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on Economic Design |
| By: | Federico Echenique; Teddy Mekonnen; M. Bumin Yenmez |
| Abstract: | We develop a general framework for incorporating distributional preferences in market design. We identify the structural properties of these preferences that guarantee the path independence of choice rules. In decentralized settings, a greedy rule uniquely maximizes these preferences; in centralized markets, the associated deferred-acceptance mechanism uniquely implements them. This framework subsumes canonical models, such as reserves and matroids, while accommodating complex objectives involving intersectional identities that lie beyond the scope of existing approaches. Our analysis provides unified axiomatic foundations and comparative statics for a broad class of distributional policies. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.08035 |
| By: | Zhihao Tang; Shixin Wang |
| Abstract: | In practice, auction data are often endogenously censored and anonymous, revealing only limited outcome statistics rather than full bid profiles. We study robust auction design when the seller observes only aggregated, anonymous order statistics and seeks to maximize worst-case expected revenue over all product distributions consistent with the observed statistic. We show that simple and widely used mechanisms are robustly optimal. Specifically, posted pricing is robustly optimal given the distribution of the highest value; the Myerson auction designed for the unique consistent i.i.d. distribution is robustly optimal given the lowest value distribution; and the second-price auction with an optimal reserve is robustly optimal when an intermediate order statistic is observed and the implied i.i.d. distribution is regular above its reserve. More generally, for a broad class of monotone symmetric mechanisms depending only on the top k order statistics, including multi-unit and position auctions, the worst-case revenue is attained under the i.i.d. distribution consistent with the observed k-th order statistic. Our results provide a tractable foundation for non-discriminatory auction design, where fairness and privacy are intrinsic consequences of the information structure rather than imposed constraints. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.20429 |
| By: | Jason Hartline |
| Abstract: | The Vickrey-Clarke-Groves (VCG) mechanism is infamously revenue non-monotone in combinatorial auctions. I.e., when a buyer increases their value for a bundle of items, the total auction revenue may decrease. Combinatorial auctions exhibit complementarities which broadly result in complexities in auction theory. This brief note shows that non-monotonicity in multi-item auctions is not a result of complementarities, and in fact, VCG is revenue non-monotone even in matching markets. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.20439 |
| By: | Brian Roberson |
| Abstract: | We study incentive design when multiple principals simultaneously design mechanisms for their respective teams in environments with strategic spillovers. In this environment, each principal's set of incentive-compatible mechanisms--those that satisfy their own agents' incentive compatibility constraints--depends on the mechanisms offered by the other teams. Following a classic example by Myerson (1982), such games may lack equilibrium due to discontinuities in the correspondence of incentive-compatible mechanisms. We establish general conditions for equilibrium existence by introducing a novel approach that involves tracking both the outcome distributions along the truthful-obedient path and the sets of outcome distributions achievable through unilateral deviations, thereby providing a foundation for analyzing a wide range of multi-principal mechanism design with team production and agency problems. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.20281 |
| By: | Michael Greinecker; Karolina Vocke |
| Abstract: | We study stability notions for networked many-to-many matching markets with individually insignificant agents in distributional form. Outcomes are formulated as joint distributions over characteristics of agents and contract choices. Characteristics can lie in an arbitrary Polish space. We provide a mechanical method for transferring existence results for finite matching models to large matching models for many stability notions. In particular, we show that tree-stable and pairwise-stable outcomes exist. |
| Keywords: | stability notion, matching markets, matching models |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:inn:wpaper:2026-02 |
| By: | Andrei Iakovlev |
