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on Economic Design |
| By: | Federico Bobbio; Randall A. Berry; Michael L. Honig; Thanh Nguyen; Vijay G. Subramanian; Rakesh V. Vohra |
| Abstract: | The radio spectrum suitable for commercial wireless services is limited. A portion of the radio spectrum has been reserved for institutions using it for non-commercial purposes such as federal agencies, defense, public safety bodies and scientific institutions. In order to operate efficiently, these incumbents need clean spectrum access. However, commercial users also want access, and granting them access may materially interfere with the existing activity of the incumbents. Conventional market based mechanisms for allocating scarce resources in this context are problematic. Allowing direct monetary transfers to and from public or scientific institutions risks distorting their non-commercial mission. Moreover, often only the incumbent knows the exact value of the interference it experiences, and, likewise, only commercial users can predict accurately the expected monetary outcome from sharing the resource. Thus, our problem is to determine the efficient allocation of resources in the presence of private information without the use of direct monetary transfers. The problem is not unique to spectrum. Other resources that governments hold in trust share the same feature. We propose a novel mechanism design formulation of the problem, characterize the optimal mechanism and describe some of its qualitative properties. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.21793 |
| By: | Dipankar Das |
| Abstract: | Traditional auction theory posits that bid value exhibits a positive correlation with the probability of securing the auctioned object in ascending auctions. However, under uncertainty and incomplete information, as is characteristic in real-time advertising markets, truthful bidding may not always represent a dominant strategy or yield a Pure Strategy Nash Equilibrium. Real-Time Bidding (RTB) platforms operationalize impression-level auctions via programmatic interfaces, where advertisers compete in first-price auction settings and often resort to bid shading, i.e., strategically submitting bids below their private valuations to optimize payoff. This paper empirically investigates bid shading behaviors and strategic adaptation using large-scale RTB auction data from the Yahoo Webscope dataset. Integrating Minority Game Theory with clustering algorithms and variance-scaling diagnostics, we analyze equilibrium bidding behavior across temporally segmented impression markets. Our results reveal the emergence of minority-based bidding strategies, wherein agents partition hourly ad slots into submarkets and place bids strategically where they anticipate being in the numerical minority. This strategic heterogeneity facilitates reduced expenditure while enhancing win probability, functioning as an endogenous bid shading mechanism. The analysis highlights the computational and economic implications of minority strategies in shaping bidder dynamics and pricing outcomes in decentralized, high-frequency auction environments. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.15717 |
| By: | Juan Pereyra; Eduardo Duque-Rosas; Juan Pablo Torres-Martínez |
| Abstract: | The student-optimal stable mechanism (DA), the most popular mechanism in school choice, is the only one that is stable and strategy-proof. However, when DA is implemented, a student can change the schools of others without changing her own. We show that this drawback is limited: a student cannot change her schoolmates while remaining in the same school. We refer to this new property as local non-bossiness and use it to provide a new characterization of DA that does not rely on stability. Furthermore, we show that local non-bossiness plays a crucial role in providing incentives to be truthful when students have preferences over their colleagues. As long as students first consider the school to which they are assigned and then their schoolmates, DAinduces the only stable and strategy-proof mechanism. There is limited room to expand this preference domain without compromising the existence of a stable and strategy-proof mechanism. |
| Keywords: | School Choice, Local Non-bossiness, Student-optimal stable mechanism, Preferences over Colleagues |
| JEL: | D47 C78 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:mnt:wpaper:2510 |
| By: | Tomás Peruchin (Department of Economics, Universidad de San Andrés) |
| Abstract: | This thesis examines the design of petroleum exploration and production (E&P) rights auctions in Argentina, emphasizing the theoretical and policy implications of President Milei’s 2024 Ley Bases reform to Hydrocarbon Law 17, 319, which introduced royalty bidding as an alternative to the prevailing investment-commitment framework.The study develops a Bayesian auction model in which firms, facing incomplete information, compete after receiving noisy private signals regarding the tract’s underlying value. Two mechanisms are examined: (i) work-commitment bidding, where competition is based on the scale of exploration and production expenditures under a flat royalty; and (ii) royalty bidding, where firms bid a royalty rate rather than committing to a fixed investment level.The symmetric Bayesian Nash equilibrium is characterized by numerically solving coupled integro-differential equations, calibrated to the specific conditions of Argentina’s hydrocarbon sector.The analysis reveals a key policy trade-off: royalty bidding enhances government rent capture but exposes the state to greater fiscal volatility, whereas work-commitment schemes provide more stable, though typically smaller, revenue flows, limiting the upside from high-quality tracts. |
