and at which payments are nonnegative. We show that if a domain contains the essentially quasi-linear domain, then no mechanism is efficient and strategy-proof. We also show that if there is a mechanism that satis es efficiency, strategy-proofness, individual rationality, and no subsidy for losers on a domain, the domain must be contained in the essentially quasi-linear domain. Our results demonstrate that the quasi-linearity of preferences is es- sential for the design of an efficient and strategy-proof mechanism. Our results also have implications for the public goods model with transfers. |
| Keywords: | Strategy-proofness, efficiency, non-quasi-linear preferences, essen- tially quasi-linear preferences, generalized Vickrey mechanism, maximal do- main. |
| JEL: | D44 D71 D61 D82 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-21-008-v2 |
| By: | Kleiner, Andreas; Moldovanu, Benny; Strack, Philipp |
| Abstract: | A key insight is that many, seemingly different, economic problems share a common mathematical structure: they all involve the maximization of a functional over sets of monotonic functions that are either majorized by, or majorize, a given function. 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 characterization 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. |
| JEL: | D82 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21429 |
| By: | Kleiner, Andreas; Moldovanu, Benny; Strack, Philipp; Withmeyer, Mark |
| Abstract: | We study multidimensional mean-preserving contractions (MPC) and their extreme and exposed points. Proposition 1 focuses on extreme MPCs of a measure μ. Necessarily, each finitely supported extreme MPC ν induces a partition of X, the domain of μ, in convex sets such that the support of ν on each element of the partition is an affinely independent set, and such that the restriction of ν on each element of the partition is itself a MPC of the restriction of the prior μ on that element. Proposition 2 connects finitely supported Lipschitz-exposed points (measures that are unique optimizers of Lipschitz-continuous objectives) and power diagrams, which are divisions of a space into convex polyhedral cells according to a weighted proximity criterion. Power diagrams are very useful in a number of economic applications such as optimal transport and mechanism design. Finally, we apply the above results to several questions concerning moment persuasion and categorization |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21430 |
| By: | Andrew Mackenzie (Department of Economics, Rutgers University); Christian Trudeau (Department of Economics, University of Windsor) |
| Abstract: | We introduce endogenous shareholding auctions for production economies where a monopolist must elicit consumer demand in order to determine price and quantity. Each of these auctions has the property that the auction's profit is distributed across the monopolist and the consumers in accordance with ownership shares that are determined over the course of the auction. We characterize this class, and a larger class, on the basis of standard axioms. Finally, we investigate optimal auctions according to both prior-free domination and subjective expected welfare. |
| Keywords: | auctions; Groves mechanism; monopolist; regulations. |
| JEL: | D82 D47 D24 D44 H41 D61 D63 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:wis:wpaper:2603 |
| By: | Jiawei Chen; Anh Nguyen; Matthew Shum |
| Abstract: | We study common-value auctions in which bidders have horizontally differentiated preferences. In a specific two-bidder parameterization, winning conveys good news about the object's value to the winner, a phenomenon we call the winner's bliss in contrast to the conventional winner's curse. Additional implications also differ from the conventional analysis. When bidders' preferences are horizontally differentiated, seller revenue is reduced with information disclosure, and advantageous selection sustains bilateral trade under asymmetric information. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.08419 |
| By: | Bergemann, Dirk; Bonatti, Alessandro; Smolin, Alex |
| Abstract: | We develop a framework for the optimal pricing and product design of LLMs in which a provider sells menus of token budgets to users who differ in their valuations across a continuum of tasks. Under a homogeneous production technology, we show that users' high-dimensional type profiles are summarized by a scalar index, reducing the seller's problem to one-dimensional screening. The optimal mechanism takes the form of committed-spend contracts: buyers pay for a budget that they allocate across token classes priced at marginal cost. We extend the analysis to environments with multiple differentiated models and to competition between a proprietary leader and an open-source fringe, showing that competitive pressure reshapes both the intensive and extensive margins of compute provision. Each element of our theory (token-budget menus, maximum- and minimum-spend plans, multi-model versioning, and linear API pricing) has a direct counterpart in the observed pricing practices of providers such as Anthropic, OpenAI, and GitHub. |
| Keywords: | Large Language Models |
| JEL: | D47 D82 D83 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21275 |
| By: | Takara Sakai; Riki Kawase |
