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on Economic Design |
| By: | Jason Hartline |
| Abstract: | The article reviews the robust design and analysis of auctions, focusing on the predominant paradigm in the computer science literature, which quantifies robustness by the worst-case, over environments, ratio between the robust auction's performance and that of an optimal auction for the environment. Applications include robust analysis of canonical auctions such as the first-price auction for the welfare objective, prior-robust auction design for the revenue objective, and prior-robust design of exchange mechanisms for the gains-from-trade objective. Finally, the revelation principle is not without loss in robust mechanism design. The potential loss can be quantified by the revelation gap, the fraction of the optimal robust guarantee that is lost when restricting from all mechanisms to revelation mechanisms. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.01805 |
| By: | Minoru Kitahara; Yasunori Okumura |
| Abstract: | This paper compares the stable improvement cycles (SIC) mechanism of Erdil and Ergin (2008) with the efficiency-adjusted deferred acceptance (EADA) mechanism of Kesten (2010) in school choice problems with incomplete priorities. When school priorities are strict partial orders, we show that the EADA mechanism produces a constrained efficient matching. Combined with earlier results for the SIC mechanism, this establishes the outcome equivalence of the two mechanisms: the sets of matchings attainable under them coincide. We then move beyond transitivity and consider acyclic priority relations. On this broader domain, neither mechanism is guaranteed to produce a constrained efficient matching, but their failures take opposite forms. The SIC mechanism may under-improve: its outcome is always stable but may be Pareto dominated by another stable matching. By contrast, the EADA mechanism may over-improve: its outcome is never Pareto dominated by any stable matching but may itself be unstable. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.12543 |
| By: | Lars Ehlers; M. Bumin Yenmez |
| Abstract: | Institutions often face constraints richer than a single capacity. Protecting the priority of a student who cannot be accommodated may then block a lower-priority student who fits. We introduce COP-and-Choose, a cumulative offer process followed by a choice step, and show that its greedy version, which skips such blockers, leaves no student worse off than any fair matching or Knapsack Deferred Acceptance (KDA). Greedy is the unique consistent rule preserving this guarantee. With substitutability and size monotonicity at every school, greedy is strategy-proof and Pareto-undominated among strategy-proof mechanisms. If either fails at a school, one additional capacity-one school yields a market where, under every proposal order, greedy is manipulable and no strategy-proof mechanism weakly Pareto dominates it. In a three-resource refugee-resettlement calibration with simulated preferences, 19--33 percent of families gain relative to KDA and none lose, while 21--83 percent strongly envy another family. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.25481 |
| By: | Masato Eguchi |
| Abstract: | Many school choice mechanisms give students higher priority at schools they rank highly and aim to reward students' eagerness. This paper studies whether a centralized mechanism can incorporate such rank-dependent priorities while preserving truthful reporting. I consider a mechanism that jointly specifies how reported preferences modify schools' original priorities and how assignments are determined based on the modified priorities. I require the modification rule to satisfy rank monotonicity and the resulting matching to be stable with respect to the modified priorities. These two requirements jointly capture the policy objective of rewarding eagerness. My main result shows that any mechanism satisfying these requirements as well as strategy-proofness is outcome equivalent to the student-proposing Deferred Acceptance mechanism using the original priorities. Thus, if eagerness affects the outcome while the rank-dependent policy goal is maintained, the mechanism must be manipulable. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.39425 |
| By: | Minoru Kitahara; Yasunori Okumura |
| Abstract: | This paper studies school choice when each school has an original priority order and an adjusted priority order reflecting policies such as affirmative action. We introduce a weak notion of stability that permits justified envy under one priority order only when the opposite priority relation is supported by the other. We characterize weakly stable matchings as stable matchings under the intersection of the two priority profiles. Using the efficiency-adjusted deferred acceptance algorithm, we obtain a weakly stable matching that cannot be Pareto improved upon, within the set of weakly stable matchings, for any group containing all improved students by the adjustment. We also show that any Pareto improvement over this outcome necessarily creates justified envy under both priority profiles. Finally, our mechanism is responsive to stronger priority adjustments: the outcome under a stronger affirmative action policy is not Pareto dominated by that under a weaker policy for any group containing all students improved by the stronger adjustment. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.12558 |
