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on Economic Design |
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Issue of 2019‒04‒22
eleven papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Klemperer, Paul |
| Abstract: | This paper adds new material, including about implementations of the product-mix auction and more detail about the bidding languages, to Klemperer (2008) [see next page for details]. Software (pro bono) to run several versions of product-mix auctions is now available at http://pma.nuff.ox.ac.uk. |
| Keywords: | Auction; Bank of England; bidding language; geometric bidding language; Multi-object auction; multi-product auction; product mix auction; product-mix auction; Simultaneous ascending auction; simultaneous multiple round auction |
| JEL: | D44 E58 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13667&r=all |
| By: | Francesco Decarolis; Maris Goldmanis; Antonio Penta |
| Abstract: | The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative effciency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism (used by Facebook). We nd that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and effciency. |
| Keywords: | Collusion, digital marketing agencies, facebook, Google, GSP, internet auctions, online advertising, VCG |
| JEL: | C72 D44 L81 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1088&r=all |
| By: | Cary Deck (University of Alabama and Chapman University); Maroš Servátka (Macquarie Graduate School of Management and University of Economics in Bratislava); Steven Tucker (University of Waikato) |
| Abstract: | The bubble and burst pattern in asset market experiments is among the most replicable results in experimental economics. Numerous studies have searched for means to reduce this mispricing. Using controlled laboratory experiments, we compare mispricing in standard double auction markets to prices in two clock auctions. The double Dutch auction, shown to be more efficient than the double auction in commodity market experiments, does not eliminate bubbles. However, the English Dutch auction does yield prices reflective of underlying fundamentals and succeeds in taming bubbles even with inexperienced traders in the common declining fundamental value environment. |
| Keywords: | asset markets; experimental economics; institutional design |
| JEL: | C91 D02 D14 G12 |
| Date: | 2019–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:19/04&r=all |
| By: | Jääskeläinen, Jan; Tukiainen, Janne |
| Abstract: | We provide novel stylized facts about competition, bidding, entry and bidders across a wide spectrum of public procurement auctions using comprehensive and rich Finnish data. Competition for publicly procured contracts is relatively low with a median bidder count of two (three conditional on receiving any bids). Bidders typically are very heterogeneous in size, which likely limits competition further. Competition seems to work roughly as expected as on average (standardized) bids mainly decrease with the number of actual and potential bidders. Using information on registrations as a good proxy for potential bidders, we show that the ratio of actual to potential bidders increases with the number of actual bidders. We also show that being present in the contracting authority's municipality or province correlates positively with registering, entry (bidding) and winning, but other firm characteristics matter less. While attracting more competition by means of contract and auction rule design is a desirable policy goal and we show suggestive evidence that the use of scoring rule can be an entry barrier, increasing competition may be in practice difficult. Therefore, reservation prices may be a more useful policy tool to alleviate issues associated with the lack of competition. |
| Keywords: | competition, entry, public procurement, Local public finance and provision of public services, D44, H57, H76, L11, |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:118&r=all |
| By: | M. Derksen; B. Kleijn |
| Abstract: | We propose a model for price formation in financial markets based on clearing of a standard call auction with random orders, and verify its validity for prediction of the daily closing price distribution statistically. The model considers random buy and sell orders, placed following demand- and supply-side valuation distributions; an equilibrium equation then leads to a distribution for clearing price and transacted volume. Bid and ask volumes are left as free parameters, permitting possibly heavy-tailed or very skewed order flow conditions. In highly liquid auctions, the clearing price distribution converges to an asymptotically normal central limit, with mean and variance in terms of supply/demand-valuation distributions and order flow imbalance. With simulations, we illustrate the influence of variations in order flow and valuation distributions on price/volume, noting the emergence of resistance levels, as well as the distinction between high- and low-volume auction price variance. To verify the validity of the model statistically, we predict a year's worth of daily closing-price distributions for 5~shares in the Eurostoxx 50 index; Kolmogorov-Smirnov statistics and QQ-plots demonstrate with ample statistical significance that the model predicts closing price distributions accurately, and compares favourably with alternative methods of prediction. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.07583&r=all |
| By: | Ashenfelter, Orley C; Graddy, Kathryn |
