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on Economic Design |
| By: | Jerry Anunrojwong |
| Abstract: | We study prior-independent auction design when bidder values are independently and identically distributed and the seller knows only a scale-invariant shape restriction on their distribution, but neither the distribution nor the scale of values. We show that the maximin problem over a broad class of dominant-strategy incentive-compatible mechanisms reduces without loss to scale-free mechanisms. For any $n\ge 2$ monotone-hazard-rate bidders, the second-price auction without a reserve is maximin optimal over this class, including randomized mechanisms that may allocate to a lower bidder. We derive its exact guarantee for every $n$ and the sharp exponential rate at which its loss relative to the Bayesian optimum vanishes. Many familiar auctions are standard: they allocate only to a highest bidder, although incentive compatibility does not require this. For two regular bidders, we solve the standard problem exactly: its optimal mechanism mixes the second-price auction with a relative-markup auction and achieves a worst-case ratio of approximately $0.524413$. We construct a nonstandard mechanism that sometimes allocates to the lower bidder and achieves approximately $0.524829$, proving that standardness is strictly costly. The contrast is driven by tail restrictions: monotone hazard rate makes lower-rank allocation unhelpful, whereas regularity permits it to improve worst-case revenue. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.02479 |
| By: | Boyu Liu; Wei Tang; Zihe Wang; Shuo Zhang |
| Abstract: | Classic results show that even an arbitrarily small correlation across bidders' information can enable full surplus extraction in auctions and related mechanism design settings. Motivated by this fragility, we study the information independence in a second-price auction when the seller commits to a private private information structure, meaning bidders' signals are independent ex ante, while bidders share a symmetric and arbitrarily correlated prior distribution over their valuations. We first show that the seller optimal efficient outcome with full surplus extraction can always be implemented by a private private information structure that admits a Bayes Nash equilibrium. However, this equilibrium may not be stable. We then further construct a private private information structure that achieves revenue arbitrarily close to maximum welfare while admitting a strict equilibrium. At the same time, we establish an impossibility result: under private private information, in general, bidder surplus cannot achieve maximal welfare exactly, and we characterize necessary and sufficient conditions on the prior distribution under which bidder surplus can be made arbitrarily close to maximal welfare. We finally explore which other efficient outcomes are achievable under private private information. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.24530 |
| By: | Sanyyam Khurana (Ashoka University) |
| Abstract: | Consider a finite set of potential bidders for the sale of an indivisible object where every bidder has an outside option. Bidders have private information about the object’s value and their outside option which are drawn from two different probability distributions. Every bidder participates in the auction if and only if their value for the object is larger than their outside option, which leads to uncertain number of participants. The seller imposes a floor on the number of participating bidders in order to conduct an auction. If the floor is not met, the auction is canceled. We show that if either the value distribution is strengthened or the outside option distribution is weakened, the bidders raise their bids. We also show that the bidders raise their bids due to the imposition of a floor. |
| Date: | 2026–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:ash:wpaper:168 |
| By: | Barkley, Aaron; Genesove, David; Hansen, James |
| Abstract: | This paper concerns how trade mechanism choice affects how decentralized markets respond to shocks and policy choices. We consider this issue in the context of housing market search. We pose a dynamic search model in which agents can trade by auction or negotiation, both featuring two-sided incomplete information. We apply the model to housing data, estimating buyer and seller value distributions using a structural auction model, primitives that are used in solving for the search model equilibrium. Adding auctions as a second mechanism dampens the shock response of prices and values as agents optimally switch between mechanisms. We also find that policies that increase seller information disclosure at one mechanism can nonetheless benefit sellers and harm buyers, at odds with their intended purpose. Our estimates also highlight how mechanism efficiency assumptions influence search cost inference, with estimated seller negotiation search costs significantly lower under Nash bargaining than incomplete information. |
| Keywords: | Auctions; Price determination |
| JEL: | C78 D44 D47 D83 R21 R31 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19262 |
| By: | Charles Po-Cheng Huang |
