nep-cta 2022-03-21 papers

on Contract Theory and Applications

Issue of 2022‒03‒21
two papers chosen by
Guillem Roig
University of Melbourne

Matching with Recall By Yann Bramoullé; Brian W. Rogers; Erdem Yenerdag
A Solomonic Solution to Ownership Disputes: An Application to Blockchain Front-Running By Joshua S. Gans; Richard T. Holden

By:	Yann Bramoullé (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Brian W. Rogers (Department of Economics, Washington University in St. Louis); Erdem Yenerdag (Department of Economics, Washington University in St. Louis)
Abstract:	We study a two-period one-to-one dynamic matching environment in which agents meet randomly and decide whether to match early or defer. Crucially, agents can match with either partner in the second period. This "recall" captures situations where, e.g., a firm and worker can conduct additional interviews before contracting. Recall has a profound impact on incentives and on aggregate outcomes. We show that the likelihood to match early is nonmonotonic in type: early matches occur between the good-but-not-best agents. The option value provided by the first-period partner provides a force against unraveling, so that deferrals occur under small participation costs.
Keywords:	dynamic matching, unraveling, recall
JEL:	C78 D47 D82 D83
Date:	2022–03
URL:	http://d.repec.org/n?u=RePEc:aim:wpaimx:2203&r=

A Solomonic Solution to Ownership Disputes: An Application to Blockchain Front-Running

By:	Joshua S. Gans; Richard T. Holden
Abstract:	Blockchain front-running involves multiple agents, other than the legitimate agent, claiming a payment from performing a contract. It arises because of the public nature of blockchain transactions and potential network congestion. This paper notes that disputes over payments are similar to classic ownership disputes (such as King Solomon's dilemma). We propose a simultaneous report mechanism that resolves Solomon's dilemma (using only ordinal preference information) and also eliminates blockchain front-running. In each case, the mechanism relies on threats to remove ownership from all claimants and preferences from the legitimate claimant over allocations to other agents.
JEL:	D82 D86
Date:	2022–02
URL:	http://d.repec.org/n?u=RePEc:nbr:nberwo:29780&r=

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