| Abstract: | When multiple informative equilibria are possible in a general cheap talk game, how much information can a principal guarantee herself? To answer this question, I define the notion of worst-case implementation-implementation via the worst non-trivial equilibrium of a mechanism. Under this objective, standard full-commitment mechanisms fail, yielding the principal no more than her no-communication payoff. Partial commitment, however, can provide a strict improvement. The possibility of facing a strategic, uncommitted principal disciplines the agent's reporting incentives across all equilibria. I characterize the worst-case optimal mechanism and payoff under weak assumptions on the players' preferences. The optimal mechanism has a simple two-message structure. The agent's messages are polarizing, designed to maximize their strategic impact on the uncommitted principal's actions. If full commitment is interpreted as decision automation, these results highlight a fundamental complementarity between automated and human decision-makers: the presence of a human aligns the agent's incentives to reveal information, while the automated system leverages these informative reports to take accurate actions. This strategic interaction is often overlooked by literature that compares the two based on standalone decision accuracy. Applications of the model include bail-setting automation, fintech lending, delegation, lobbying, and audit design. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.13645 |
| By: | Yeon-Koo Che (Columbia University [New York]); Julien Grenet (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, IPP - Institut des politiques publiques); Yinghua He (Rice University [Houston]) |
| Abstract: | This chapter surveys the application of matching theory to school choice, motivated by the shift from neighborhood assignment systems to choice-based models. Since educational choice is not mediated by price, the design of allocation mechanisms is critical. The chapter first reviews theoretical contributions, exploring the fundamental trade-offs between efficiency, stability, and strategyproofness, and covers design challenges such as tie-breaking, cardinal welfare, and affirmative action. It then transitions to the empirical landscape, focusing on the central challenge of inferring student preferences from application data, especially under strategic mechanisms. We review various estimation approaches and discuss key insights on parental preferences, market design trade-offs, and the effectiveness of school choice policies. |
| Keywords: | Preference Estimation, Top Trading Cycles, Immediate Acceptance, Deferred Acceptance, Matching Theory, School Choice |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:ipppap:hal-05528233 |
| By: | Manik Dhar; Kunal Mittal; Clayton Thomas |
| Abstract: | Among two-candidate elections that treat the candidates symmetrically and never result in a tie, which voting rules are fair? A natural requirement is that each voter exerts an equal influence over the outcome, i.e., is equally likely to swing the election one way or the other. A voter's influence has been formalized in two canonical ways: the Shapley-Shubik (1954) index and the Banzhaf (1964) index. We consider both indices, and ask: Which electorate sizes admit a fair voting rule (under the respective index)? For an odd number $n$ of voters, simple majority rule is an example of a fair voting rule. However, when $n$ is even, fair voting rules can be challenging to identify, and a diverse literature has studied this problem under different notions of fairness. Our main results completely characterize which values of $n$ admit fair voting rules under the two canonical indices we consider. For the Shapley-Shubik index, a fair voting rule exists for $n>1$ if and only if $n$ is not a power of $2$. For the Banzhaf index, a fair voting rule exists for all $n$ except $2$, $4$, and $8$. Along the way, we show how the Shapley-Shubik and Banzhaf indices relate to the winning coalitions of the voting rule, and compare these indices to previously considered notions of fairness. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.13894 |
| By: | Felix Brandt; Haoyuan Chen; Chris Dong; Patrick Lederer; Alexander Schlenga |
| Abstract: | A central problem in multiagent systems is the fair assignment of objects to agents. In this paper, we initiate the analysis of classic majoritarian social choice functions in assignment. Exploiting the special structure of the assignment domain, we show a number of surprising results with no counterparts in general social choice. In particular, we establish a near one-to-one correspondence between preference profiles and majority graphs. This correspondence implies that key properties of assignments -- such as Pareto-optimality, least unpopularity, and mixed popularity -- can be determined solely by the associated majority graph. We further show that all Pareto-optimal assignments are semi-popular and belong to the top cycle. Elements of the top cycle can thus easily be found via serial dictatorships. Our main result is a complete characterization of the top cycle, which implies the top cycle can only consist of one, two, all but two, all but one, or all assignments. By contrast, we find that the uncovered set contains only very few assignments. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.14816 |
| By: | Frank Yang |