| Abstract: | A central operator schedules each vehicle's passage time through a bottleneck to achieve a dynamic system optimum (DSO). The assignment depends on each vehicle's preferred arrival time, which is private and must be elicited from each vehicle. Mechanisms that elicit exact preferences, such as the Vickrey-Clarke-Groves (VCG) mechanism, can achieve strategyproofness but involve relatively complex rules and a computational burden on the operator. We focus instead on coarse reporting, in which each vehicle selects from a finite menu of time slots of a common width. This discrete interface already structures reservation and appointment systems in practice, including managed lanes for automated vehicles, airport slot allocation, and delivery appointment windows. We design a slot-based DSO mechanism on this coarse interface, in which the operator implements DSO assignment based on the reported slots and charges a capacity shadow price as a toll, and evaluate its performance. We prove that both the worst-case misreporting gain and the expected efficiency loss decrease quadratically in the slot width. The efficiency loss decays in this way under binding capacity, while the worst-case misreporting gain requires an additional condition on the preferred arrival time distribution and the schedule cost function. Analyzing the no-toll case, we find that the misreporting incentive persists, however finely the slots are refined, indicating that the toll also serves to elicit truthful reports. Numerical experiments support these theoretical results and show that they continue to hold in parameter regions outside the sufficient conditions. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.17400 |
| By: | Dahlberg, Matz; Lundholm, Mikael; Nordin, Mattias; Schouten, Henk |
| Abstract: | The mode of sale may affect prices not only through selling rules, but also by changing the composition of potential buyers. We study this mechanism by randomly varying the mode of sale in a three-year field experiment, conducted with the Swedish Enforcement Authority, that assigns foreclosed homes to auction or brokered sale. Assignment to brokered sales raise prices by about 15% relative to auctions. Using pre-treatment appraisals, we show that the foreclosure discount is mode-dependent: auction sales occur at a substantial discount, whereas brokered sales occur close to appraised market value. To explain why the discount arises in auctions, we develop a model in which auction participation barriers deter household buyers and create scope for resale-oriented professional buyers, lowering prices and potentially generating inefficient allocations. Historical individual-level foreclosure data support the mechanism: repeat buyers are present in auctions, purchase at larger discounts, and resell more quickly than other buyers. |
| Date: | 2026–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:e74gp_v1 |
| By: | Nikolas Koumpis; Koushik Kar; Leandros Tassiulas; Manolis Zampetakis |
| Abstract: | A central challenge in modern energy market design is the formulation of a strategy-proof imbalance settlement layer that secures both the economic efficiency of the institution and the stability of the power grid. Public data reveals that the day-ahead market is strategically biased below actual consumer demand. Such empirical observations are explained by active prosumers which provide implementable incentives for demand under-reporting. Active prosumers buy energy in the day-ahead market and sell energy in the real-time market for balancing real-time energy deviations. By under-reporting their demand for the day ahead they inflate real-time imbalances and, under uniform pricing, they dispatch their generation assets more profitably. We model the two-stage institution under linear preferences and benchmark it against its associated competitive equilibria. We show that although consumers' incentives for demand under-reporting vanish when the day-ahead market scales, prosumers' incentives remain lower bounded by a positive gain which depends only on the real-time market generation stack and their shares over it. To restore incentive compatibility under the existing informational constraints, we design a leave-one-out contrastive scoring rule-based penalty that is implemented by the day-ahead market operator, incentivizes prosumers to report their demand truthfully and ensures small charges when participating honestly. We illustrate these results with numerical simulations on synthetic data and evaluate our mechanism on real-market data by first rationalizing demand reports as subjective equilibria of the induced game. Our mechanism demonstrates strong incentive alignment while retaining a low cost for honest participation. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.25910 |
| By: | Braghieri, Luca |
| Abstract: | How should a benevolent sender communicate private information to a receiver who updates beliefs in a systematically biased way? As an example, consider a hospital that has to communicate a test result to a patient prone to pessimistic inferences. I model this situation as a Bayesian sender observing an exogenous signal about the state of the world and choosing how to coarsen it before transmitting it to a receiver with updating biases. I show two main results: first, paternalistic information design can achieve first-best outcomes if and only if the sender can compress her information into categories that are both safe, meaning that they induce the receiver to take welfare-maximizing actions despite his biased updating, and lossless, meaning that they preserve the first-best value of the underlying information. Second, I show that the same decision problems for which information is most valuable under Bayesian updating are also the ones for which biased updating is hardest to mitigate through optimal information design. Together, these results characterize both the promise and the limits of paternalistic information design. Applications to medical reporting and AI-assisted lending show when coarsening information improves decisions and when it necessarily sacrifices first-best welfare. |