| By: | Szilvia P\'apai |
| Abstract: | Matching mechanisms differ in how much of an agent's preference ranking must be determined and reported to obtain a particular object. A mechanism is singleton-attainable (SA) if every object that an agent can obtain through some report can also be obtained by reporting only that object as acceptable. With an SA mechanism, once an attainable object has been identified, the agent need not rank or report any other object. Singleton-attainability identifies a distinct dimension in matching theory and market design: transparent access to attainable outcomes, separate from incentives, stability, welfare or equity. We establish general conditions for SA and derive its strategic implications. Top-lift invariance and truncation invariance together imply SA, while strategyproofness and stability each imply SA. By contrast, no Pareto improvement over a strategyproof, individually rational, and non-wasteful mechanism is SA. In particular, every Pareto improvement over Deferred Acceptance violates SA. We introduce report width, which measures how many acceptable objects may have to be reported to obtain an object. SA mechanisms have report width one. Report width is unbounded for a large class of efficient mechanisms that Pareto-improve Deferred Acceptance. Stable selection with report-induced priorities has width one when priorities are monotone and maximal width under reverse priority dominance. Rank-welfare maximization has width one when the outside-option rank is fixed and maximal width when it is report-dependent. These results reveal a structural divide, which we call the width dichotomy: across all mechanisms and families in our classification and all structural classes we study, report width is either one or unbounded. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.27293 |
| By: | Benjamin Brooks (Department of Economics, University of Chicago); Songzi Du (Department of Economics, University of California San Diego) |
| Abstract: | A mechanism is participation secure if each agent has an action that guarantees them a payoff better than their outside option, no matter how other agents behave and no matter how uncertainty about preferences is resolved. Participation security implies that every agent’s interim payoff exceeds their outside option, in every information structure and equilibrium. The converse is true if the mechanism is elementary: Every action is the unique best response for some type in some information structure and equilibrium. Elementary mechanisms are shown to be a sufficient class for maximizing the welfare guarantee. Hence, for maximizing the guarantee, participation security is equivalent to interim participation in all information structures and equilibria. |
| Keywords: | Mechanism design, information design, dual reduction, max-min, Bayes correlated equilibrium, robustness, participation security, individual rationality. |
| JEL: | C72 D44 D82 D83 |
| Date: | 2026–09–14 |
| URL: | https://d.repec.org/n?u=RePEc:bfi:wpaper:2026-126 |
| By: | \"Ozg\"un Ekici; M. Bumin Yenmez |
| Abstract: | In a recent study, Ekici and Yenmez (2026) characterize top trading cycles (TTC) on the unrestricted domain by strategy-proofness, individual rationality, and pair rationality, uncovering a correspondence between the axiomatic foundations of TTC and deferred acceptance, matching theory's two canonical rules. We show that their characterization fails on the single-peaked domain, but it holds on the single-dipped domain even without strategy-proofness. They also show that pair rationality can be replaced in their characterization by two weaker conditions concerning agents' first and second choices. In contrast, this replacement fails on the single-dipped domain, even when strategy-proofness is imposed. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.39163 |
| By: | Matheus Venturyne Xavier Ferreira |