| Abstract: | Merit-based scholarships are widely used to attract high-achieving students, but do they guarantee an improvement in the merit of a university's student pool? We study this question in centralized college admissions using a matching with contracts framework. We first introduce the scholarship choice rule, which processes scholarship levels from highest to lowest and selects the highest-merit students at each level. We show that scholarship feasibility, scholarship maximality, and no justified envy uniquely characterize this rule. We further characterize the student-proposing deferred-acceptance mechanism based on this rule as the unique mechanism, up to outcome equivalence, satisfying the extensions of the three axioms, together with individual rationality, and strategy-proofness. We then study the welfare effects of scholarship provision. In general matching markets, a university may be matched with lower-merit students after introducing a scholarship. Finally, when all schools use the scholarship choice rule and every student is eligible for every scholarship level a school offers, we show that a common merit ranking is necessary and sufficient for scholarship provision to guarantee, for every student-preference profile satisfying within-school monotonicity, a weak improvement in the scholarship-providing school's student pool. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.08136 |
| By: | Nicholas Teh |
| Abstract: | We study whether strictly positive marginal values restore the compatibility of envy-freeness up to one good (EF1) and Pareto optimality (PO) for indivisible goods. For two agents, we identify the exact threshold in the number of goods. Every instance with at most seven goods and strictly increasing valuations admits an allocation that is both EF1 and PO, without any submodularity assumption. In contrast, we construct an eight-good instance with normalized, integer-valued, strictly increasing, submodular valuations in which every EF1 allocation is strictly Pareto dominated. Thus, eight goods are necessary and sufficient for a two-agent counterexample. Finally, we strengthen the three-agent NP-hardness result of Chandramouleeswaran and Nimbhorkar (2026): deciding whether an EF1 and PO allocation exists remains NP-hard for normalized, integer-valued, monotone submodular valuations even when zero marginals are confined to eight fixed agent-good pairs, all involving a single agent. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.23367 |
| By: | Josue Ortega; Geng Zhao; Gabriel Ziegler |
| Abstract: | We study the expected average rank achieved by the Efficiency-Adjusted Deferred Acceptance (EADA) mechanism in i.i.d.\ matching markets. While student-proposing Deferred Acceptance gives students an expected average rank of logarithmic order, we prove that EADA's expected average rank is at most $4\log\log n+O(1)$. Therefore, EADA improves the asymptotic order of students' assignments. At the cost of a weaker bound, $O((\log\log n)^2)$, we extend this conclusion to a much larger class of mechanisms. Namely, every Pareto-efficient mechanism that weakly Pareto-dominates DA breaks DA's logarithmic barrier. These are the first asymptotic guarantees for the expected average rank of EADA and of the broader class of Pareto-efficient improvements of DA. The conclusions extend to many-to-one markets with bounded quotas and random markets with correlated preferences. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.09984 |
| By: | Meina Takahashi |
| Abstract: | We extend the concept of priority-neutral matching, introduced by Reny (2022) in the school choice context, to the roommate problem. We prove three main results. First, a blocking-neutral matching always exists in constrained roommate problems under arbitrary feasibility constraints (Theorem 1). Second, the set of stable matchings is contained in the set of blocking-neutral matchings, which in turn is contained in the set of Pareto-optimal matchings (Theorem 2). Third, whenever stable matchings exist, the set of blocking-neutral matchings coincides with the set of stable matchings (Theorem 3). We also show that existence fails under weak preferences and extend the concept to two-sided school choice. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.11682 |
| By: | Benkert, Jean-Michel; Schmutzler, Armin |
| Abstract: | This paper investigates the value of recommendations for disseminating economic information, with a focus on frictions resulting from preference heterogeneity. We consider Bayesian expected-payoff maximizers who receive non-strategic recommendations by other consumers. The paper provides conditions under which different consumer types accept these recommendations. Moreover, we assess the overall value of a recommendation system and the determinants of that value. Our analysis highlights the importance of disentangling objective information from subjective preferences when designing value-maximizing recommendation systems. |
| Keywords: | Optimal design |
| JEL: | D02 D47 D83 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19410 |
| By: | Hiroaki Odahara (Market Design Center, Graduate School of Economics, The University of Tokyo; Graduate School of Informatics and Engineering, The University of Electro-Communications) |
| Abstract: | Pay-to-bid auctions charge participants before allocation and therefore make losing-side payments vulnerable to seller intervention. This paper introduces targeted-loss exposure, a stress test that records a designated bidder's payment when one rival's equilibrium report is fixed at an arbitrarily high level while her type distribution is preserved. Under nonnegative payments and an ordering in which a winner pays at least as much as a loser, revenue equivalence yields a sharp two-bidder bound attained by the silent war of attrition. For any number of bidders, the same format attains the upper bound among payment-ordered rank-local rules. The proof formulates payment location as a linear program and constructs a dual probability measure. With more than two bidders, complementary slackness determines the optimal loser-payment schedule almost everywhere. Winner-pay auctions have zero exposure, standard all-pay auctions lie strictly below the frontier, and frontier exposure decreases as the number of bidders rises. A loser-only rule shows that removing payment ordering can make exposure unbounded. A common-shock extension also shows that anticipating intervention changes bids but preserves the ordering of standard formats. The results separate the total interim payment fixed by revenue equivalence from the winning or losing state to which that payment is attached. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.29518 |
