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on Economic Design |
| By: | Laura Doval; Pablo Schenone |
| Abstract: | We provide a framework to study stability notions for two-sided dynamic matching markets in which matching is one-to-one and irreversible. The framework gives centerstage to the set of matchings an agent anticipates would ensue should they remain unmatched, which we refer to as the agent's conjectures. A collection of conjectures, together with a pairwise stability and individual rationality requirement given the conjectures, defines a solution concept for the economy. We identify a sufficient condition--consistency--for a family of conjectures to lead to a nonempty solution (cf. Hafalir, 2008). As an application, we introduce two families of consistent conjectures and their corresponding solution concepts: continuation-value-respecting dynamic stability, and the extension to dynamic markets of the solution concept in Hafalir (2008), sophisticated dynamic stability. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.04857&r= |
| By: | Jeremias Lenzi |
| Abstract: | Voting mechanisms are widely accepted and used methods for decentralized decision-making. Ensuring the acceptance of the voting mechanism's outcome is a crucial characteristic of robust voting systems. Consider this scenario: A group of individuals wants to choose an option from a set of alternatives without requiring an identification or proof-of-personhood system. Moreover, they want to implement utilitarianism as their selection criteria. In such a case, players could submit votes multiple times using dummy accounts, commonly known as a Sybil attack (SA), which presents a challenge for decentralized organizations. Is there a voting mechanism that always prevents players from benefiting by casting votes multiple times (SA-proof) while also selecting the alternative that maximizes the added valuations of all players (efficient)? One-person-one-vote is neither SA-proof nor efficient. Coin voting is SA-proof but not efficient. Quadratic voting is efficient but not SA-proof. This study uses Bayesian mechanism design to propose a solution. The mechanism's structure is as follows: Players make wealth deposits to indicate the strength of their preference for each alternative. Each player then receives an amount based on their deposit and the voting outcome. The proposed mechanism relies on two main concepts: 1) Transfers are influenced by the outcome in a way that each player's optimal action depends only on individual preferences and the number of alternatives; 2) A player who votes through multiple accounts slightly reduces the expected utility of all players more than the individual benefit gained. This study demonstrates that if players are risk-neutral and each player has private information about their preferences and beliefs, then the mechanism is SA-proof and efficient. This research provides new insights into the design of more robust decentralized decision-making mechanisms. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.01844&r= |
| By: | Lassi Ahlvik; Matti Liski; Mikael Mäkimattila |
| Abstract: | This paper develops a mechanism design approach to study externalities and re-distribution. The mechanism screens individuals’ social weights to strike a balance among broad distributional objectives, incentives to work, and incentives to reduce externalities. The welfare-optimal allocation can be decentralized through income taxation, defining income-dependent externality payments. Two applications use individual-level administrative data on incomes, pollution measures, and financial burdens to demonstrate how population characteristics shape the optimal policy on carbon emissions. |
| Keywords: | Pigouvian taxation, optimal income taxation, inequality, climate change |
| JEL: | D82 H21 H23 Q54 Q58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11174&r= |
| By: | Jan Knoepfle; Julia Salmi |
| Abstract: | We analyze the dynamic tradeoff between the generation and the disclosure of evidence. Agents are tempted to delay investing in a new technology in order to learn from information generated by the experiences of others. This informational free-riding is collectively harmful as it slows down innovation adoption. A welfare-maximizing designer can delay the disclosure of previously generated information in order to speed up adoption. The optimal policy transparently discloses bad news and delays good news. This finding resonates with regulation demanding that fatal breakdowns be reported promptly. Remarkably, the designer's intervention makes all agents better off. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.11728&r= |
| By: | Christian Ewerhart |
| Abstract: | The n-player Tullock contest with complete information is known to admit explicit solutions in special cases, such as (i) homogeneous valuations, (ii) constant returns, and (iii) two contestants. But can that model be solved more generally? In this paper, we show that key characteristics of the equilibrium, such as individual efforts, winning probabilities, and payoffs cannot, in general, be expressed in terms of the primitives of the model using basic arithmetic operations plus the extraction of roots alone. In this sense, the Tullock contest is intractable. We argue that our formal concept of tractability captures the intuitive understanding of the notion. |
