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on Economic Design |
| By: | Christian Basteck; Lars Ehlers |
| Abstract: | We study random assignment of indivisible objects among a set of agents with strict preferences and outside options. When agents may rank some objects as unacceptable, we consider different notions of measuring waste of object(s) from an ex-ante perspective. The most natural one is $q$-agent-object-waste whereby both one agent and one of his acceptable objects are unassigned with at least probability $q$. On the one hand, we show that any mechanism satisfying equal treatement of almost equals (whereby any two agents with identical rankings over objects receive the same probability shares for objects they both regard acceptable), strategy-proofness and ex-post weak non-wastefulness (whereby in any assignment in the support we cannot have that both one agent and one of his acceptable objects are unassigned) must be $q$-agent-object-wasteful with $q\geq \frac{1}{6}$. On the other hand, we show that random serial dictatorship (RSD) attains the minimal bound of $\frac{1}{6}$ in this class for four agents or three objects. In addition, we consider $q$-object-wastefulness where an object remains unassigned with probability $q$, while agents, who consider it acceptable, remain unassigned with aggregate probability $q$. We again show that RSD attains the minimal bound of $\frac{1}{4}$ in this class of mechanisms with respect to $q$-object-wastefulness for three objects. Finally, we show that random deferred acceptance (RDA) may be strictly less agent-object-wasteful than RSD (but at the cost of violating equal treatment of almost equals). |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.27261 |
| By: | Camilo J. Sirguiado; Jiarui Xie |
| Abstract: | In centralized school choice, a designer who announces a mechanism may deviate from it to favor some students without being detected. A mechanism is credible if it admits no such deviation. We study this credibility problem when students do not know others' reports and may observe only part of the assignment. Credibility is demanding: among common school choice mechanisms, only deferred acceptance is credible, and only when students observe enough of the assignment. We therefore rank mechanisms by their credibility. Deferred acceptance is more credible than any other stable mechanism and strictly more credible than the Boston mechanism, regardless of how much of the assignment students observe. Its ranking relative to top trading cycles and efficiency-adjusted deferred acceptance depends on disclosure: deferred acceptance is strictly more credible when students observe the entire assignment, whereas the ranking reverses when students observe only their own assignment. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.29597 |
| By: | Potarca, Matthias |
| Abstract: | The decline of auction-format sales in favor of posted prices on digital marketplaces is commonly attributed to behavioral biases or secular changes in the market environment. This paper examines the latter by jointly modeling two forms of buyer opportunity cost within a standard symmetric independent private values framework: an entry cost sunk upon auction participation, and a mechanism-independent outside option reflecting the surplus a buyer can obtain from a close substitute at a known market price. A seller chooses between a second-price auction and a posted price; potential buyers decide whether to participate after observing their private valuations. The outside option endogenously partitions buyers into low-value types, who bid their full valuation, and high-value types, whose bids are capped at the outside option price, giving rise to qualitatively distinct entry regimes that the seller anticipates and actively shapes. Pressure from either channel strictly erodes the auction's advantage, but the seller's response to the two is asymmetric. The model yields testable implications that qualitatively align well with observed patterns and place weight on the outside option channel as a driver for the shift towards posted prices. |
| Keywords: | auctions, posted prices, entry costs, outside options, mechanism design, e-commerce |
| JEL: | D44 D47 D82 L81 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kitwps:343538 |
| By: | Endre Cs\'oka |
| Abstract: | We study the repeated allocation of a single indivisible resource among $n$ strategic players. Each player $i$ has a privately known value distribution $D_i$, and values are drawn independently across players and periods. The goal is to find fair and efficient mechanisms. We apply the repeated first-price auction with equal initial endowments of virtual money. We show that each player can asymptotically secure the same fair-floor guarantee $f(D_i)$ as in Cs\'oka 2026; consequently, the mechanism is $1.283$-optimal. This provides a simpler and more robust alternative mechanism for this special case and may also help derive sharper upper bounds on the price of anarchy. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.05499 |
| By: | Hadi Hosseini; Shraddha Pathak; Lirong Xia; Chengkai Zhang |
