|
on Economic Design |
|
Issue of 2020‒08‒10
fifteen papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Satoru Fujishige; Zaifu Yang |
| Abstract: | We propose a new and general dynamic design for efficiently auctioning multiple heterogeneous indivisible items. The auction applies to all unimodular demand types of Baldwin and Klemperer (2019) which are a necessary and sufficient condition for the existence of competitive equilibrium in economies with indivisible goods and accommodate a variety of substitutes, complements, gross substitutes and complements, strong substitutes, and other kinds. Every bidder has private valuation on each of his interested bundles of items and the seller has a reserve price for every bundle of items. The auctioneer announces the current prices for all items, bidders respond by reporting their demands at these prices, and then the auctioneer adjusts the prices of items. The trading rules are simple, transparent, and detail-free. Although bidders are not assumed to be price-takers so they can strategically exercise their market power, this auction induces bidders to bid truthfully and yields an efficient outcome. Bidding sincerely is an ex post perfect Nash equilibrium. The auction is also privacy-preserving and independent of any probability distribution assumption. |
| Keywords: | Dynamic Auction, Incentive-Compatibility, Competitive Equilibrium, Unimodular Demand Types, Substitute, Complement, Indivisibility, Dynamic Auction Game of Incomplete Information. |
| JEL: | D44 C78 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:20/08&r=all |
| By: | Benjamin Balzer (University of Technology Sydney); Antonio Rosato (University of Technology Sydney); Jonas von Wangenheim (University of Bonn, Germany) |
| Abstract: | We study the behavior of expectations-based loss-averse bidders in Dutch and first-price auctions with independent private values. With loss-averse preferences, the strategic equivalence between these formats no longer holds. Intuitively, as the Dutch auction unfolds, a bidder becomes more optimistic about her chances of winning; this stronger "attachment" effect pushes her to bid more aggressively than in the first-price auction. Thus, Dutch auctions raise more revenue than first-price ones. Indeed, we show that the Dutch auction raises the most revenue among standard auction formats. Our results imply that with expectations- based reference-dependent preferences sequential mechanisms might outperform static ones. |
| Keywords: | Reference-Dependent Preferences; Loss Aversion; Dutch Auctions; Revenue Equivalence; Personal Equilibrium |
| JEL: | D44 D81 D82 |
| Date: | 2020–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:2020/05&r=all |
| By: | Nicolas C. Bedard (Wilfrid Laurier University, Ontario, Canada); Jacob K. Goeree (AGORA Center for Market Design, UNSW, Sydney, Australia); Philippos Louis (University of Cyprus, Cyprus); Jingjing Zhang (University of Technology Sydney) |
| Abstract: | We compare the first-price sealed-bid (FPSB) auction and the simultaneous multiple- round auction (SMRA) in an environment based on the planned sale of 900 MHz spectrum in Australia. Three bidders compete for five indivisible items. Bidders are permitted to obtain at most three items and need to obtain at least two to achieve profitable scale, i.e. items are complements. Value complementarities, which are a common feature of spectrum auctions, exacerbate the Òfitting problemÓ and undermine the usual logic for superior price discovery in the SMRA. With substitutes, bidders reduce demands as prices rise and a tatonnement-like dynamic produces market-clearing prices. With complements, however, all that bidders may be interested in at higher prices are larger packages. In addition, the SMRA assigns provisional winners each round, which exposes bidders to the risk of losses when they win only a subset of their desired package. We find that the FPSB outperforms the SMRA across a range of bidding environments: in terms of efficiency, revenue, and protecting bidders from losses due to the exposure problem. Moreover, the FPSB exhibits superior price discovery in that it almost always results in competitive (ÒcoreÓ) prices unlike the SMRA, which frequently produces prices that are too low because of demand-reduction or too high because of the exposure problem. We demonstrate the robustness of our findings by considering two-stage variants of the FPSB and SMRA as well as environments in which bidders know their own values but not the distributions from which values are drawn. |
| Keywords: | Spectrum auctions; laboratory experiments; price discovery; exposure problem; market design |
| JEL: | C78 C92 D47 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:ecowps:2020/03&r=all |
| By: | Cumpston, Anne; Khezr, Peyman |
| Abstract: | This article aims to provide a comprehensive survey of the theoretical research on multi-unit auctions to help identify the gap in this literature. Multi-unit auctions have been extensively used in practise and account for significant amount of transactions in some real-world markets. However, the theoretical research on these auctions has attract less attention compared to single unit auctions. The focus of this article is on those research that study multi-unit auctions for the sale of multiple units of homogeneous objects to potential buyers with more than one unit demand. The articles are categorized based on the assumptions of their models regarding bidders' values and the type of auction. Further the gap in this literature is identified with those areas that require further theoretical research. |