| By: | Federico Vaccari |
| Abstract: | This paper studies how much public information is needed to implement efficient trade in dynamic markets with privately informed sellers and buyers. An institution compares a certified statistic of market composition with the statistic implied by agents' reports. Truthful reporting is supported when the statistic changes after every unilateral change in reported type. When all market compositions are possible, the least number of public announcements is {K, L}, where K is the number of seller qualities and L the number of buyer types. The certificate must rely on information outside the reports it checks. The paper also shows that information sufficient to discipline reports need not coordinate buyers across limited capacity. Posted-price implementation may require certified capacities and a clearing rule. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.19140 |
| By: | Josue Ortega |
| Abstract: | Immediate Acceptance (IA, also known as the Boston mechanism) is commonly used to assign students to schools because it produces a Pareto-efficient matching if parents report their preferences over schools truthfully, unlike student-proposing Deferred Acceptance (DA). In this paper, we ask: does IA produce meaningfully better average ranks than DA, conditional on truth-telling? We show that, in i.i.d. one-to-one random markets, IA's expected average rank is asymptotically $\log n$, just like DA's. Therefore, IA's Pareto efficiency does not translate into a first-order improvement in expected average rank. This conclusion extends to variations of IA as well as to many-to-one markets. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.24970 |
| By: | Deniz Kattwinkel; Alexander Winter |
| Abstract: | A principal must decide whether to implement a project. She privately knows the cost, an agent privately knows the benefit. Monetary transfers are not available, and compared to the principal, the agent does not fully internalize the cost. We show that the principal-optimal mechanism does not require the agent to report. Instead, it either ignores the agent or endows the agent with free information and full decision authority. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.09409 |
| By: | Carnehl, Christoph; Ottaviani, Marco; Preusser, Justus |
| Abstract: | This paper overviews the economics of scientific grants, focusing on the interplay between the inherent uncertainty in research, researchers’ incentives, and grant design. Grants differ from traditional market systems and other science and innovation policy tools, such as prizes and patents. We outline the main economic forces specific to science, noting the limited attention given to grant funding in the economics literature. Using tools from information economics, we identify key incentive problems at various stages of the grant funding process and offer guidance for effective grant design. In the allocation stage, funders aim to select the highest-merit applications while minimizing evaluation costs. The selection rule, in turn, impacts researchers’ incentives to apply and invest in their proposals. In the grant management stage, funders monitor researchers to ensure efficient use of funds. We discuss the advantages and potential pitfalls of (partial) lotteries and emphasize the effectiveness of staged grant design in promoting a productive use of grants. Beyond these broadly applicable insights, our overview highlights the need for further research on grantmaking. Understudied areas include, at the micro level, the interplay of different grant funding stages, and at the macro level, the interaction of grants with other instruments in the market for science. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19235 |
| By: | Maria-Florina Balcan; Tejas Pagare; Karan Singh |
| Abstract: | Motivated by modern marketplaces, where the platform or the seller routinely gathers detailed user profiles, we study a novel learning theoretic model that simultaneously involves information and mechanism design. Specifically, we consider the economic setting recently introduced by Bergemann et al. (2022), where in addition to the menu of quality-price pairs, the seller offers information on the value of the match between product quality and buyer's taste via a signaling scheme. We relax the assumption that the seller knows the buyers' belief about the distribution of tastes and study the sample requirements of designing a revenue maximizing scheme. We consider both the batch setting where we have access to data from a set of i.i.d. buyers and an online demand query model where we observe the buyers' behaviors to seller's schemes. Despite the apparent non-convexity of the problem, we also give the first FPTAS to compute a scheme that maximizes the revenue within an arbitrarily small additive loss, which was left open by Bergemann et al. (2022). Overall, this brings a new learning perspective in asymmetric economic settings where buyers and sellers know different types of information. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.16699 |