| Keywords: | Auction of Natural Resources; Bayesian Nash Equilibrium; Petroleum Contract Design; Oil and gas E&P rights; Fiscal Regimes in Extractives; Resource Rent Capture. |
| JEL: | D44 D82 H21 Q35 Q38 Q47 Q48 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:sad:ypaper:20 |
| By: | Georgalos, Konstantinos (Department of Economics, Lancaster University Management School); Gonçalves, Ricardo (Católica Porto Business School, Universidade Católica Portuguesa); Ray, Indrajit (Economics Section, Cardiff Business School, Cardiff University); SenGupta, Sonali (Department of Economics, Queen’s Business School, Queen’s University Belfast) |
| Abstract: | This paper reports results from a laboratory experiment on a continuous Japanese-English auction in a common-value ‘wallet game’. The main objective is to test whether bidders follow the equilibrium bidding strategy predicted by theory. We find systematic deviations from equilibrium behaviour: instead of bidding according to the Nash equilibrium, subjects appear to rely on expected value (EV) bidding. As a consequence, observed auction prices are higher than the theoretical benchmark, and the winner’s curse occurs in a substantial fraction of auctions. We analyse bidding behaviour in detail and discuss the implications of our findings |
| Keywords: | Japanese-English auction (JEA); Wallet game; Continuous bids; Winner’s curse; Expected value bidding |
| JEL: | C72 C91 C92 D63 D83 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2025/25 |
| By: | Rodney Garratt; Morten Linnemann Bech; Marko Nanut Petric; Caner Ates |
| Abstract: | This paper introduces a novel liquidity-saving mechanism (LSM) for real-time gross settlement (RTGS) systems based on an auction framework. Unlike conventional queue-based LSMs that optimise payment netting given pre-committed liquidity, the proposed mechanism reverses the process by eliciting bids from participants to establish mutually beneficial liquidity-sharing arrangements. These arrangements are supported through side payments from liquidity receivers to liquidity providers, ensuring incentive alignment. The mechanism is evaluated using agent-based simulations calibrated with transaction data from four RTGS systems: BCRP-RTGS (Peru), SAMOS and SADC-RTGS (South Africa), and SIC (Switzerland). Across all trials, auction success rates averaged 79% (ranging from 62 to 100%). These success rates were sufficiently high that observed failures typically did not increase liquidity usage. Overall, the findings demonstrate the importance of side payments in coordinating participant incentives, reveal the trade-off between liquidity efficiency and settlement delay, and highlight the potential of auction-based LSM designs to enhance RTGS system efficiency. |
| Keywords: | payment system, liquidity savings mechanism (LSM), real-time gross settlement (RTGS) system, auctions |
| JEL: | G21 C72 D44 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1318 |
| By: | Dongkyu Chang (City University of Hong Kong); Duk Gyoo Kim (Yonsei University); Wooyoung Lim (The Hong Kong University of Science and Technology) |
| Abstract: | In the standard dynamic screening problem between an uninformed seller and a privately informed buyer, theory suggests that the presence (absence) of the buyer's outside option leads to a substantial surplus for the seller (buyer). This outcome arises from contrasting unraveling processes that theory predicts: negative selection occurs in the absence of an outside option, while positive selection occurs in the presence of it. We examine the validity of these contrasting unraveling processes and report laboratory data that qualitatively deviate from theoretical predictions. We found that the seller's profit ranking was reversed between the two environments. In particular, in the presence of an outside option, the buyer frequently rejected current-round offers, leading to pervasive delays; and the seller's reported beliefs about the buyer's type were qualitatively more consistent with the negative selection than with the theoretically predicted positive selection. |
| Keywords: | Positive Selection, Outside Options, Laboratory Experiments |
| JEL: | C78 C91 D03 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-272 |
| By: | Hawkins, Isobel; Gao, Shuo; Kim, Youngho; Teytelboym, Alexander; Bull, Joseph W.; Maron, Martine; Milner-Gulland, E.J.; Kate, Kerry ten; Theis, Sebastian; zu Ermgassen, Sophus |
| Abstract: | The global community has committed to a substantial increase in the scale of investment in nature via Target 19 of the Kunming-Montreal agreement. An important but understudied mechanism for attracting private investment into biodiversity outcomes is conservation compensation funds – funds that aggregate payments to compensate for negative impacts on biodiversity to contribute to strategic objectives. We described the principles of effective compensation funds based on economic and ecological theory, and assembled by far the largest database of operational compensation funds to date (32 funds across 17 countries) through a mixed methods review. We explored the variety of practice in real-world implementation, and how empirical practice compares to theory, highlighting key gaps. In doing so, we provided a guide to the design of ecologically effective compensation funds, a hitherto understudied but potentially substantial source of investment for biodiversity outcomes. |