| Abstract: | Works of art and culture are sold by many means. These include transactions between dealers and their customers, auctions with open outcry, internet auctions, and even, occasionally, sealed bid auctions. However, the standard procedure for establishing art valuations for the most expensive works is still most commonly the English auction, where prices ascend in open bidding. This paper describes how art auctions really work, along with the state of competition between auction houses. For expensive art, competition is dominated by the duopoly of Christie's and Sotheby's. The paper proceeds to describe various interesting features of art auctions, including the declining price anomaly, whether or not auctioneers provide accurate information, and anchoring effects in art auctions. The public auction system provides a valuable method for setting and determining values; it is probable that the inability of auctioneers to capture a significant part of the benefits of the information they produce leads to less use of the auction system than is optimal for society. |
| Keywords: | Art auctions |
| JEL: | D44 Z11 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13665&r=all |
| By: | Agustín G. Bonifacio; Jordi Massó |
| Abstract: | We study social choice rules defined on the domain of semilattice single- peaked preferences. Semilattice single-peakedness has been identified as the necessary condition that a set of preferences must satisfy so that the set can be the domain of a strategy-proof, tops-only, anonymous and unanimous rule. We characterize the class of all such rules on that domain and show that they are deeply related to the supremum of the underlying semilattice structure. |
| Keywords: | Strategy-proofness; Unanimity; Anonymity; Tops-onlyness; Single-peakedness. |
| JEL: | D71 |
| Date: | 2019–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:965.19&r=all |
| By: | Laura Doval; Vasiliki Skreta |
| Abstract: | We characterize the revenue-maximizing Perfect Bayesian equilibrium for a seller who owns one unit of a durable good and interacts with a privately informed buyer over infinitely many periods. In each period, the seller can design a mechanism that determines the rules of trade. In the revenue-maximizing equilibrium, as long as a sale has not occurred, the seller chooses a mechanism that can be implemented as a posted price. Conceptually, this shows that the shape of the revenue-maximizing mechanism to sell a durable good is the same under commitment or limited commitment. Methodologically, the paper provides a recipe for problems of mechanism design with limited commitment. While in the case of commitment, subject to the truthtelling and participation constraints of the buyer, the seller's problem is a decision problem, in the case of limited commitment, we show that the seller's problem can be represented as an intrapersonal equilibrium, where the different "incarnations" of the seller represent the different beliefs he may have about the buyer's valuation. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.07456&r=all |
| By: | Aperjis, Christina (Power Auctions LLC); Kotowski, Maciej (Harvard Kennedy School); Zeckhauser, Richard (Harvard Kennedy School) |
| Abstract: | We study the problem of allocating multiple items to two agents whose cardinal preferences are private information. If money is available, Bayesian incentive compatibility and ex-ante Pareto efficiency can be achieved using the Expected Externality Mechanism (EEM). Absent money, under certain reasonable conditions, Bayesian incentive compatibility and ex-post Pareto efficiency remain achievable with a modified EEM that uses one good as a numeraire in lieu of money. We study this modified EEM’s properties and compare it with other allocation procedures. |
| JEL: | D82 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp19-014&r=all |
| By: | Sylvain Béal (Université de Bourgogne Franche-Comté, CRESE); André Casajus (HHL Leipzig Graduate School of Management, Dr. Hops Craft Beer Bar, Leipzig, Germany); Eric Rémila (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne, France); Philippe Solal (Université de Saint-Etienne, CNRS UMR 5824 GATE Lyon Saint-Etienne, France) |
| Abstract: | We relax the assumption that the grand coalition must form by imposing the axiom of Cohesive efficiency: the total payoffs that the players can share is equal to the maximal total worth generated by a coalition structure. We determine how the three main axiomatic characterizations of the Shapley value are affected when the classical axiom of Efficiency is replaced by Cohesive efficiency. We introduce and characterize two variants of the Shapley value that are compatible with Cohesive efficiency. We show that our approach is not limited to variants of the Shapley value. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:crb:wpaper:2019-03&r=all |
| By: | Mehmet Ekmekci; Stephan Lauermann |
| Abstract: | We study a model of information transmission through an informal election. Partially informed senders send binary messages to a receiver, and the receiver chooses a policy after observing the number of messages sent. Our leading example is protests in which the citizens' participation choices are their messages, and there may be positive costs or benefits of participation. A policy maker infers information from the aggregate turnout. However, the presence of activists who obtain direct benefits from participation adds noise to turnout. We show that the interplay between noise and costs leads to strategic substitution and strategic complementarity effects in the participation decisions, and we characterize their implications for the informativeness of protests. When there is no noise, information aggregates and the outcome is efficient. Our findings contrast with existing work, which shows that for many informal election scenarios with costless participation, a bias of the policy maker may prohibit any information transmission. |
| Keywords: | Voting, Information Aggregation |
| JEL: | C70 D80 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_080&r=all |