| Abstract: | The design of credible auctions---mechanisms where a revenue-maximizing auctioneer has no incentive to deviate from the protocol---faces a fundamental cryptographic barrier when the auctioneer controls shill bidders. While a natural approach is to use Secure Multi-Party Computation (MPC) to remove the trusted auctioneer, the impossibility of fair coin flipping of Cleve (1986) implies that monolithic MPC protocols grant the auctioneer a "free option": they can learn the auction's outcome and unilaterally abort if the revenue is unsatisfactory. Cryptographic commitments with ex-ante penalties mitigate this abort asymmetry, but no finite penalty suffices for heavy-tailed distributions. We circumvent this barrier by introducing the MPC Decomposition Principle. Rather than encrypting the entire mechanism, we use MPC strictly as an information-restriction tool. We isolate the winner determination problem into a minimal MPC gadget that computes and reveals the winner's identity but no payment information. This qualitative restriction mathematically bounds the information leaked upon an abort. By combining this gadget with sequential revelation and finite economic penalties, we design the Sequential Revelation Auction (SRA). We prove that bounding the information leakage strictly bounds the value of the free option, showing that a penalty of $k \geq \sum_{i=1}^n Rev(F_i)$ is sufficient for credibility, and tight: for equal-revenue distributions, every smaller penalty admits a profitable deviation. Using constant-round MPC, the SRA resolves an open question of Akbarpour and Li (2020) and Ferreira and Weinberg (2020) by providing a constant-round, incentive-compatible, revenue-optimal credible auction for all product distributions with vanishing revenue tails |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.27402 |
| By: | Thanawat Sornwanee |
| Abstract: | We introduce a notion and motivation for very credible auctions. This is a strengthening in the commitment in the credible auctions setting, making it more suitable for a modern digital applications. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14263 |
| By: | Teemu Pennanen |
| Abstract: | The tendency of the double auction mechanism to drive prices to competitive equilibrium has been well documented in laboratory experiments, but the phenomenon has lacked a theoretical explanation. This paper studies dynamic double auctions in a pure exchange economy where agents bid their indifference prices implied by their current holdings and preferences. We show that Walras equilibria coincide with the fixed points of the double auction and that repeated double auctions generate bounded sequences of allocations and prices whose cluster points are Walras equilibria with transfers. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.01562 |
| By: | Shota Ichihashi; Doh-Shin Jeon; Byung-Cheol Kim |
| Abstract: | Many digital platforms earn revenue by selling content access and displaying ads. We study monopoly screening by a platform allocating heterogeneous content and ads to heterogeneous consumers. Advertising generates revenue and affects information rents through nuisance, which alters the platform's incentives to allocate content. The optimal mechanism balances a trade-off between advertising and rent extraction: Expanding content access increases advertising revenue but reduces sales revenue by raising information rents. The mechanism features novel distortions in content access and ad exposure, rationalizes contracts across ad-supported platforms, and explains why greater ad profitability may weaken incentives to invest in content quality. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.12870 |
| By: | Arkarup Basu Mallik; Mihir Bhattacharya; Ojasvi Khare |
| Abstract: | We study strategy-proof social choice where agents have single-dipped preferences and outcomes may be sets of alternatives. While point-valued strategy-proof rules select an endpoint, we ask which outcomes survive when sets are compared through responsive extensions. Under the standard responsive extension, preferences over fixed-length intervals remain single-dipped, so the endpoint restriction persists and anonymity yields a single-threshold rule. Under responsive dominance, the incomplete order shared by all responsive extensions, an interior interval can survive because the two extreme intervals need not be comparable. For arbitrary sets, requiring every chosen alternative to be most preferred by some agent yields voting-by-committees rules, with one committee per endpoint; anonymous rules have a two-threshold quota form. The characterization holds on the entire endpoint-peaked domain, and every such rule is group-strategy-proof. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14059 |
| By: | Xiaotie Deng; Ningyuan Li |
| Abstract: | We study strategic disclosure of the action space in principal-agent contracting, where an agent selects a disclosed action set to shape the principal's perception of her capabilities before contract design. Unaware of the strategic disclosure, the principal designs a revenue-optimal contract as if the disclosed action set were complete and accurate. We consider two variants distinguished by cost verifiability. When costs are unverifiable, the agent can extract the entire first-best surplus, leaving the principal with zero revenue. When costs are verifiable, we characterize the agent's optimal disclosure strategy in binary-outcome settings and, more generally, when the principal is restricted to linear contracts, reducing the agent's problem to a two-variable convex optimization problem. We prove that the agent can secure utility of at least a $1/e$ fraction of the first-best surplus, which also yields a $1/e$ welfare guarantee under optimal disclosure. While the principal's revenue can be arbitrarily small compared to the first-best surplus, when the ratio of maximum to minimum expected reward among non-null base actions is at most $L$, we establish a revenue guarantee of $\Theta(1/\log L)$ relative to the first-best surplus. We also compare utilities and welfare under strategic disclosure with their counterparts in the canonical model. Finally, we extend the agent's $1/e$ utility guarantee to general outcome spaces without restricting the principal to linear contracts. Our results show how strategic action-space disclosure changes the distribution of surplus while preserving a constant-factor welfare guarantee under the agent's optimal disclosure. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.25410 |
| By: | \"Ozg\"un Ekici; M. Bumin Yenmez |
| Abstract: | Matching theory has largely evolved around two canonical rules: deferred acceptance (DA) in the marriage problem and top trading cycles (TTC) in the object reallocation problem. Although the two rules operate through different procedures, we show that they rest on a common axiomatic foundation. In the marriage problem, stability decomposes into individual rationality and pair rationality, and a classic result characterizes DA by these two axioms together with strategy-proofness for the proposing side. We show that individual rationality, pair rationality, and strategy-proofness likewise characterize TTC. More strongly, three weak rationality axioms concerning individuals and pairs, together with strategy-proofness, uniquely determine TTC. Even weak rationality requirements therefore rule out strategy-proof implementation when there is a cap on the size of exchange cycles. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.28174 |
| By: | Yasushi Kawase; Warut Suksompong; Hanna Sumita; Yu Yokoi |
| Abstract: | We study a fractional assignment setting where $n$ objects are to be assigned to $n$ agents with unit capacity, and each agent specifies an ideal distribution over the objects. Unlike in classic random assignment, these ideal distributions are not necessarily degenerate, as agents may prefer a mixture of objects rather than any single object. We assume that agents seek to minimize the $\ell_1$ distance between their ideal distribution and the distribution they receive, which is equivalent to maximizing the overlap between the two distributions. We propose two mechanisms, one based on water filling (WF) and the other on quadratic programming (QP), and show that both mechanisms are utilitarian-optimal (and hence Pareto efficient), envy-free, strategyproof, and satisfy equal treatment of equals. Moreover, we highlight a distinct advantage of each mechanism: while the WF mechanism satisfies the stronger property of group-strategyproofness, the QP mechanism is more robust in terms of egalitarian overlap welfare. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.18299 |
| By: | Siwei Chen; Pengbo Wang |
| Abstract: | A collective rule must often choose a public outcome on a constrained boundary. We characterize truthful choice with diagonal unanimity on the entire boundary of any compact full-dimensional strictly convex body in finite dimension at least two. On the full domain of linear support preferences, ordinary individual strategy-proofness and diagonal unanimity force the rule to select one fixed participant's preferred point at every profile. The population is any fixed finite nonempty set. No Pareto condition, boundary smoothness, or continuity or measurability of the rule is assumed. If interior outcomes are allowed instead, two or more participants can use positive fixed weighted averages of preferred points for truthful non-dictatorial compromise on the same type domain. The proof derives regularity from the two agents' incentive inequalities, transports a common support-measure bound across reports, and makes every convexified attainable menu a Minkowski summand of the feasible body. Boundary generation then forces fixed control. The result extends the spherical public-good location question and identifies the role of boundary-valued choice in eliminating truthful compromise. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.26302 |
| By: | Simon van Tartwijk (University of Amsterdam) |