| Abstract: | A principal screens an agent with an arbitrary set of allocations $X$. The agent's preferences over allocations are comonotonic. A subset of allocations $X^*\subseteq X$ is a surplus-elasticity frontier if (i) any other allocation has a demand curve that is pointwise lower and less elastic than some allocation in $X^*$ and (ii) the allocations in $X^*$ can be ordered in terms of their demand curves such that a higher demand curve is more inelastic. We show that any surplus-elasticity frontier is an optimal menu. Moreover, if the incremental demand curves along the frontier are also ordered by their elasticities, then the frontier is optimal even among stochastic mechanisms. The result is agnostic to type distributions and redistributive welfare weights -- the same frontier remains optimal for a broad class of objectives. As applications, we show how these results immediately yield new insights into optimal bundling, optimal taxation, sequential screening, selling information, and regulating a data-rich monopolist. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.20087 |
| By: | Federico Echenique (UC Berkeley - University of California [Berkeley] - UC - University of California); Matías Núñez (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We describe a sequential mechanism that fully implements the set of efficient outcomes in environments with quasi-linear utilities. The mechanism asks agents to take turns in defining prices for each outcome, with a final player choosing an outcome for all: Price & Choose. The choice triggers a sequence of payments, from each agent to the preceding agent. We present several extensions. First, payoff inequalities may be reduced by endogenizing the order of play. Second, our results extend to a model without quasi-linear utility, to a setting with an outside option, robustness to max-min behavior and caps on prices. |
| Keywords: | Prices, Mechanism, Subgame-perfect implementation, Efficiency |
| Date: | 2025–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05511714 |
| By: | Tom Demeulemeester |
| Abstract: | The code that was used in Erdil & Ergin (2008, AER) to compute stable improvement cycles sometimes generated unstable matchings. I identify the minor bug in their code that caused this issue, and I present a corrected implementation. While the general insights from the computational experiments obtained by Erdil & Ergin (2008) persist, the true fraction of improving students is slightly smaller than reported, while their average improvement in rank is larger than reported. All theoretical findings in Erdil & Ergin (2008) are unaffected. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.13250 |
| By: | Piotr Dworczak; Alex Smolin |
| Abstract: | An agent chooses an action using her private information combined with recommendations from an informed but potentially misaligned adviser. With a known alignment probability, the adviser reports his signal truthfully; with remaining probability, the adviser can send an arbitrary message. We characterize the decision rule that maximizes the agent's worst-case expected payoff. Every optimal rule admits a trust region representation in belief space: advice is taken at face value when it induces a posterior within the trust region; otherwise, the agent acts as if the posterior were on the trust region's boundary. We derive thresholds on the alignment probability above which the adviser's presence strictly benefits the agent and fully characterize the solution in binary-state as well as binary-action environments. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.09490 |
| By: | Florian Brandl; Wanying Huang; Atulya Jain |
| Abstract: | We study whether a social planner can improve the efficiency of learning, measured by the expected total welfare loss, in a sequential decision-making environment. Agents arrive in order and each makes a binary action based on their private signal and the social information they observe. The planner can intervene by jointly designing the social information disclosed to agents and offering monetary transfers contingent on agents' actions. We show that, despite such flexibility, efficient learning cannot be restored with a finite budget: whenever learning is inefficient without intervention, no combination of information disclosure and transfers can achieve efficient learning while keeping total expected transfers finite. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.08812 |
| By: | Kazuki Sekiya; Suguru Otani; Yuki Komatsu; Sachio Ohkawa; Shunya Noda |
| Abstract: | Two-sided platforms must recommend users to users, where matches (termed \emph{dates} in this paper) require mutual interest and activity on both sides. Naive ranking by predicted dating probabilities concentrates exposure on a small subset of highly responsive users, generating congestion and overstating efficiency. We model recommendation as a many-to-many matching problem and design integrators that map predicted login, like, and reciprocation probabilities into recommendations under attention constraints. We introduce \emph{effective dates}, a congestion-adjusted metric that discounts matches involving overloaded receivers. We then propose \emph{exposure-constrained deferred acceptance} (ECDA), which limits receiver exposure in terms of expected likes or dates rather than headcount. Using production-grade predictions from a large Japanese dating platform, we show in calibrated simulations that ECDA increases effective dates and receiver-side dating probability despite reducing total dates. A large-scale regional field experiment confirms these effects in practice, indicating that exposure control improves equity and early-stage matching efficiency without harming downstream engagement. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.19689 |