| Keywords: | Auctions; multi-unit; uniform; discriminatory. |
| JEL: | D44 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101336&r=all |
| By: | Gopakumar Achuthankutty (Indira Gandhi Institute of Development Research); Souvik Roy (Economic Research Unit, Indian Statistical Institute, Kolkata) |
| Abstract: | We consider domains that exhibit single-peakedness only over a subset of linearly ordered set of alternatives. We call such domains partially single-peaked and provide a characterization of the unanimous and strategy-proof social choice functions on these domains. We obtain the following interesting auxiliary results: (i) we characterize all unanimous and strategyproof social choice functions on generalized top-connected domains, which are an important sub-class of the maximal single-peaked domain, (ii) we show that strategy-proofness and group strategy-proofness are equivalent on partially single-peaked domains, and (iii) lastly, we identify and characterize the unanimous and strategy-proof SCFs on partially single-peaked domains that are close to being anonymous. As an application of this result, we obtain a characterization of the unanimous and strategy-proof social choice functions on multi-peaked domains (Stiglitz (1974), Epple and Romano (1996a)), multiple single-peaked domains (Reffgen (2015)) and single-peaked domains on graphs (Demange (1982)), Schummer and Vohra (2002)). |
| Keywords: | Partially single-peaked domain, strategy-proofness, group strategy-proofness, partly dictatorial min-max rules |
| JEL: | D71 D82 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2020-020&r=all |
| By: | Eric Kamwa (LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles) |
| Abstract: | A voting rule is said to be vulnerable to the truncation paradox if some voters may want to favor a more preferable outcome by providing only a part of their sincere rankings on the competing candidates rather than listing their entire preference rankings on all the competing candidates. This voting paradox was first introduced by Brams (1982). This paper provides for three-candidate elections and for large electorates, a characterization and an evaluation of the likelihood of the truncation paradox for the whole family of one-shot scoring rules and runoff scoring rules. We assume three scoring models for dealing with incomplete rankings: the pessimistic, the optimistic and the averaged scoring models. We find that under the optimistic model, all the one-shot scoring rules are immune to the truncation paradox and this paradox is more likely to occur under the pessimistic scoring model than under the averaged scoring model. For each of the scoring runoff rules, we find that the likelihood of the truncation paradox is higher under the pessimistic scoring model and it is lower under the optimistic scoring model. Our analysis is performed under the Impartial Anonymous Culture assumption. |
| Date: | 2020–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02879390&r=all |
| By: | Kleiner, Andreas; Moldovanu, Benny |
| Abstract: | We study how parliaments and other committees vote to select one out of several alternatives in situations where not all available options can be ordered along a "left-right" axis. Practically all democratic parliaments routinely use Sequential Binary Voting Procedures in order to select one of several alternatives. Which agendas are used in practice, and how should they be designed ? We assume that preferences are single-peaked on an arbitrary tree and we study convex agendas where, at each stage in the sequential, binary voting process, the tree of remaining alternatives is divided in two subtrees that are subjected to a binary Yes-No vote. In this wide class of situations we show that dynamic, strategic voting is congruent with sincere, unsophisticated voting even if agents are privately informed, and no matter what their beliefs about other voters are. We conclude the paper by illustrating the empirical implications of our results for two large case studies from Germany and from the UK. |
| Keywords: | agenda; Revealed Preference; voting |
| JEL: | D02 D72 D82 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14183&r=all |
| By: | Vincent Pons (Harvard Business School - Harvard University [Cambridge], National Bureau of Economic Research - National Bureau of Economic Research); Clémence Tricaud (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique); Vestal Mcintyre (Harvard Kennedy School - Harvard Kennedy School) |
