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on Economic Design |
| By: | Srinivas Tunuguntla; Carl F. Mela; Jason Pratt |
| Abstract: | Digital advertising platforms and publishers sell ad inventory that conveys targeting information, such as demographic, contextual, or behavioral audience segments, to advertisers. While revealing this information improves ad relevance, it can reduce competition and lower auction revenues. To resolve this trade-off, this paper develops a general auction mechanism -- the Information-Bundling Position Auction (IBPA) mechanism -- that leverages the targeting information to maximize publisher revenue across both search and display advertising environments. The proposed mechanism treats the ad inventory type as the publisher's private information and allocates impressions by comparing advertisers' marginal revenues. We show that IBPA resolves the trade-off between targeting precision and market thickness: publisher revenue is increasing in information granularity and decreasing in disclosure granularity. Moreover, IBPA dominates the generalized second-price (GSP) auction for any distribution of advertiser valuations and under any information or disclosure regime. We also characterize computationally efficient approximations that preserve these guarantees. Using auction-level data from a large retail media platform, we estimate advertiser valuation distributions and simulate counterfactual outcomes. Relative to GSP, IBPA increases publisher revenue by 68%, allocation rate by 19pp, advertiser welfare by 29%, and total welfare by 54%. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.09541 |
| By: | Aspelund, Karl M.; Russo, Anna |
| Abstract: | Market mechanisms aim to reduce environmental degradation at low cost, but they are undermined when participants’ conservation actions are not marginal to the incentive — or “additional” —as the lowest-cost participants may not be the highest social value. We investigate this challenge in the Conservation Reserve Program’s auction mechanism for ecosystem services, linking bids to satellite-derived land use. Three-quarters of marginal auction winners are not additional. The heterogeneity in counterfactual land use introduces adverse selection. We develop a model of bidding and additionality to quantify welfare implications. Alternative auctions increase efficiency by using scoring rules that incorporate expected land use impacts. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361138 |
| By: | Peruchin Tomas Francisco |
| 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. |
| JEL: | D44 Q35 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4827 |
| By: | David K Levine |
| Date: | 2026–01–17 |
| URL: | https://d.repec.org/n?u=RePEc:cla:levarc:735347000000000031 |
| By: | Yifan Dai; Drew Fudenberg; Harry Pei |
| Abstract: | A sender first publicly commits to an experiment and then can privately run additional experiments and selectively disclose their outcomes to a receiver. The sender has private information about the maximal number of additional experiments they can perform (i.e., their type). We show that the sender cannot attain their commitment payoff in any equilibrium if (i) the receiver is sufficiently uncertain about their type and (ii) the sender could benefit from selective disclosure after conducting their full-commitment optimal experiment. Otherwise, there can be equilibria where the sender obtains their commitment payoff. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.05914 |
| By: | Rouault, Cyril; Zoroglu, Resul |
| Abstract: | This paper examines rebate rules in the context of public goods provision. These rules aim to redistribute the surplus when total contributions exceed the cost of the project. Using an axiomatic approach, we establish impossibility results that highlight the inherent tensions between fairness, participation incentives, and contribution incentives. We then propose and characterize the Proportional Rebate with Threshold rule, which identifies a coherent trade-off across these objectives. |
| Keywords: | Public goods provision, Crowdfunding, Axioms, Rebates, Fairness |
| JEL: | D63 D71 D82 G32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kitwps:335020 |
| By: | Wei-Chen Lee; Martin Bullinger; Alessandro Abate; Michael Wooldridge |
| Abstract: | We consider a scheduling problem of strategic agents representing jobs of different weights. Each agent has to decide on one of a finite set of identical machines to get their job processed. In contrast to the common and exclusive focus on makespan minimization, we want the outcome to be fair under strategic considerations of the agents. Two natural properties are credibility, which ensures that the assignment is a Nash equilibrium and equality, requiring that agents with equal-weight jobs are assigned to machines of equal load. We combine these two with a hierarchy of fairness properties based on envy-freeness together with several relaxations based on the idea that envy seems more justified towards agents with a higher weight. We present a complete complexity landscape for satisfiability and decision versions of these properties, alone or in combination, and study them as structural constraints under makespan optimization. For our positive results, we develop a unified algorithmic approach, where we achieve different properties by fine-tuning key subroutines. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.13244 |