| Abstract: | Recent work in fair division has focused on either simultaneously satisfying closely related fairness notions or achieving a single notion across the ex-ante and ex-post worlds. We study the compatibility of two fundamentally different fairness notions: envy-freeness and equitability. For indivisible goods-only and chores-only settings, we study the existence and complexity of simultaneously satisfying their relaxations, revealing sharp contrasts between the two settings. We show that EF1+EQ1 may fail to exist even for normalized binary goods: we construct an instance with 113 agents and 341 goods in which every agent approves exactly 165 goods, but no complete allocation satisfies both notions. Our main algorithmic result computes an EF1+EQ1 allocation for every normalized binary goods instance with at most seven agents. Thus, the smallest number of agents admitting a counterexample lies between 8 and 113, leaving the cases from 8 through 112 unresolved. In sharp contrast, binary chores admit the stronger EFX+EQX guarantee for any number of agents, even without normalization. We further initiate the study of cross-notion ex-ante and ex-post guarantees, asking whether randomized allocations can provide ex-ante guarantees for one notion while preserving ex-post guarantees for another. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.26410 |
| By: | Adam Hamdan |
| Abstract: | This paper studies the intensity of priority violations in matching markets. An agent is said to have very justified envy if she prefers another agent's match to her own and her priority advantage for the object exceeds $k$ ranks. I show that unless $k$ is prohibitively large, Pareto efficiency is incompatible with the elimination of very justified envy. A simple generalization of Deferred Acceptance and Immediate Acceptance is shown to eliminate very justified envy for any $k$. In simulations of random matching markets, I find that modest relaxations to justified envy can yield significant improvements in assignment ranks. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.07682 |
| By: | Nadia Gui\~naz\'u; Noelia Juarez; Paola Manasero; Pablo Neme; Jorge Oviedo |
| Abstract: | We provide the first polyhedral characterization of worker-quasi-stable matchings in the classical one-to-one matching model. By modifying the classical stability constraints, we introduce a convex polytope and prove that it is integral. Consequently, its extreme points coincide exactly with the incidence vectors of worker-quasi-stable matchings, demonstrating that worker-quasi-stability preserves the geometric tractability of standard stability. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.20032 |
| By: | Yi-You Yang |
| Abstract: | Sequential-entry procedures need not reach every stable matching. We ask whether full reachability is restored when agents on both sides may enter and exit repeatedly, with proposal-chain restabilization after each population change. It is not: a three-by-three marriage market has a stable matching that is unreachable from the empty active market along any such history restricted to terminal agents. We then allow temporary historical agents who are absent at the terminal date. For every target stable matching, we construct a target-dependent, preference-preserving augmentation and an admissible history that reaches it, with all temporary agents exiting before termination. The construction extends to many-to-one markets with responsive hospital preferences. Thus reachability depends on the admissible history class. Terminal-agent histories may select a proper subset of the stable set, whereas preference-preserving augmented histories recover the full stable set. When such augmented histories are admissible but past participants are unobserved, the terminal primitives alone do not exclude any stable matching. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.20176 |
| By: | Paul H. Y. Cheung; Zichang Wang |
| Abstract: | We study a setting in which an agent receives private information before choosing from a menu and anticipates hindsight scrutiny. Such scrutiny creates a motive for conservatism toward menu expansions. Our key axiom, conservatism, is a direct weakening of preference for flexibility: Adding an option is weakly beneficial whenever it leaves the menu's hindsight benchmark unchanged. Together with standard axioms, conservatism characterizes a scrutiny representation of preferences over menus in which the agent behaves as if she evaluates each menu by subtracting anticipated scrutiny from the material value of informed choice. Menu preference identifies a unique minimum pair of private information and scrutiny intensity, while incorporating subsequent stochastic-choice data pins down the actual pair. Applications to medical liability and corporate innovation illustrate the implications of our model for accountability design. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.28866 |
| By: | Claudia Cerrone; Yoan Hermstr\"{u}wer; Josu\'e Ortega |
| Abstract: | Roughly fifty thousand families in England appeal their school assignments each year through a centralized and understudied procedure that improves the placement of about one in five claimants. This paper shows that appeals are not an institutional afterthought: they change how parents report preferences to the education authority and the quality of placements it generates. Once the appeal stage is incorporated, Immediate Acceptance (IA) becomes less manipulable and can support equilibrium outcomes that Pareto dominate those of Deferred Acceptance (DA) under truth-telling, reversing the DA-IA welfare comparison. In a preregistered experiment, we find results consistent with the theoretical predictions: appeals increase truth-telling in IA, leaving DA essentially unchanged, and widen the IA-DA efficiency gap. Around 60% of the IA efficiency gain appears before any appeal is upheld, because subjects anticipating the possibility of a potential appeal rank schools differently. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.06865 |