| By: | Joshua Bißbort; Daniel Heyen; Soheil Shayegh |
| Abstract: | Advice plays a central role in health, personal finance, and energy-efficiency decisions. We study how a benevolent expert should design verifiable advice—such as whether to commission a diagnostic test of different accuracy—when the agent is behaviorally biased, either neglecting payoff-relevant considerations or updating beliefs in a systematic, non-Bayesian way. The expert both informs the agent about underlying risk and persuades the agent away from choices driven by bias. In a Bayesian persuasion framework with a binary safe-versus-risky decision and moderate (monotone) distortions, we show that the expert’s payoff need not be monotone in informativeness: intermediate information can reduce welfare relative to no information. Nonetheless, full disclosure remains optimal. |
| Keywords: | expert advice, risky choice, Bayesian persuasion, information design, behavioral bias, non-Bayesian updating, full disclosure |
| JEL: | D82 D81 D03 D83 I18 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12482 |
| By: | Enrico Manfredi |
| Abstract: | Collective decision-making can be viewed as the problem of aggregating multiple noisy information channels about an unknown state of the world. Classical epistemic justifications of majority rule rely on restrictive assumptions about the homogeneity and symmetry of these channels, which are often violated in realistic environments. This paper introduces the Epistemic Shared-Choice Mechanism (ESCM), a lightweight and auditable procedure that endogenously estimates issue-specific signal reliability and assigns bounded, decision-specific voting weights. Using central limit approximations, the paper provides an analytical comparison between ESCM and unweighted majority rule, showing how their relative epistemic performance depends on the distributional structure of information in the population, including unimodal competence distributions and segmented environments with informed minorities. The results indicate that endogenous and bounded epistemic weighting can improve collective accuracy by merging procedural and epistemic requirements. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.13499 |
| By: | Karolina Vocke |
| Abstract: | In many-to-many matching markets, various concepts have been introduced to analyze stability. Most of these concepts are not straightforward to interpret. For instance, stability blocks may make members of a blocking coalition worse off. This paper argues that the differences between stability concepts stem from different implicit assumptions about anonymity in the market. By explicitly incorporating these anonymity assumptions into the market model, particularly using large markets, it is shown that many differences between stability concepts vanish. In these large markets, stability is a better-behaved solution concept: stability blocks lead to improvements for all members of a blocking coalition, unlike in finite markets. Furthermore, in large markets, an interpretation of each stability concept at the agents’ level can be given explicitly in a natural non-cooperative foundation. |
| Keywords: | matching markets, stability concepts, anonymity |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:inn:wpaper:2026-01 |
| By: | Janne Tukiainen (Department of Economics, University of Turku); Vesa Soini (Hanken School of Economics and Department of Economics, University of Turku); Susmita Baulia (RBB Economics and Department of Economics, University of Turku); Jan Jääskeläinen (Finnish Competition and Consumer Authority) |
| Abstract: | We study the extent of a one-size-fits-all approach in the design of public procurement (PP) tenders using comprehensive data from Finland. We show that crucial PP design features related to auction and contract rules tend to have significant lack of variation across different tenders for different industries within a contracting authority. We show that this organizational rigidness is due to both organizational level culture and individual employee level work habit formation with the latter being more important. We find that both greater organizational rigidity and deviating from the national industry norms are associated with lower number of bids and higher probability of zero-bid tenders, pointing to a potential efficiency loss from organizational rigidness in PP, and offering a solution that buyers should mimic how other organizations typically buy similar products rather than how they themselves buy very different products. Keywords: public procurement, organizational culture |
| Keywords: | public procurement, organizational culture |
| JEL: | D44 H57 H76 L25 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:tkk:dpaper:dp177 |