| Abstract: | This paper studies a randomizing threshold auction of the kind online platforms use to sell search-advertising slots. The mechanism awards the slot outright only when the highest bid sufficiently exceeds the runner-up's, and otherwise assigns it by lottery among the close bidders. Such relative-bid randomization can raise revenue above the standard second-price auction when advertisers' values are bimodal: usually low but occasionally very high, reflecting whether an ad matches the user's query. It does so by threatening runaway winners with the risk of losing, and charging them a certainty premium to restore a sure win. Welfare effects cut both ways. A second-price auction having only its reserve with which to tax a runaway winner can, once the best-matched advertisers are far enough ahead, only refuse to sell to the weaker ones outright. The randomizing auction has a second instrument and keeps serving weaker bidders. Over the range, randomization raises both revenue and total welfare. However, the best-matched advertisers are nonetheless taxed and ad relevance for users is lowered. A learning exercise further shows that randomization prevents advertisers from separately inferring rival values and the pricing rule from observed outcomes. These results are then interpreted in the light of the U.S. antitrust case against Google, which ability to impose the randomized generalized second-price auction (rGSP) was held to be direct evidence of monopoly power and the resulting remedies have begun to require auction transparency. |
| JEL: | D44 D82 L41 |
| Date: | 2026–09–27 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260075 |
| By: | Terrence McGovern; Jan Benedikt Napp; Wenjun Zheng |
| Abstract: | We consider a robust delegation problem in which the principal does not know the distribution from which the underlying state is drawn. The principal can choose a general randomized mechanism and maximizes her worst-case expected payoff over all state distributions. Our main result characterizes the robustly optimal mechanism. The mechanism has up to three regions: (i) accommodation, where the agent's ideal action is taken, (ii) calibrated randomization, where each type receives a distinct lottery, and (iii) pooling, where all types receive the same lottery. We then extend our model to a multidimensional setting in which preferences are additively separable and satisfy a cross-dimensional symmetry condition, and show that delegating separately across dimensions is robustly optimal. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.31529 |
| By: | Hiroto Sato; Ryo Shirakawa |
| Abstract: | Consider a situation wherein a decision maker sequentially searches for the best alternative among heterogeneous options with an arbitrary search order. The agent partially learns the value of an option when inspecting it. The information structure jointly determines the ex-ante and ex-post value of investigating each option, thereby shaping the entire learning path. We characterize the set of all search behaviors compatible with some information structure, which forms a polytope. A single information structure rationalizes all these search behaviors, which minimizes the agent's welfare among all information structures. Under certain symmetry assumption over primitives, we also examine the set of all feasible pairs of search and choice behaviors, with and without option sellers' price competition, and prove the same results. Our study not only provides a simple framework for analyzing how information shapes ordered learning paths, but also offers sharp insights into information design and identification problems in such environments. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.16431 |
| By: | Hiroto Sawada; Raphael Boleslavsky; Kristopher W. Ramsay; Mehdi Shadmehr |
| Abstract: | States and alliances spend enormous resources signaling resolve to deter adversaries. Two canonical strategies are burning money (sunk costs) and burning bridges (audience costs). Large audience costs can deter effectively, but they may be infeasible and, even when feasible, can increase the likelihood of war relative to burning money. We propose a signaling design in which the defender retains the flexibility to fight or back down but commits ex ante, before learning its resolve, to a rule mapping realized resolve into costly actions. When audience costs are limited, this design raises defender payoffs while reducing the likelihood of war. We discuss implementation through laws and automated algorithms. We also characterize defender payoffs when audience costs are chosen endogenously from a feasible set, showing that lowering the maximum feasible audience cost can raise defender payoffs, and we compare these payoffs with those under the standard burning-money setting without commitment. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14625 |
| By: | Tingyi Lin; Yichen Shi; Ke Dong; Jiazhuo Li; Shawn Yu; Huanxi Zhang |
| Abstract: | A seller and a buyer with independent private values can trade only at a posted price. We determine the worst case of this mechanism exactly: the best posted price always guarantees a $\beta_*=0.738024...