| By: | Schmidt, Lorenz; Ritter, Matthias; Mußhoff, Oliver; Odening, Martin |
| Keywords: | Agricultural Finance, Farm Management |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360670 |
| By: | Phillips, Owen R.; Bastian, Christopher T.; Cook, Benjamin R.; Menkhaus, Dale J.; Gao, Shen |
| Abstract: | We analyze behavior and market outcomes when agents face an endogenous choice of trading in either English auction or private negotiation. We develop a theoretical model to illustrate agent value for a trading institution. We then conduct market experiments with stable supply and demand conditions and sequentially linked English auction then negotiation (or auction then negotiation) institutions, allowing agents transaction institution choice. Linked prices converge to levels between those observed in auction or negotiation alone. Quantities sold and total welfare increases in these linked markets. Our results extend the literature and offer insights for both fed and feeder cattle markets. |
| Keywords: | Marketing |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360827 |
| By: | Hua, Yizhou; Wang, Holly |
| Keywords: | Marketing |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360864 |
| By: | Romain Biard (Université Marie et Louis Pasteur, LmB, UMR6623, F-25000 Besançon, France); Mostapha Diss (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France); Salma Larabi (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France) |
| Abstract: | We propose a weighted minority voting mechanism within a two-round sequential voting process, in which all individuals retain their voting rights in the second round but with different weights depending on the first-round outcome. In a utilitarian framework where individuals have a given utility function that depends on the outcomes of each round, first-round winners are identified and vote with reduced weight in the second round, while losers retain full weight. By giving greater weight to first-round losers, this design ensures that first-round winners continue to contribute to the final decision without dominating it, thereby mitigating repeated disadvantages for losers. We then compare the expected aggregate utility of society across different levels of second-round weight assigned to first-round losers, including both the simple majority rule – where all voters carry equal weight in both rounds – and the limiting case of minority voting where first-round losers receive no weight in the second round. To do so, we analyze two models: one in which individual utility derives solely from material payoffs, and another in which a form of harmony is considered, whereby individuals incur a utility loss if others repeatedly belong to the losing minority. This analysis allows us to assess how strategic behavior affects the effectiveness of the proposed mechanism. |
| Keywords: | Voting, Minority Voting, Simple Majority, Utilitarianism, Harmony. |
| JEL: | C72 D70 D71 D72 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:crb:wpaper:2026-01 |
| By: | Jeremy McEntire |
| Abstract: | Tournament-based compensation schemes with forced distributions represent a widely adopted class of relative performance evaluation mechanisms in technology and corporate environments. These systems mandate within-team ranking and fixed distributional requirements (e.g., bottom 15% terminated, top 15% promoted), ostensibly to resolve principal-agent problems through mandatory differentiation. We demonstrate through agent-based simulation that this mechanism produces systematic classification errors independent of implementation quality. With 994 engineers across 142 teams of 7, random team assignment yields 32% error in termination and promotion decisions, misclassifying employees purely through composition variance. Under realistic conditions reflecting differential managerial capability, error rates reach 53%, with false positives and false negatives each exceeding correct classifications. Cross-team calibration (often proposed as remedy) transforms evaluation into influence contests where persuasive managers secure promotions independent of merit. Multi-period dynamics produce adverse selection as employees observe random outcomes, driving risk-averse behavior and high-performer exit. The efficient solution (delegating judgment to managers with hierarchical accountability) cannot be formalized within the legal and coordination constraints that necessitated forced ranking. We conclude that this evaluation mechanism persists not through incentive alignment but through satisfying demands for demonstrable process despite producing outcomes indistinguishable from random allocation. This demonstrates how formalization intended to reduce agency costs structurally increases allocation error. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06583 |
| By: | Navin Kartik; Elliot Lipnowski; Harry Pei |
| Abstract: | Does electoral replacement ensure that officeholders eventually act in voters' interests? We study a reputational model of accountability. Voters observe incumbents' performance and decide whether to replace them. Politicians may be "good" types who always exert effort or opportunists who may shirk. We find that good long-run outcomes are always attainable, though the mechanism and its robustness depend on economic conditions. In environments conducive to incentive provision, some equilibria feature sustained effort, yet others exhibit some long-run shirking. In the complementary case, opportunists are never fully disciplined, but selection dominates: every equilibrium eventually settles on a good politician, yielding permanent effort. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.13351 |