| Abstract: | Voters who support a candidate with little or no chance of winning face a choice: whether to express their true preference, vote for their preferred candidate, and risk wasting their vote; or vote strategically for a second-best candidate who is more likely to be in a position to win. To explore this tradeoff, this study focuses on French parliamentary and local elections, in which the top two candidates always qualify for the second round, and others also qualify if they get a number of voters higher than 12.5 percent of registered citizens. Results show that third candidates who qualify for the second round tend to prefer staying in the race rather than dropping out. Many of the third candidates' supporters then act expressively and vote for them instead of their second-best candidate among the top two. The study finds this disproportionally harms the candidate ideologically closest to the third and often causes their defeat. This behavior by voters and candidates likely affects the results of many elections beyond those in the study, including European elections and other proportional elections, where voters face similar trade-offs. The results call for ideologically similar parties to reach agreements limiting the number of candidates or lists that are competing, and for the adoption of voting systems in which electoral outcomes are less distorted by voters' and candidates' failure to act strategically. |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:ipppap:halshs-02516426&r=all |
| By: | Parag A. Pathak (MIT); Tayfun Sönmez (Boston College); M. Utku Ünver (Boston College); M. Bumin Yenmez (Boston College) |
| Abstract: | COVID-19 has revealed several limitations of existing mechanisms for rationing scarce medical resources under emergency scenarios. Many argue that they abandon various ethical values such as equity by discriminating against disadvantaged communities. Illustrating that these limitations are aggravated by a restrictive choice of mechanism, we formulate pandemic rationing of medical resources as a new application of market design and propose a reserve system as a resolution. We develop a general theory of reserve design, introduce new concepts such as cutoff equilibria and smart reserves, extend previously-known ones such as sequential reserve matching, and relate these concepts to current debates. |
| Keywords: | ethical rationing, reserve system, COVID-19, vaccine, ventilator |
| JEL: | D45 D47 I14 |
| Date: | 2020–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:1015&r=all |
| By: | Julien Combe (UCL - University College of London [London]); Victor Hiller (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - Sorbonne Universités); Olivier Tercieux (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Benoît Audry (Agence de la biomédecine [Saint-Denis la Plaine]); Yinghua He (Rice University [Houston]); Christian Jacquelinet (Agence de la biomédecine [Saint-Denis la Plaine], IPP - Institut des politiques publiques); Marie-Alice Macher (Agence de la biomédecine [Saint-Denis la Plaine], INSERM U1018, Faculté de Médecine Paris Sud - INSERM - Institut National de la Santé et de la Recherche Médicale) |
| Abstract: | Many countries, including France, have seen a sharp increase in the number of renal disease patients waiting for a transplant. The shortage of kidney transplants has led some countries to develop "paired donation" programmes, which allow patients who can only find incompatible living donors to "swap" donors in order to receive a compatible transplant. In France, the number of additional transplants obtained through this programme is very limited, due in large part to the strict legal framework governing paired donations. For example, the law stipulates that an exchange can only take place between two patient / donor pairs. In its June 2018 summary report, the French National Consultative Ethics Committee (CCNE) lays out avenues to reform the paired donation programme. The French government is expected to present a draft law on revision of the bioethics law in the coming months. It therefore struck us as important to assess the potential effect on transplant numbers if the law were changed to authorise more exible practices in the paired donation programme. On the face of things, increasing the number of patient / donor pairs allowed to take part in an exchange seems like a good way of generating more transplants, but we show that this measure has only a modest impact. A different approach, which has proven effective in other countries, is to allow "donation chains". We show that allowing donation chains that begin with deceased donors, even at modest frequency, can more than triple the number of transplants. |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:ipppap:halshs-02516424&r=all |
| By: | Seungjin Han |
| Abstract: | This paper studies competing mechanism games with no restrictions on the complexity of mechanisms where principals can announce mechanisms and agents select and communicate with at most one principal. It proposes the solution concept of robust quasi ex-post equilibrium in which agents' strategies of communicating with a non-deviating principal is ex-post optimal. Two simple revelation principles are established. The Strong Revelation Principle allows us to check if an equilibrium allocation in a specific competition model is a robust quasi ex-post equilibrium allocation. The Weak Revelation Principle leads to the characterization of the set of robust quasi ex-post equilibrium allocations in terms of model primitives. |
| Keywords: | ex-post incentive compatibility; competing mechanisms; quasi ex-post equilibrium; Revelation Principles |
| JEL: | C72 D47 D82 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2020-11&r=all |
| By: | Dugast, Jerome; Uslu, Semih; Weill, Pierre-Olivier |