| JEL: | D82 D83 D91 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21484 |
| By: | Philipp Strack (Department of Economics, Yale University); Kai Hao Yang (School of Management, Yale University) |
| Abstract: | A monopolist offers personalized prices to consumers with unit demand. Consumers differ in their values, costs, and protected characteristics such as race or gender. The seller is subject to a non-discrimination constraint: consumers with the same cost, but different protected characteristics must face identical price distributions. Such regulations are present in markets like credit or insurance. We characterize the optimal pricing rule. Under this rule, surplus accrues to both protected groups, but only to those with intermediate values. Strengthening the constraint to cover transaction prices redistributes surplus, harming the low-value group and benefiting the high-value group. Meanwhile, prohibiting the use of protected characteristics as pricing inputs instead of regulating outputs harms the low-value group. |
| Keywords: | Price discrimination, personalized pricing, discrimination, market segmentation, protected characteristics, optimal transport |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2447r1 |
| By: | Simon Finster (WIFO); Bernhard Kasberger (WIFO); Simon Rütten (WIFO) |
| Abstract: | In European day-ahead electricity markets, carbon allowance costs passed through by marginal fossil plants raise consumer expenditure and generate inframarginal rents for non-emitting generators. We propose a settlement modification: when the zonal day-ahead price exceeds a threshold, non-emitting generation is remunerated at the clearing price minus a fixed CO2-proxy deduction, while all other units continue to receive the uniform price. The mechanism thus reallocates a part of the inframarginal rents to consumers. Using hourly data we estimate static average expenditure reductions of about 8.5 percent in Austria and 4.7 percent in Germany in 2025. We discuss bidding incentives around the threshold, interactions with Contracts for Difference, implementation in coupled bidding zones, and a gas-cost variant for the 2022 energy crisis. |
| Date: | 2026–03–27 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2026:i:725 |
| By: | Hao-Hsuan Chen |
| Abstract: | Paper A defines a time-consistent actuarial runtime that prices each side-effect-bearing action against a contractually fixed safe default and gates execution against a reserve budget. It treats the operator as passive. This paper makes the operator strategic. We characterise a five-attack space for autonomous AI-agent insurance contracts and prove when the actuarial runtime is gaming-resistant. Two attack surfaces -- post-toll safe-default selection and within-boundary action splitting -- are closed by Paper A's minimal-authority and no-splitting clauses. The remaining three require new contract clauses. First, common-control aggregation prevents cross-boundary re-routing from reducing toll below the boundary potential applied to total exposure. Second, interface failures such as invalid JSON are contract-relevant events, not safety wins: treating them as zero-toll safe defaults can reward unreliable models, while escalation fees reverse the incentive. We validate this interface-compliance theorem on committed cross-model traces from the companion empirical paper. Third, a model-identity menu with a componentwise-minimum penalty schedule makes truthful reporting of the deployed model weakly dominant. We then compose these clauses with Paper A's runtime guarantees to obtain joint incentive compatibility over the five-attack space. Finally, a two-parameter premium family discharges operator individual rationality and weak budget balance at the truthful equilibrium. The result is an incentive-compatibility layer for actuarial control of autonomous-agent side effects. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.16326 |
| By: | Alonso, Ricardo; Gan, Tan; Hu, Ju |
| Abstract: | We study delegation rules by principals uninformed of the underlying state (external uncertainty) and the preferences of better-informed agents (internal uncertainty). Evaluating delegation sets with a max–min criterion, we show that in multidimensional environments optimal delegation sets are simple: for broad classes of preference uncertainty, optimal delegation sets are convex. Thus, interval delegation is always (robustly) optimal when the action space is unidimensional. Internal uncertainty can justify greater discretion, allowing actions that are never optimal for the principal in any state; and a version of the ally principle holds: alignment along enough dimensions implies unconstrained delegation along all dimensions. |
| JEL: | D23 D82 L22 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21382 |
| By: | Furkan Sezer |