| By: | Endre Cs\'oka |
| Abstract: | The VCG family and the AGV mechanism are two classical approaches to efficient implementation in the static social choice problem. In 2024, Cs\'oka et al. showed that AGV has critical weaknesses. In contrast, the transferable-utility Guaranteed Utility Mechanism (TU-GUM) retains all the standard desirable properties of AGV while adding further ones, including collusion-proofness, because it implements efficiency in Guaranteed Utility Equilibrium. TU-GUM also applies to a more general dynamic setting with multiple extensions. Moreover, TU-GUM is a special case of an even more general and robust mechanism that combines contingent first-price tendering with the coordinated execution of dynamic stochastic multi-agent projects through a surprisingly simple rule. This paper summarizes and connects existing results from a different perspective, with some minor new observations. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.28722 |
| By: | Andreas Kleiner; Benny Moldovanu; Philipp Strack; Mark Whitmeyer |
| Abstract: | We study multidimensional mean-preserving contractions (MPC) and their ex treme points. Proposition 1 focuses on extreme MPCs of a measure µ: each finitely supported extreme MPC ν induces a partition of X, the domain of µ, into convex sets such that the support of ν on each element of the partition is an affinely indepen dent set, and such that the restriction of ν on each element of the partition is itself an MPC of the restriction of the prior µ on that element. We apply our results to several questions concerning moment persuasion and categorization. In particular, we prove that categories and prototypes (key elements typically assumed to be exogenous in the classical literature on categorization) can endogenously emerge as outcomes of optimization when the decision maker faces limits on the amount of information that she can either acquire or process. |
| Keywords: | mean-preserving contractions, convex order, extreme points, Bayesian per suasion, information design, categorization |
| JEL: | C02 D82 D83 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_777 |
| By: | Sylvain Béal (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France); Emmanuelle Lebeuf (Université Marie et Louis Pasteur, F-25000 Besançon, France); Kevin Techer (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France) |
| Abstract: | We introduce a new allocation rule for network games that combines a local component and a global component. The local component depends only on the links incident to each player, whereas the global component allocates a surplus equally among the members of each connected component. We characterize this allocation rule by three classical axioms together with a new axiom, Fairness under Neighborhood Restriction, which requires that two adjacent players experience the same payoff variation when the network is restricted to their local neighborhoods, that is, to the sets of links incident to each player. We also examine an alternative allocation rule that differs only in its global component, distributing the surplus within each connected component in proportion to players’ degrees in the network. |
| Keywords: | Network games, Fairness under Neighborhood Restriction, Neighborhood Equal Surplus Division, axiomatic characterization |
| JEL: | C71 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:crb:wpaper:2026-08 |
| By: | Erik Ansink (Vrije Universiteit Amsterdam); Hans-Peter Weikard (Wageningen University) |
| Abstract: | We study ordered claims problems in which availability of a resource changes across positions according to a stationary linear transition structure. Our main motivating example is the allocation of river water with conveyance loss. Allocations assigned to agents at different positions have different implications for their feasibility and for resource requirements. We characterise a class of geometric allocation rules in which claims are weighted by a constant multiplicative factor along the ordering and then scaled to the feasibility boundary. We apply these rules to two settings that capture opposing transition effects. In river water allocation the geometric weighting factor balances proportional sharing with efficiency considerations that would favour upstream agents. In a setting of river pollution with pollution decay, a geometric rule balances equal access to pollution rights with a reduction of pollution damage when favouring upstream agents. |
| JEL: | C71 D63 Q25 |
| Date: | 2026–09–06 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260067 |
| By: | Laurenz Marstaller (University of Bonn) |
| Abstract: | This paper studies how platforms jointly choose fees and recommendations and their implications for fee regulation. A platform charges sellers a commission rate and ranks products based on price and match-value. The analysis shows that price-sensitive rankings intensify seller competition, allowing the platform to extract more surplus. Commission-rate caps constrain fees, but platforms may respond by making recommendations less price-sensitive, attenuating consumersurplus gains. By contrast, capped nominal fees can be more effective because they shift the platform’s incentives toward transaction volume rather than transaction value. Effective fee regulation must therefore account for how platforms adjust their recommendation policies in response. |
