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on Economic Design |
| By: | Dirk Bergemann; Tibor Heumann; Stephen Morris |
| Abstract: | How should a buyer design procurement mechanisms when suppliers' costs are unknown, and the buyer does not have a prior belief? We demonstrate that simple mechanisms - that share a constant fraction of the buyer utility with the seller - allow the buyer to realize a guaranteed positive fraction of the efficient social surplus across all possible costs. Moreover, a judicious choice of the share based on the known demand maximizes the surplus ratio guarantee that can be attained across all possible (arbitrarily complex and nonlinear) mechanisms and cost functions. Similar results hold in related nonlinear pricing and optimal regulation problems. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.09129 |
| By: | Christian Basteck; Ulysse Lojkine |
| Abstract: | In a strategy-proof mechanism, the influence of an agent may be measured as the set of outcomes an agent can bring about by varying her (reported) type. More specifically, we refer to an agent's influence on her own relevant outcomes as her freedom, and to the influence on outcomes relevant for other agents as her power over others. The framework generalises both the notion of opportunity set from the freedom of choice literature, and established power indices for binary voting. It identifies constrained efficient mechanisms as those that maximise agents' freedom. Applying our framework to the analysis of assignment rules, we provide novel characterisations of the top trading cycles rule and bipolar serial dictatorships in terms of their freedom and power properties. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10112 |
| By: | Abhimanyu Nag |
| Abstract: | We study Sybil manipulation in BRACE, a competitive equilibrium mechanism for combinatorial exchanges, by treating identity creation as a finite perturbation of the empirical distribution of reported types. Under standard regularity assumptions on the excess demand map and smoothness of principal utilities, we obtain explicit linear bounds on price and welfare deviations induced by bounded Sybil invasion. Using these bounds, we prove a sharp contrast: strategyproofness in the large holds if and only if each principal's share of identities vanishes, whereas any principal with a persistent positive share can construct deviations yielding strictly positive limiting gains. We further show that the feasibility of BRACE fails in the event of an unbounded population of Sybils and provide a precise cost threshold that ensures disincentivization of such attacks in large markets. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10203 |
| By: | Kühn, Sarah (Center for Mathematical Economics, Bielefeld University); Duman, Papatya (Center for Mathematical Economics, Bielefeld University); Hoyer, Britta (Center for Mathematical Economics, Bielefeld University); Streck, Thomas (Center for Mathematical Economics, Bielefeld University); Stroh-Maraun, Nadja (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | Preferences are central to matching markets, yet experiments typically rely on induced preferences that may not reflect real-world decision-making. We examine how induced versus non-induced preferences shape behavior in matching experiments, extending Chen and Sönmez (2006). Using the most frequently used school choice mechanisms (Boston, Deferred Acceptance, and Top Trading Cycles), we supplement monetary incentives with participants’ own preferences. Our results show that preference induction systematically affects truthful reporting and comprehension of mechanisms. These findings underscore that experimental design choices matter for the validity of behavioral insights and have direct implications for policy evaluation. |
| Keywords: | Non-induced Preferences, Experiments, Matching, School Choice |
| Date: | 2025–12–10 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:758 |
| By: | Pietro Salmaso; Bernardo Moreno; Dolors Berga |
| Abstract: | We assume that a finite set of alternatives can be described by an ordered set of characteristics and offer a general version of lexicographicity that incorporates the possibility that agents' preferences over characteristics are not separable (the desirability of a characteristic does not depend on other characteristics). We first characterize all strategy-proof rules as a family of sequential rules by committees, with the particularity that the committee used in the decision over each characteristic may depend on the decision about previous ones. Our characterization does not require imposing voter sovereignty and the rules may incorporate restrictions over the alternatives to be selected. Then, we obtain the subclass of anonymous rules that where the committees are quota committees. Finally, we demonstrate that the only anonymous and strategy-proof rules that select a Condorcet winner are the subclass of sequential rules by majority (quota) committees. |
| Keywords: | anonymity, Condorcet winner, lexicographic preferences, sequential rules by committee, strategy-prooofnes |
| JEL: | D71 D72 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1541 |
| By: | Steven Kivinen (University of Graz, Austria); Norovsambuu Tumennasan (Dalhousie University, Canada) |
| Abstract: | Generalized median voter (GMV) rules on the single-peaked preference domain are group strategy-proof. We show that if incomplete information coexists with the ability to commit to coalitional agreements, then GMV rules can be susceptible to insincere voting by groups with heterogeneous beliefs. We identify strategic compromise as a novel source of insincere voting in this environment. Our two main results characterize the set of fair, efficient, and robust voting rules: those that ensure sincere voting under asymmetric information and coalition formation. Each result uses a different notion of robustness, and both give (at most) two alternatives special treatment, with the remaining alternatives chosen according to a type of consensus. |