| Keywords: | Tullock contest, pure-strategy Nash equilibrium, solution by radicals, Galois theory |
| JEL: | C02 C72 D72 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:447&r= |
| By: | Andrew Koh; Sivakorn Sanguanmoo; Weijie Zhong |
| Abstract: | We provide a unified analysis of how dynamic information should be designed in optimal stopping problems: a principal controls the flow of information about a payoff relevant state to persuade an agent to stop at the right time, in the right state, and choose the right action. We further show that for arbitrary preferences, intertemporal commitment is unnecessary: optimal dynamic information designs can always be made revision-proof. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.12278&r= |
| By: | Navin Kartik; Francesco Squintani; Katrin Tinn |
| Abstract: | Do elections efficiently aggregate politicians' policy-relevant private information? This paper argues that politicians' office motivation is an obstacle. In a two-candidate Hotelling-Downs model in which each candidate has socially-valuable policy information, we establish that equilibrium welfare is at best what can be obtained by disregarding one politician's information. We also find that for canonical information structures, politicians have an incentive to ``anti-pander'', i.e., to overreact to their information. Some degree of pandering -- underreacting to information -- would be socially beneficial. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.17084&r= |
| By: | Axel Ockenfels (University of Cologne & Max Planck Institute for Research on Collective Goods); Tayfun Sönmez (Boston College); M. Utku Ünver (Boston College) |
| Abstract: | The primary goal of living crossover kidney donation is to overcome medical incompatibility between donor and recipient through organ exchange and thereby increase the number of kidney transplants. Internationally, a number of best practices have been established on which our statement and recommendations are based. The Federal Ministry of Health in Germany presented an “Entwurf eines Dritten Gesetzes zur Änderung des Transplantationsgesetzes – Novellierung der Regelungen zur Lebendorganspende und weitere Änderungen” to introduce a kidney exchange program and allow new variants of living kidney donations in Germany. This represents significant progress in addressing the challenges of organ shortage and improving outcomes both for many donors and for patients with end-stage renal disease. We particularly welcome the inclusion of variants of crossover-donation (3-way exchange, non-directed donation) and the mandatory participation of transplant centers in a centralized crossover-donation system in the proposed bill and demonstrate below that these are important elements of an effective system (Section 2). We make two important recommendations for adjustments to the bill, both of which are consistent with international best practices for kidney exchange systems. First, compatible donor-recipient pairs should be allowed to participate in the exchange system. Although these pairs could perform a transplant directly, their participation can not only significantly increase the total number of transplants and shorten the waiting list (simulations suggest that the inclusion of compatible pairs could increase the number of kidney transplants through exchange by up to 160%), it is also often possible to allocate a higher quality kidney (younger donor, better tissue compatibility) to the recipient of the compatible pair through exchange (Section 3). Second, while the current provisions of the proposed bill imply the use of non-directed (anonymous) donations primarily for immediate matches with the best possible tissue compatibility on the waiting list, non-directed donations should preferably be used to initiate chains of exchanges. Kidney chains allow for more and higher quality transplants than direct allocation of the initial donation (Section 4). We also point out some ambiguities or potential errors in the bill regarding the simultaneity of operations, the exclusion of liver transplants, and cost estimates. Overall, the proposed changes have enormous potential to increase the effectiveness of the planned kidney exchange programs in Germany and to enable many more patients with renal insufficiency to receive a life-saving transplant. We hope that our paper will contribute to the best possible design of the reform. |
| Keywords: | Kidney exchange program, living donor transplants, organ shortage solutions, non-directed donation, transparent policy-reform |
| JEL: | I18 I11 D47 H51 J18 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkpbs:060&r= |
| By: | P. Battiston; M. Magnani; D. Paolini; L. Rossi |
| Abstract: | We empirically analyze the strategic proofness of a positional voting system. We exploit the setting of the Eurovision Song Contest, where each country participates both as a candidate — with an artist and a song — and with a set of voters, — including jury members, and the popular vote – and where voters attribute points according to a modified version of the Borda rule. Despite voters being forbidden from voting their country’s song, we find evidence of strategic behavior in the competition final, particularly among industry experts (jury members), who tend to attribute lower votes to close competitors of their country’s candidate. By matching Eurovision voting data to Spotify data on success and musical featuresof each competing song, we show that this behaviour is not explained by intrinsic quality or commercial success of individual songs, but is rather driven by strategic considerations. Strategic voting potentially aspects any settings where voters have an interest in specific candidates being elected, a relevant example being the election of members of international bodies: our analysis provides empirical evidence that forbidding votes for own candidates is not enough to neutralize strategic behavior. |