| Abstract: | We study a continuous-time stochastic Stackelberg control problem in which a leader steers a system of strategic followers through two non-standard channels - the information structure and a transfer mechanism - rather than through the dynamics directly. The latent environment is a jump-diffusion; the leader commits to a Gaussian public-signaling channel whose belief consequences are tracked by a finite-dimensional projection filter (the exact filter being infinite-dimensional), together with a Groves transfer that aligns the followers' incentives. Under truthful disclosure, efficient behavior is a dominant-strategy best response, and the induced differential game admits saturated and bang-bang Nash feedback. We cast the leader's distributionally robust problem, over a relative-entropy ambiguity neighborhood, as a two-controller Isaacs equation; prove that incentive alignment collapses the bilevel Stackelberg problem to a single robust control problem with an exact first-order condition; and characterize the value function as the unique viscosity solution, with a verification theorem valid for the non-smooth bang-bang feedback and a semiconcavity result that renders the switching set Lebesgue-null. We instantiate the framework on resilient multi-area power-system coordination under extreme weather. Calibrated to the 2021 Winter Storm Uri, an Isaacs solve over ERCOT's near-islanded interconnection (a 0.82 GW tie, under 2% of peak) shows mutual aid removes about 8% of social cost, rising to roughly 30% under the FERC/DOE-recommended interregional transfer capability; a reserve-scheduling experiment shows that public disclosure lowers welfare cost by 37% under autarky and 48% under market coupling, and that information design and market coupling are complements under common (systemic) risk. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.24015 |
| By: | Vahideh Manshadi (Yale School of Management, Yale University); Faidra Monachou (Yale School of Management, Yale University); Ilan Morgenstern (Yale School of Management, Yale University) |
| Abstract: | To meet voluntary climate targets, firms often complement internal decarbonization efforts by purchasing carbon credits in the voluntary carbon market (VCM), which finance projects that reduce emissions elsewhere. However, these emissions reductions are difficult to verify, and growing evidence of overcrediting has cast doubt on the VCM's potential to genuinely offset emissions. We investigate how the VCM's defining features shape its climate effectiveness. Our model captures three central elements: adverse selection, as high-quality projects that truly reduce emissions are costlier yet difficult to distinguish from low-quality ones; imperfect third-party certification, as projects are screened based on a noisy signal of quality; and buyer preferences for non-carbon attributes, as some firms value credits that generate observable social or economic co-benefits beyond reducing emissions. We show that the market fails to sustain trade if certification is sufficiently noisy, as quality uncertainty erodes buyer confidence and triggers a market-for-lemons collapse. However, demand for co-benefits can sustain markets that would otherwise collapse. Yet in such cases, the market remains active but yields limited carbon abatement, as most traded credits are low-quality. We then examine policy and market design interventions reflecting recent developments in practice, such as penalizing buyers for greenwashing and offering credit portfolios. We show that these measures can be counterproductive for carbon mitigation if certification remains inaccurate. Accordingly, we demonstrate that the certifier's incentives for accuracy can be strengthened by modifying its fee structure so that its revenue is tied to the market value rather than the volume of credits. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2536 |
| By: | Fan, Ying (Department of Building and Real Estate. The Hong Kong Polytechnic University. Hong Kong SAR, China); Fu, Yuqi (School of Business. Soochow University. Suzhou, China); Yang, Zan (Department of Real Estate and Construction Management, Royal Institute of Technology) |
| Abstract: | Online-to-offline platforms increasingly use buyer-facing visibility systems to allocate consumer attention, but transactions often remain dependent on human agents who execute offline work. This paper studies whether buyer-facing visibility also shapes the supply of offline execution capacity. We assemble high-frequency data from a large housing brokerage platform in Beijing that link daily listing visibility, traffic, agent participation, showing trips, closing-agent identities, and sale-related listing records. To estimate the effect of visibility-induced buyer attention, we use a listing-level mechanical rank-shock instrument based on the entry and exit of other properties above the focal listing in the relevant search set. The evidence shows that higher visibility-induced traffic mobilizes offline labor: listings attract more participating agents on the extensive margin and receive more showing trips from participating agents on the intensive margin. This labor expansion, however, does not translate into a systematically stronger observable closing agent, suggesting that visibility expands contest participation more than winner selection. We develop a model in which buyer-facing visibility raises agents' expected returns to offline execution, inducing entry and effort under fixed commission shares. Calibrated counterfactual simulations suggest that execution-aware visibility allocation can substantially improve platform outcomes: a marginal transaction-value rule raises platform transaction value by 36.9% while mobilizing 11.0% more participating agents, and a welfare-aware rule preserves similar value gains while tempering agent-participation expansion. The paper identifies cross-side labor effects of buyer-facing information systems and shows that recommendation design in online-to-offline platforms should account for offline executability. |