$ fraction of first-best welfare, where $\beta_*$ is the root of an explicit equation, the worst-case buyer is unique up to scaling, and no pair of distributions attains the worst case. This closes the gap $[0.7292, 0.73805]$ left by a line of work from SODA 2016 through two STOC 2023 papers and AAAI 2026. The proof is an explicit certificate of optimality: after one change of variables, the gap between the optimal value and that of any buyer distribution is a sum of nonnegative integrals, as in a linear-programming dual, and equality identifies the worst-case shape. The certificate also gives the complete tradeoff between gains from trade and the seller's initial welfare: when first-best gains from trade are a fraction $\kappa$ of initial seller welfare, the exact worst-case fraction $\rho(\kappa)$ of gains obtained by the best price satisfies $\rho(\kappa)\sim2/\log(1/\kappa)$ as $\kappa\to0$. The worst-case buyer has two constant segments joined by an explicit nonexponential curve, approached through a vanishing atom whose value tends to infinity. The same constant is the exact guarantee of dominant-strategy mechanisms with individual rationality and strong budget balance in every realization. For two units with increasing submodular valuations, an explicit finite instance has ratio below $0.7290804$, so multi-unit trade is strictly harder than single-unit trade. For any bounded ordered buyer pair we characterize the least common-price mass that guarantees a prescribed ratio against every ordered seller pair; a bound on this one-sided functional would determine the exact two-unit constant. Within an explicit family the unique minimum is $0.729080...$, conjectured to be optimal. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.35888 |
| By: | Han Wang |
| Abstract: | A principal faces a decision problem under uncertainty and can contract with a researcher to provide relevant information. The cost of acquiring information is only known to the researcher, and, moreover, by privately making an investment the researcher can reduce their expected cost. We show that this contracting problem can be viewed as an information design problem with cost constraints and use techniques from that literature to solve for the optimal contract. The principal never overinvests but may underprovide investment even when it is efficient. We establish a cutoff in the cost of investment below which the principal induces investment and show that this cutoff is higher for a better investment opportunity, in the sense that the post-investment distribution of costs improves in the monotone-likelihood-ratio order. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.15019 |
| By: | Ian Ball; Drew Fudenberg; Stephen Morris |
| Abstract: | Bayesian monotonicity is a necessary condition for full implementation in Bayes-Nash equilibrium. Under the sequential equilibrium refinement, however, multi-stage mechanisms can expand the scope for implementation. We show that this additional implementation power is fragile. Whenever a multi-stage mechanism sequentially implements a social choice correspondence that is not Bayesian monotone, we construct arbitrarily small "information perturbations'' and show that there are sequential equilibria under these perturbations that yield inadmissible decisions with probability bounded away from zero. Under these perturbations, players' types are not independent conditional on the state and some player is sometimes uncertain of their payoff type. We show by example that the general result fails if perturbations are required to satisfy conditional independence or "known payoff types.'' |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.30464 |
| By: | Irene Aldridge |
| Abstract: | We study a matching mechanism where agents and objects are described by features rather than complete rankings. A single spectral projection reduces the problem to a one-dimensional sort, computable in O(N log N) time. We prove that on descaled features and preferences, our algorithm obtains the exact Nash Social Welfare (NSW) optimum within the projected space, with an unconditional utilitarian-welfare guarantee and a conditional NSW guarantee. The proposed mechanism is stable against exogenous noise but not strategy-proof; we provide an explicit profitable misreport. On an agentic AI shopping application, the diagnostics correctly anticipate both a success and a failure case. A 100-instance robustness study confirms the findings. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.29958 |
| By: | Emmanuel Guerre; Yao Luo |
| Abstract: | We consider nonparametric identification of independent private value first-price auction models, in which the analyst only observes winning bids. Our benchmark model assumes an exogenous number of bidders N. We show that, if the bidders observe N, the resulting discontinuities in the winning bid density can be used to identify the distribution of N. The private value distribution can be nonparametrically identified in a second step. This extends, under testable identification conditions, to the case where N is a number of potential buyers, who bid with some unknown probability. Identification also holds in presence of additive unobserved heterogeneity drawn from some parametric distributions. |
| Keywords: | Auction models, unobserved competition, nonparametric identification, density discontinuities, bidder uncertainty, unobserved heterogeneity |
| JEL: | C14 C57 D44 |
| Date: | 2026–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-827 |
| By: | Zi Yang Kang; Piotr Dworczak |