| Keywords: | Strategical Voting, Positional Voting, Eurovision Song Contest |
| JEL: | D72 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:par:dipeco:2024-ep02&r= |
| By: | Kevin Riehl; Anastasios Kouvelas; Michail Makridis |
| Abstract: | City road infrastructure is a public good, and over-consumption by self-interested, rational individuals leads to traffic jams. Congestion pricing is effective in reducing demand to sustainable levels, but also controversial, as it introduces equity issues and systematically discriminates lower-income groups. Karma is a non-monetary, fair, and efficient resource allocation mechanism, that employs an artificial currency different from money, that incentivizes cooperation amongst selfish individuals, and achieves a balance between giving and taking. Where money does not do its job, Karma achieves socially more desirable resource allocations by being aligned with consumers' needs rather than their financial power. This work highlights the value proposition of Karma, gives guidance on important Karma mechanism design elements, and equips the reader with a useful software framework to model Karma economies and predict consumers' behaviour. A case study demonstrates the potential of this feasible alternative to money, without the burden of additional fees. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.05132&r= |
| By: | Carolin Bauerhenne; Jonathan Bard; Rainer Kolisch |
| Abstract: | The global home healthcare market is growing rapidly due to aging populations, advancements in healthcare technology, and patient preference for home-based care. In this paper, we study the multi-day planning problem of simultaneously deciding patient acceptance, assignment, routing, and scheduling under uncertain travel and service times. Our approach ensures cardinality-constrained robustness with respect to timely patient care and the prevention of overtime. We take into account a wide range of criteria including patient time windows, caregiver availability and compatibility, a minimum time interval between two visits of a patient, the total number of required visits, continuity of care, and profit. We use a novel systematic modeling scheme that prioritizes health-related criteria as hard constraints and optimizes cost and preference-related criteria as part of the objective function. We present a mixed-integer linear program formulation, along with a nested branch-and-price technique. Results from a case study in Austin, Texas demonstrate that instances of realistic size can be solved to optimality within reasonable runtimes. The price of robustness primarily results from reduced patient load per caregiver. Interestingly, the criterion of geographical proximity appears to be of secondary priority when selecting new patients and assigning them to caregivers. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.06215&r= |
| By: | Brian McFadden |
| Abstract: | A mechanism is described that addresses the fundamental trade off between media producers who want to increase reach and consumers who provide attention based on the rate of utility received, and where overreach negatively impacts that rate. An optimal solution can be achieved when the media source considers the impact of overreach in a cost function used in determining the optimal distribution of content to maximize individual consumer utility and participation. The result is a Nash equilibrium between producer and consumer that is also Pareto efficient. Comparison with the literature on Recommender systems highlights the advantages of the mechanism.The review suggests advancements over that literature including identifying an optimal content volume for the consumer and improvements for handling multiple objectives A practical algorithm to generate the optimal distribution for each consumer is provided. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.16212&r= |
| By: | Shaun D. McRae; Frank A. Wolak |
| Abstract: | Recent energy shortfalls in renewables-dominated electricity markets call for a mechanism to ensure demand is met under all system conditions. We demonstrate severe shortcomings of an increasingly popular mechanism—reliability options—caused by its interaction with fixed-price forward contracts for energy. Large generators can trigger the option exercise, weakening the short-term incentive to sell output provided by forward contracts alone. In the longer term, hydro generators sell more forward contracts and store less water, reducing system reliability. We empirically show that Colombian generators respond to these incentives. We analyze a standardized energy contracting approach to long-term resource adequacy that does not create these economic incentives. |
| JEL: | L13 Q40 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32616&r= |