| By: | Bouvard, Matthieu; Jullien, Bruno; Martimort, David |
| Abstract: | We study how the organizational structure of producers affects competition between systems. We model systems as differentiated bundles of complementary components, where components within each system are produced either by a single firms (integration) or by two distinct firms (disintegration). When information about buyers' preferences is symmetric, disintegration typically increases prices and reduces total welfare as the less efficient system gains market share relative to integration. In addition, when buyers' preferences are private information, disintegration magnifies the quality distortions suppliers introduce to screen buyers and further reduces the market share of the more efficient system. Overall, the analysis suggests that technological standards that facilitate the combination of components from different suppliers can have adverse effects. |
| Keywords: | Composite goods; suppliers organization; competition; double; marginalization. |
| JEL: | D82 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131250 |
| By: | Ricardo Alonzo Fern\'andez Salguero |
| Abstract: | The growing urgency of the climate crisis has driven the implementation of diverse policy instruments to mitigate greenhouse gas (GHG) emissions. Among them, carbon pricing mechanisms such as carbon taxes and emissions trading systems (ETS), together with voluntary carbon markets (VCM) and compensation programs such as REDD+, are central components of global decarbonization strategies. However, academic and political debate persists regarding their true effectiveness, equity, and integrity. This paper presents an umbrella review of the empirical evidence, synthesizing key findings from systematic reviews and meta-analyses to provide a consolidated picture of the state of knowledge. A rigorous methodology based on PRISMA guidelines is used for study selection, and the methodological quality of included reviews is assessed with AMSTAR-2, while the risk of bias in frequently cited primary studies is examined through ROBINS-I. Results indicate that carbon taxes and ETS have demonstrated moderate effectiveness in reducing emissions, with statistically significant but heterogeneous elasticities across geographies and sectors. Nonetheless, persistent design problems -- such as insufficient price levels and allowance overallocation -- limit their impact. By contrast, compensation markets, especially VCM and REDD+ projects, face systemic critiques regarding integrity, primarily related to additionality, permanence, leakage, and double counting, leading to generalized overestimation of their real climate impact. We conclude that while no instrument is a panacea, compliance-based carbon pricing mechanisms are necessary, though insufficient, tools that require stricter design and higher prices. Voluntary offset mechanisms, in their current state, do not represent a reliable climate solution and may undermine the integrity of climate targets unless they undergo fundamental reform. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06887 |
| By: | Navin Kartik; Frances Xu Lee; Wing Suen |
| Abstract: | We study voluntary disclosure with multiple biased senders who may bear costs for disclosing or concealing their private information. Under relevant assumptions, disclosures are strategic substitutes under a disclosure cost but complements under a concealment cost. Additional senders thus impede any sender's disclosure under a disclosure cost but promote it under a concealment cost. In the former case, a decision maker can be harmed by additional senders, even when senders have opposing interests. The effects under both kinds of message costs turn on how a sender, when concealing his information, expects others' messages to systematically sway the decision maker's belief. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.10048 |
| By: | Joshua S. Gans |
| Abstract: | This paper shows that income effects create an endogenous barrier to arbitrage, allowing price discrimination to survive costless resale. A monopolist sells an indivisible good to consumers with heterogeneous incomes who can freely resell. When the good is strictly normal, a consumer's reservation price to resell increases as the purchase price decreases—lower prices leave buyers wealthier and raise their valuation of the good. The monopolist exploits this by subsidising low-income consumers to raise their reservation prices to a target that high-income consumers must also pay. The optimal schedule increases dollar-for-dollar with income in the subsidised segment, weakly dominates uniform pricing, and achieves the first-best allocation when the entire market is served. We show the mechanism extends beyond income effects: low substitutability with market alternatives generates large reservation-price responses even when income sensitivity is modest. Sustaining discrimination requires market power at the individual level—consumer-specific quantity limits—not merely aggregate output restrictions. Extensions examine multiple monopolists and endogenous privacy choices. |
| JEL: | D11 D42 L12 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34669 |