| Abstract: | We study the design of priority pricing systems with heterogeneous agents in environments in which improving quality for some agents reduces the average quality that can be provided. Contrary to the equity-efficiency tradeoff emphasized in public debates, we show that under economically natural conditions priority pricing can Pareto-improve on an equal-allocation benchmark. Three priority tiers suffice for such an improvement, combining higher quality for a fee, lower quality with compensation, and an intermediate tier at the benchmark quality; two tiers are never enough. Our results provide a framework for overcoming equity-efficiency tensions in applications such as lane pricing, waiting-line design, public provision, and insurance. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.22652 |
| By: | Rod Falvey (Bond University); Tom Lane (Newcastle University); Shravan Luckraz (University of Nottingham Ningbo China); Shuo Yang (University of Nottingham Ningbo China); Wanjun Zheng (Zhejiang University of Finance and Economics) |
| Abstract: | This paper reexamines the Holmström’s moral hazard in teams for environments where team production problems are repeated a finite number of times. Motivated by the observation that many real-world team interactions are naturally repeated while much of the literature emphasizes static peer-evaluation rules or repeated-game constructions that rely on infinite horizons, we adapt a Galbraith Mechanism (GM)-style allocation mechanism to a finitely repeated principal–agent team production setting and evaluate its performance both analytically and in the laboratory. We construct a repeated GM allocation that mixes equal sharing with proportional rewards, characterize subgame-perfect equilibria that sustain higher aggregate effort than static equal-share benchmarks, and design credible finite-horizon history-dependent punishments to select efficient equilibria when multiplicity arises. A laboratory experiment on a twice-repeated game tests the mechanism’s static and dynamic predictions under alternative allocation treatments. Our results show that groups under the (repeated GM) proportional allocation exert significantly higher effort than under (one-shot GM) equal sharing, consistent with theoretical predictions. Observed behavior indicates increased cooperation with repeated interaction. |
| Keywords: | Team Production; Moral Hazard; Finitely Repeated Games; Galbraith Mechanism |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:not:notcdx:2026-05 |
| By: | Yijia Ding |
| Abstract: | This paper provides an explicit characterization of the (unique) equilibrium of the two-bidder all-pay auction with asymmetrically distributed, independent private values. The characterization is achieved through recasting the problem into its equivalence in the quantile space and thereby obtaining equilibrium bid functions that involve only integrals and inverses of the primitives. No regularity assumption is required: the value distributions can be continuous, discrete, singular continuous, or any mixture of these. The explicit formula makes comparative statics transparent. Raising one bidder's value distribution in first-order stochastic dominance raises that bidder's equilibrium bid distribution in the same order. Perturbing a symmetric-bidder model has different revenue effects depending on the direction of the perturbation: whereas slightly weakening one of the two bidders reduces expected revenue, slightly strengthening one of the two has an ambiguous effect. The explicit formula also turns some involved arguments in the literature into direct corollaries. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14041 |
| By: | Georgy Lukyanov; Yaroslav Yosifov |
| Abstract: | Global games select a unique cutoff when a player's incentive moves monotonically with private information. We show that this logic can fail when a privately informed participant can take a costly, simultaneous, and unobserved action that defends the status quo. In a currency-attack model, the defender acts only at intermediate signals. Along the traders' cutoff equation, this interval response creates an endogenous defense-loss term that vanishes at the endpoints of an activation component but can dominate the decreasing benchmark payoff margin in between. We establish a primitive region in which defense is inactive and uniqueness survives, and a finite-CDF overshoot condition under which two active-defense cutoff roots coexist with the inactive benchmark root. Because marginal indifference need not imply global incentives, we also give sufficient conditions for a genuine monotone cutoff best response. Finally, outward-rounded interval arithmetic proves that a proper-prior parameter vector has exactly three symmetric monotone-cutoff equilibria and that this topology persists locally. The result isolates a payoff-based boundary of global-game selection: hidden intervention can restore multiplicity without public signalling or a perturbation of the information hierarchy. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.00323 |