| By: | Thomas Daske (Technical University of Munich, TUM School of Management) |
| Abstract: | We ask which welfare judgments can be institutionalized without incentive costs when agents' material and distributive preferences are private information. A policy rule is de_nitely implementable if it is implementable under arbitrary variation in the distribution of types: the normative end remains _xed, while the institutional means|the transfer scheme|may adjust to the distribution. We interpret an ex post budget imbalance, if required for de_nite implementation, as an incentive cost: it entails external subsidies or resource destruction. We _nd that a policy rule is costless only if it locally admits a welfare representation as aggregate material surplus plus a relational component. Every such relational component must obey a common normative grammar. A substantive subclass satisfying this grammar is globally attainable. Costlessness thus disciplines welfare evaluation without eliminating normative choice. We illustrate this normative freedom through three relational welfare judgments in public-good provision: political restraint, subsidiarity, and minority protection. |
| Keywords: | implementation theory, definite implementation, ex post budget balance, interpersonal preferences, material utilitarianism, relational welfare judgments |
| JEL: | D82 D63 D64 D61 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:aiw:wpaper:51 |
| By: | Vilok Taori |
| Abstract: | A principal seeks to allocate $k$ identical objects among n sequentially arriving, impatient agents. Each agent privately observes her valuation, and the principal's payoff from allocating an object depends on the recipient's valuation. The principal can perfectly verify the valuation of at most $m$ agents, where $m |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.10478 |
| By: | Terence Highsmith |
| Abstract: | I model balanced task allocation where tasks stochastically arrive and must be matched to a fixed set of agents; the novel constraint is that agents must receive allocations that require the same level of average effort. Social work supervisors, call center managers, and courts all rotate allocation across workers to satisfy this constraint, but the Rotation mechanism is not Pareto efficient. I design the Dynamic Pseudomarket (DPM) mechanism, and it satisfies Pareto efficiency and asymptotic balance. I derive an explicit equation characterizing DPM's expected productivity gain over Rotation that can be estimated only from aggregate statistics in firm-level data. Simulation results indicate large average productivity gains. These results indicate that preference-based allocation can Pareto dominate the status quo. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.23222 |
| By: | Takashi Kunimoto (School of Economics, Singapore Management University); Cuiling Zhang (School of Economics, Singapore Management University) |
| Abstract: | We identify the ex ante welfare (EAW) condition as a necessary requirement to implement ex post efficient bilateral trade in any finite type space with interdependent values and correlated beliefs. As these finite settings become finer to approximate a continuous type space, we derive a limit EAW condition by taking the EAW condition in finite settings to its limit. We show that this limit condition trivially holds in the benchmark continuous setting admitting a full-support density function. We then insist on locally robust implementation by requiring efficient trade to be implemented uniformly across all finite type spaces that approximate the benchmark continuous type space. Our main result shows that under high interdependence, locally robust implementation of efficient trade is impossible. We thus show that the negative results of Myerson and Satterthwaite (1983) and Fieseler, Kittsteiner, and Moldovanu (2003) under independent beliefs can also emerge as the robust limit of discrete environments even when beliefs are correlated. |
| Keywords: | bilateral trade; the ex ante welfare condition; interdependence; correlation. |
| JEL: | C72 D78 D82 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:ris:smuesw:023538 |
| By: | Chandio, Rabail; Lence, Sergio; Zhang, Wendong |
| Abstract: | Farmland auctions are widely used, particularly for high-quality parcels, yet their effect on sale price remains unclear. Using detailed transaction data, we show that although higher-quality ground is more likely to be sold via auction, auctions are associated with lower prices on average after controlling for observable characteristics. We reconcile this apparent contradiction by demonstrating that auction performance is highly dependent on land quality: auctions perform relatively well for higher and homogeneous quality, easily observable parcels but generate worse outcomes for lower-quality or more ambiguous land. These findings highlight that auctions are not universally “effective”, but instead operate as a context-dependent sales mechanism shaped by the underlying characteristics of the asset. |
| Keywords: | Agricultural Finance, Farm Management |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404337 |
| By: | Daske, Thomas |