| Keywords: | robust group strategy-proofness, voting, median voter |
| JEL: | C71 C78 D70 D80 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2025-15 |
| By: | Benjamin Heymann |
| Abstract: | We model a procurement scenario in which two \textit{imperfect} bidders act simultaneously on behalf of a single buyer, a configuration common in display advertising and referred to as \textit{side-by-side bidding} but largely unexplored in theory. We prove that the iterated best response algorithm converges to an equilibrium under standard distributional assumptions and provide sufficient condition for uniqueness. Beyond establishing existence and convergence, our analysis provides a tractable numerical method for quantitative studies of side-by-side procurement. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.04850 |
| By: | Nizar Riane |
| Abstract: | In this paper, we study the public procurement market through the lens of game theory by modeling it as a strategic game with discontinuous and non-quasiconcave payoffs. We first show that the game admits no Nash equilibrium in pure strategies. We then analyze the two-player case and derive two explicit mixed-strategy equilibria for the symmetric game and for the weighted $(p, 1-p)$ formulation. Finally, we establish the existence of a symmetric Nash equilibrium in the general $N$-player case by applying the diagonal disjoint payoff matching condition, which allows us to extend equilibrium existence to the mixed-strategy setting despite payoff discontinuities. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10109 |
| By: | Gustavo Berganti\~nos; Leticia Lorenzo |
| Abstract: | The International Air Transport Association (IATA) states that the revenue from interline tickets must be shared among the different airlines according to a weighted system. We analyze this problem following an axiomatic approach, and our theoretical results support IATA's procedure. Our first result justifies the use of a weighted system, but it does not specify which weights should be applied. Assuming that the weights are fixed, we provide several results that further support the use of IATA's mechanism. Finally, we provide results for the case in which all flights can be considered equivalent and no weighting is required. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10418 |
| By: | Xiuxia Yin (Department of Actuarial, Financial and Economic Mathematics. Universitat de Barcelona and BEAT); Pedro Calleja (Department of Actuarial, Financial and Economic Mathematics. Universitat de Barcelona and BEAT); Josep Maria Izquierdo (Department of Actuarial, Financial and Economic Mathematics. Universitat de Barcelona and BEAT) |
| Abstract: | In claims problems, we explore three characterizations of the constrained equal awards rule based on how allocations respond to an agent increasing its claim. In the first one we ensure that over-demanding by an unsatisfied agent does not harm others. In the second one we require that such over-demanding leaves the entire allocation unchanged. Finally, in the third one we weaken this last condition by protecting only the initially fully compensated agents. |
| Keywords: | Claims problems, Over-demand proofness, Expansion invariance |
| JEL: | C71 C78 D47 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:490web |
| By: | Sjaak Hurkens; Matthew Ellman |
| Abstract: | This paper examines crowdfunding of a risky project with constant returns to scale. The crowdfunder's chosen threshold and interest rate jointly determine profit and welfare via information aggregation and investors' information acquisition and bidding decisions. At fixed investor strategies, a higher threshold funds fewer projects but raises the ratio of good to bad quality among those funded – a "crowdblessing" or positive selection lacking in standard finance. This also reduces incentives to acquire and use private information, as do interest rate increases. Optimal design trades off the scale of investment against the level of crowdblessing. Surprisingly, profit-maximizers induce excessive information acquisition to limit investor rent. Comparative statics show that information acquisition falls with its cost, rises with its precision and falls with prior optimism. Costs reduce welfare but may raise profits by facilitating rent-extraction. |
| Keywords: | costly information, crowdfunding, P2P finance, rent extraction |
| JEL: | C72 D82 G23 L12 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1540 |
| By: | Federico Echenique; Anqi Li |
| Abstract: | We study misspecified Bayesian learning in principal-agent relationships, where an agent is assessed by an evaluator and rewarded by the market. The agent's outcome depends on their innate ability, costly effort -- whose effectiveness is governed by a productivity parameter -- and noise. The market infers the agent's ability from observed outcomes and rewards them accordingly. The evaluator conducts costly assessments to reduce outcome noise, which shape the market's inferences and provide implicit incentives for effort. Society -- including the evaluator and the market -- holds dogmatic, inaccurate beliefs about ability, which distort learning about effort productivity and effort choice. This, in turn, shapes the evaluator's choice of assessment. We describe a feedback loop linking misspecified ability, biased learning about effort, and distorted assessment. We characterize outcomes that arise in stable steady states and analyze their robust comparative statics and learning foundations. Applications to education and labor market reveal how stereotypes can reinforce across domains -- sometimes disguised as narrowing or even reversals of outcome gaps -- and how policy interventions targeting assessment can help. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.01129 |