| Abstract: | Should regulators encourage the migration of trade from over-the-counter (OTC) to centralized markets? To address this question, we consider a model of equilibrium and socially optimal market participation of heterogeneous banks in an OTC market, in a centralized market, or in both markets at the same time. We find that banks have the strongest private incentives to participate in the OTC market if they have the lowest risk-sharing needs and highest ability to take large positions. These banks endogenously assume the role of OTC market dealers. Other banks, with relatively higher risk-sharing needs and lower ability to take large positions, lie at the margin: they are indifferent between the centralized market and the OTC market, where they endogenously assume the role of customers. We show that more customer bank participation in the centralized market can be welfare improving only if banks are mostly heterogeneous in their ability to take large positions in the OTC market, and if participation costs induce banks to trade exclusively in one market. Empirical evidence suggests that these conditions for a welfare improvement are met. |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14258&r=all |
| By: | David Bounie; Antoine Dubus; Patrick Waelbroeck |
| Abstract: | We investigate the strategies of a data intermediary selling consumer information to firms for price discrimination purpose. We analyze how the mechanism through which the data intermediary sells information influences how much consumer information she will collect and sell to firms, and how it impacts consumer surplus. We consider three selling mechanisms tailored to sell consumer information: take it or leave it, sequential bargaining, and auctions. We show that the more information the intermediary collects, the lower consumer surplus. Consumer information collection is minimized, and consumer surplus maximized under the take it or leave it mechanism, which is the least profitable mechanism for the intermediary. We discuss two regulatory tools – a data minimization principle and a price cap – that can be used by data protection agencies and competition authorities to limit consumer information collection, increase consumer surplus, and ensure a fair access to information to firms. |
| Keywords: | market for information, competition, price discrimination, data collection, privacy, selling mechanisms |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8307&r=all |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Philipp Strack (Cowles Foundation, Yale University) |
| Abstract: | A single seller faces a sequence of buyers with unit demand. The buyers are forwardlooking and long-lived but vanish (and are replaced) at a constant rate. The arrival time and the valuation is private information of each buyer and unobservable to the seller. Any incentive compatible mechanism has to induce truth-telling about the arrival time and the evolution of the valuation. We derive the optimal stationary mechanism in closed form and characterize its qualitative structure. As the arrival time is private information, the buyer can choose the time at which he reports his arrival. The truth-telling constraint regarding the arrival time can be represented as an optimal stopping problem. The stopping time determines the time at which the buyer decides to participate in the mechanism. The resulting value function of each buyer cannot be too convex and must be continuously differentiable everywhere, reflecting the option value of delaying participation. The optimal mechanism thus induces progressive participation by each buyer: he participates either immediately or at a future random time. |
| Keywords: | Dynamic Mechanism Design, Observable Arrival, Unobservable Arrival, Repeated Sales, Interim Incentive Constraints, Interim Participation Constraints, Stopping Problem, Option Value, Progressive Participation |
| JEL: | D44 D82 D83 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2189r2&r=all |
| By: | László Á. Kóczy (Institute of Economics, Centre for Economic and Regional Studies, Tóth Kálmán u. 4., H-1097 Budapest, Hungary and Department of Finance, Faculty of Economic and Social Sciences, Budapest University of Technology and Economics, Magyar tudósok körútja 2., H-1111 Budapest, Hungary) |
| Abstract: | The Covid-19 epidemic highlighted the significance of externalities: contacts with other people do not only affect our chances of getting infected but also our entire network.We introduce a model for coalitional network stability in networks with widespread externalities. The network function form generalises the partition function form of cooperative games in allowing the network structure to be taken into account. The recursive core for network function form games generalises the recursive core for such environments and its properties also rhyme with the corresponding inclusion properties of the optimistic and pessimistic recursive cores and can be seen as a modification of pairwise stability to a coalitional setting where the involvement of more players allows for the -- partial -- internalisation of the externalities, but we also allow residual players to endogenously respond to any externalities that may affect them. We present two simple examples to illustrate positive and negative externaliti.The first is of a favour network and show that the core is nonempty when players must pay transfers to intermediaries; this simple setting also models economic situations such as airline networks. The second models social contacts during an epidemic and finds social bubbles as the solution. |
| Keywords: | externalities, networks, recursive core, social bubble |
| JEL: | C71 C72 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:2026&r=all |