| Keywords: | Platform visibility; recommendation systems; online-to-offline platforms; algorithmic management; offline execution |
| JEL: | D83 L86 M15 |
| Date: | 2026–06–22 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:kthrec:2026_001 |
| By: | Drugov, Mikhail; Jeon, Doh-Shin |
| Abstract: | This paper studies the incentives of a subscription-funded platform that offers both proprietary and third-party content to bias its recommendations about which content users should consume. Consistent with Netflix’s practice, we consider fixed-fee bargaining between the platform and a content provider, which eliminates any static incentive to bias recommendations. However, our dynamic model identifies two distinct incentives to bias recommendations: improving the platform’s future bargaining position and increasing users’ expected surplus. The former favors first-party content, while the latter favors the ex ante superior content. As a result, biased recommendations may lead to either self-preferencing or third-party preferencing. |
| Keywords: | Platform |
| JEL: | D83 L42 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21451 |
| By: | ALEKSENKO, STEPAN; Miklos-Thal, Jeanine |
| Abstract: | We analyze the effects of information sharing in oligopoly when firms outsource pricing to a common third-party pricing algorithm developer. In a model where algorithms tailor prices to high-frequency demand shocks, we compare regimes that allow or prohibit conditioning on rival-specific shocks. Information sharing makes algorithmic prices more sensitive to seller-specific demand shocks---own and rival---and more correlated across sellers. These effects are stronger under common third-party algorithm design than under independent design because the third party's objective generates greater strategic complementarity in pricing than independent profit maximization. Information sharing harms expected consumer surplus more under common third-party design than under independent design, and its welfare effects are reversed across the two cases: information sharing lowers expected welfare under common third-party design while raising it under independent design. Our findings provide theoretical support for recent antitrust scrutiny of common third-party pricing algorithms that incorporate competitor data. |
| Keywords: | Algorithmic pricing; Information sharing; Antitrust; Oligopoly; Third-party sharing |
| JEL: | L13 L41 L42 D43 L86 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21452 |
| By: | Olivier Gossner; Rafael Veiel |
| Abstract: | We provide a strategic foundation for information: in any given game with incomplete information we define strategic quotients as information representations that are sufficient for players to compute best-responses to other players. We prove 1/ existence and essential uniqueness of a minimal strategic quotient called the Strategic Type Space (STS) in which a type is given by an interim correlated rationalizability hierarchy and represents a set of beliefs over other players' types and nature that rationalize this hierarchy and 2/ that the minimal STS has a recursive structure that is captured by a finite automaton. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.08297 |
| By: | Tomoyuki Nakajima (Faculty of Economics, The University of Tokyo) |
| Abstract: | I study optimal taxation in a directed–search economy with moral hazard, in which firms post output–contingent wage contracts that provide workers with insurance and incentives. Because the market prices these margins, the income tax is freed to redistribute alone: it is lump sum under a utilitarian planner, and under a non–utilitarian planner its marginal rate takes the transparent form τ′(ω)/[1 − τ′(ω)] = −κ κγ′(c (ω)), proportional to the slope of the social welfare weight at realized consumption and free of the skill distribution and labor–supply elasticities that dominate the Mirrleesian formula. A subsidy to vacancy creation corrects a fiscal externality on job creation, and an unemployment benefit handles the extensive margin. I then let productivity be unobservable. Single–crossing survives the moral hazard, so the downward incentive constraint binds and the high type retains an information rent; the resulting screening distortion is borne by the market’s wage schedule rather than by the tax, and the optimal anonymous income tax keeps the transparent form with the redistributive coefficient replaced by a composition–weighted average across types. A calibrated example gives the mechanism quantitative content. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:tky:fseres:2026cf1275 |
| By: | Gaston Llanes; Martin Peitz |