| Abstract: | We ask which welfare judgments can be institutionalized without incentive costs when agents’ material and distributive preferences are private information. A policy rule is definitely implementable if it is implementable under arbitrary variation in the distribution of types: the normative end remains fixed, while the institutional means - the transfer scheme - may adjust to the distribution. We interpret an ex post budget imbalance, if required for definite implementation, as an incentive cost: it entails external subsidies or resource destruction. We find that a policy rule is costless only if it locally admits a welfare representation as aggregate material surplus plus a relational component. Every such relational component must obey a common normative grammar. A substantive subclass satisfying this grammar is globally attainable. Costlessness thus disciplines welfare evaluation without eliminating normative choice. We illustrate this normative freedom through three relational welfare judgments in public-good provision: political restraint, subsidiarity, and minority protection. |
| Keywords: | implementation theory, definite implementation, ex post budget balance, interpersonal preferences, material utilitarianism, relational welfare judgments |
| JEL: | D82 D63 D64 D61 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:342974 |
| By: | Georgy Artemov; Siqi Pan |
| Abstract: | We study, theoretically and experimentally, how transparency about students' priorities and admission chances shapes their incentives to acquire information about their own preferences in school choice and college admissions. In the model, uninformed students choose schools based on a common prior. When they learn their own preferences, their choices become more heterogeneous, which frees up seats at popular schools. Students who know they have high priority have stronger incentives to learn because they can more readily act on what they learn, whereas students who know they have low priority are discouraged. Full priority disclosure concentrates learning among high-priority students. By pooling priorities, partial disclosure spreads learning incentives to pooled students and yields higher welfare. In the laboratory, however, full disclosure yields the highest welfare instead, followed by partial disclosure, and then no disclosure, because greater transparency improves subjects' understanding of the strategic environment, leading to fewer mistakes. These findings support full disclosure of priorities or admission chances to guide information acquisition. However, deviations in learning remain even under greater priority transparency, partly because subjects respond suboptimally to admission chances when these are provided directly rather than inferred. Students' ability to interpret and use them is therefore itself a policy concern. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.20698 |
| By: | Xiaohui Bei; Felix Brandt; Matthias Greger; Jannik Peters; Erel Segal-Halevi; Warut Suksompong |
| Abstract: | We consider the problem of aggregating $n$ individual distributions over $m$ alternatives into a collective distribution, also known as budget aggregation. Existing fairness notions in this literature typically do not guarantee fairness to individual agents. To address this, we define two versions of individual fair share guarantees. We show that when agents' utilities are derived from $\ell_t$ metrics for any $t\geq 1$, both these guarantees can be satisfied along with Pareto efficiency, and the corresponding distributions can be computed in polynomial time. On the other hand, for $\ell_1$ utilities, we prove that Pareto efficiency, strategyproofness, and a very weak fairness notion called single-minded positive share are not always compatible for $n, m \ge 3$. For smaller parameters, we provide rules that satisfy these three axioms. We also establish similar impossibility results for $\ell_2$ utilities. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.01228 |
| By: | Masaki Miyashita |
| Abstract: | This paper uncovers general properties of optimal information structures by exploiting a linear-programming formulation of information design. A critical observation is that an optimum can be found as ``sparse, '' i.e., many coordinates of the action-state joint distribution are zero. This implies that, once part of an action-state profile is fixed, there is limited room for the remaining part to fluctuate. As a result, agents' action recommendations are conditionally deterministic in many states, or correlated in a way that allows some agents to infer others' recommendations. The implications of sparsity are illustrated in an adoption problem, where the designer maximizes the number of adopters of an innovation that features network effects. The optimal information structure deterministically recommends full adoption in high states, while it randomizes over nested action profiles in low states, so that whenever an agent is recommended to adopt, she is certain that more optimistic agents also adopt. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.00729 |
| By: | Itai Ashlagi; Joseph Root |
| Abstract: | We study two observable queues with identical service rates, serving agents who arrive stochastically over time. Agents join the queue that minimizes their expected waiting time. Assuming one queue uses the ubiquitous First-Come-First-Served (FCFS) service rule, we show that by simply modifying its service order, the other queue can capture a strict majority of the demand. We establish an upper bound on the arrival share any rule can capture against FCFS. When both queues can design their service order, we show a novel variant of Last-Come-First-Served (LCFS) is an equilibrium in a low congestion regime. Without commitment, the picture changes, and there is an equilibrium where both queues use FCFS, and agents route to the queue with the shorter waitlist. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.11710 |