| Date: | 2025–12–24 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:fbqms_v1 |
| By: | Khanna, Shefali |
| Abstract: | Market-based instruments like carbon pricing are increasingly being adopted in developing countries to mitigate carbon emissions. However, institutional features such as long-term electricity contracts and regulated tariffs may mute their effectiveness. I explore this question in the context of the electric power sector in India, where electricity is transacted primarily via long-term bilateral contracts and state-owned distribution utilities self-schedule contracted power plants to meet their demand. The absence of a centralized and dynamic market-based economic dispatch mechanism generates short-run misallocation in electricity dispatch and distorts long-run investment decisions, such as the incentive to invest in flexible generation capacity and energy storage to complement renewable-based capacity. Using panel data on coal price schedules and monthly plant-level operations from 2012 to 2020, I construct a predicted delivered coal price index to estimate the elasticity of plant utilization with respect to fuel prices. I find that the demand for electricity from coal-fired power plants with a higher share of capacity allocated under long-term bilateral contract(s) is less sensitive to changes in coal prices, implying that the existing market design could erode some of the environmental benefits of carbon pricing. |
| Keywords: | regulated industries; utilities; energy demand; energy markets |
| JEL: | R14 J01 |
| Date: | 2025–12–12 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129494 |
| By: | Juan Dubra; Rob Waiser; Jean-Pierre Benoit |
| Abstract: | Employee burnout has long plagued firms. The prevalence of burnout shows that work-related effort is not only costly in the present but has carryover effects into the future. We incorporate this ‘effort cost spillover’ into a dynamic, two- period principal-agent model, where the worker’s effort cost in the second period increases in both their second-period and first-period efforts. We use this model to explore optimal compensation design and the connection between incentives, burnout, and turnover. Naturally, turnover may occur if it is easy to replace workers, or if firms fail to account for burnout when designing contracts. However, we show that even when turnover is very costly, and firms and workers properly understand effort cost spillover, the firm’s equilibrium strategy may be to offer high-powered incentives that induce workers to work so hard that they exit (i.e. reject any contract that the firm would offer) in the next period. Workplace measures that reduce spillover, such as flexible work arrangements, can limit turnover and improve profits dramatically. Committing to contracts for both periods in advance can also limit turnover (at the cost of reduced flexibility). |
| Keywords: | compensation, incentives, dynamic games, burnout, agency theory |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:mnt:wpaper:2512 |
| By: | I. Sebastian Buhai |
| Abstract: | We develop a continuous-time model of reputational disclosure in directed networks of biased intermediaries with career concerns. A payoff-relevant fundamental follows a diffusion and a decision maker chooses actions to track it. Experts obtain verifiable signals that reach the decision maker only if relayed by intermediaries. Intermediaries choose whether to forward evidence and an observable disclosure clock that controls the arrival rate of disclosure opportunities. Because clocks are public, silence is state dependent: when the clock is on, delay is informative and reputationally costly; when it is off, silence is mechanically uninformative. Disclosure becomes a real option on reputational capital. Along any expert-decision maker path, Markov perfect Bayesian equilibria are ladder policies with finitely many posterior cutoffs, and clock-off windows eliminate knife-edge mixing. With sufficiently high reputational stakes and low discounting, dynamic incentives rule out persistent suppression and guarantee eventual transmission of all verifiable evidence along the path, even when bias reversals block static unraveling. We then study network design and formation. Absent the high-reputation regime, among trees exactly the bias-monotone ones sustain disclosure. Under homogeneous reputational intensities the bias-ordered line is dynamically optimal; with heterogeneous intensities, optimal design screens by topology, placing high-reputation intermediaries on direct parallel routes rather than in series. In an endogenous link-formation game, pairwise stable networks can be inefficiently sparse or redundantly dense because agents ignore the option-value externalities their links create or destroy for others' reputational assets. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22987 |