| Keywords: | Algorithm Design, DMA, Platform Regulation, Platforms, Recommendations, Search |
| JEL: | D43 D83 L13 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:430 |
| By: | Pham, Ngoc Anh |
| Abstract: | A funder divides a fixed budget between an equal baseline and a merit pool awarded through a contest on a measured signal. Applicants produce the signal with two efforts: research, which the funder values, and polishing, which only raises the measure. The two-effort contest reduces exactly to a one-effort contest governed by two numbers, the signal's cost and its research content, and the design problem runs on the gap between them. Better polishing technology strictly shrinks the optimal pool; costly scrutiny of proposals re-expands it, and full scrutiny is never optimal. Voluntary participation removes researchers first and retains polishers, so the equal baseline is what shelters the research-rich; a shortlist ranked on contest strength admits exactly the entrants that shrink the pool. The same structure appears wherever fixed money is split between a flat share and a contest on a measured signal that mixes valued production with measure-improving effort, from exam-based awards to merit pay and promotion tournaments. The rule is deterministic throughout: merit still decides who wins, and the design decides how much merit pays. |
| Keywords: | contests, grantsmanship, research funding, sharing rules, multitask incentives |
| JEL: | C72 D72 O38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qmsrps:202607 |
| By: | Amine Fahli; Alfred Galichon |
| Abstract: | Optimal transport provides a common language for allocation, equilibrium, computation, and inference. Its primal problem assigns mass or agents, while its dual variables admit economic interpretations as utilities, prices, and scarcity rents. This review explains why this combination has proved unusually effective in economics. We first present the core results, including Kantorovich duality, integrality, cyclical monotonicity, the canonical distance and quadratic costs, and entropic regularization. We then trace the field's development from planning and operations research to modern analysis, statistics, and computation. The economic literature is organized around two roles for transport: as a model of matching, trade, hedonic equilibrium, and aggregate assignment; and as a tool for coupling distributions, measuring discrepancies, constructing multivariate ranks, solving inverse problems, and certifying economic conclusions. We conclude by examining extensions beyond transferable utility, one-to-one matching, static allocation, and unconstrained transport, together with open questions involving learning and identification across multiple markets. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.06277 |
| By: | Alessandro Lizzeri; Yichuan Lou; Jacopo Perego |
| Abstract: | We compare verifiable and unverifiable communication in a sender–receiver setting with partially aligned preferences, where the sender knows more than what her evidence can prove. We identify a credibility–flexibility tradeoff: tying the sender’s claims to her evidence enhances her credibility, but limits how flexibly she can communicate when her evidence does not accurately reflect her private information. This tradeoff changes the economics of verifiable disclosure. When preferences are sufficiently aligned, full evidence disclosure is neither sustainable in equilibrium nor efficient. We show that verifiability facilitates communication when preferences are sufficiently misaligned, but hinders it when they are sufficiently aligned, suggesting that institutions that impose verification need not al- ways improve information transmission. Finally, we study how verifiable and unverifiable communication can complement one another when both are available: unverifiable communication can contextualize verifiable evidence when the latter is misleading. |
| JEL: | C72 D83 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35712 |
| By: | Jens-Uwe Franck; Martin Peitz |
| Abstract: | Digital platforms allocate scarce attention through rankings, recommendations, defaults, and prominence. This article develops the concept of recommendation power as the point of intersection between two established concepts: information power and intermediation power, which is the capability to actively steer user choice by a platform that is a bottleneck for effective access. We propose a taxonomy of the objectives that typically guide platforms’ recommendation design, distinguishing an independent-advice benchmark from fifteen other objectives that may motivate systematic departures from it, grouped into direct commercial and data objectives, indirect and strategic objectives, and objectives relating to influence, welfare, and integrity. We then analyze how the EU’s Digital Markets Act (DMA) constrains recommender design, though it does not regulate recommendation power as such. Through obligations on ranking and data and transparency duties as well as through its anticircumvention provisions, the DMA protects certain user choices and access rights from the exercise of recommendation power. |
| Keywords: | recommender systems, recommendation bias, ranking, self-preferencing, gatekeepers, Digital Markets Act, platform regulation, steering |
| JEL: | K21 L15 L40 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_781 |