| Abstract: | We study a platform that interacts with a major content provider, a long tail of independent providers, and consumers who allocate attention across competing content. By designing independent-provider compensation, the platform endoge nously shapes its outside option and disciplines the major. This strategic use of long-tail compensation distorts entry relative to the first best. Allowing the platform to steer consumer attention improves entry incentives conditional on compensation, but affects bargaining incentives, and may thus increase or de crease welfare. We then consider regulation, showing that conservative minimum compensation floors robustly improve welfare, while non-discrimination policies have ambiguous welfare effects. |
| Keywords: | streaming platform, Nash bargaining, royalty negotiation, free entry, consumer steering |
| JEL: | L14 L82 L86 D43 D44 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_766 |
| By: | Dumav, Martin |
| Abstract: | We study self-enforcing contracts in a continuous-time Poisson framework, where a risk-neutralagent with limited liability exerts effort to increase the likelihood of success in a good-news project.Dynamic enforcement is irrelevant for contracts aimed at avoiding bad outcomes but importantwhen effort generates positive outcomes. We propose a two-step approach: first, we characterizethe optimal commitment contract under an exogenous bound on the agent's continuation utility;second, we determine the maximal bound the principal can credibly offer to implement the optimalself-enforcing contract. The resulting contract backloads payments and features a terminationthreshold, a partial-bonus threshold, and a full-bonus threshold. Comparative statics show thatself-enforcing contracts more closely approximate the commitment benchmark when projects areeither gradualist—featuring more frequent, smaller successes—or smaller in scale, with lower effortcosts and reduced success payoffs. These patterns imply that, in environments lacking stronginstitutions, ambitious or high-scale projects are unlikely to be unde |
| Keywords: | Self-enforcing contracts; Relational contracting; Dynamic moral hazard; Gradualist and small-scale projects; Institutions; Investment and development |
| JEL: | C73 D24 D82 D86 L14 O43 |
| Date: | 2026–06–22 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:50300 |
| By: | Galasso, Alberto; Virag, Gabor |
| Abstract: | Motivated by a growing body of empirical evidence documenting overconfidence among litigants, this paper studies the design of judicial mechanisms when defendants hold biased beliefs about their likelihood of conviction. Subjective biases have heterogeneous effects across defendant types and may fundamentally alter the structure of optimal judicial procedures. Relative to the benchmark with unbiased defendants, biased beliefs reduce the benefits of plea offers and, in some cases, the value of offering a menu of trial procedures to screen defendants. Overconfidence does not facilitate surplus extraction; instead, it reduces court welfare while increasing defendants’ expected utility. A calibration of the model using empirical evidence on judicial error rates and litigant overconfidence suggests that these effects are of significant magnitude. |
| JEL: | D82 K41 D91 K40 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21416 |
| By: | Yulia Chikish; Gregory J. Colman; Dhaval M. Dave; Brad R. Humphreys; Zachary Santamaria; Zachary Winship |
| Abstract: | Large cities worldwide have adopted congestion pricing to reduce urban traffic, with well-documented benefits for travel speeds, accident rates, and air quality. This paper identifies a novel external benefit: faster emergency medical service (EMS) response times. We provide the first evidence on how the congestion pricing program in New York City – the first comprehensive cordon-based congestion pricing system in the U.S. that was implemented on January 5th, 2025 – affects EMS performance. Exploiting the sharp geographic boundary of New York City’s congestion relief zone at 60th Street and a difference-in-discontinuities design, we first document substantial changes in traffic and mobility near the boundary: vehicular traffic declines by roughly 18 to 21 percent, accompanied by increases in pedestrian and bicycle activity. Consistent with these first-stage mechanisms, we find that congestion pricing improves EMS performance, reducing total travel times by 63–70 seconds (approximately 5–6 percent). Effects emerged quickly and show little evidence of displacement to adjacent areas. A concurrent FDNY directive requiring transport to the nearest hospital confounds standard difference-in-differences estimates but not our boundary-based design. These findings suggest that cost-benefit analyses of congestion pricing systematically understate net social benefits by omitting emergency response improvements. |
| JEL: | H41 I11 I18 R41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35414 |
| By: | Braghieri, Luca |
| Abstract: | I study how to measure information transmission when agents have misspecified priors, misinterpret signals, or update beliefs in a non-Bayesian way. I axiomatize and characterize measures of \emph{meaningful information transmission} that account for both the objective features of a signal structure and agents' (mis)interpretations of it. Meaningful information measures coincide with canonical ones under correct Bayesian beliefs, but otherwise extend them in a disciplined way grounded in the same underlying decision geometry. I then estimate meaningful information in three empirical applications and show that it can diverge sharply from canonical measures. |
| JEL: | D82 D83 D91 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21483 |