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on Economic Design |
| By: | Albin Erlanson; Andreas Kleiner |
| Abstract: | A principal has $m$ identical objects to allocate among a group of $n$ agents. Objects are desirable and the principal's value of assigning an object to an agent is the agent's private information. The principal can verify up to $k$ agents, where $k |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.02031 |
| By: | Luca Anderlini (Department of Economics, Georgetown University); GaOn Kim (MIT Sloan School of Management) |
| Abstract: | We consider auctions with N+1 bidders. Of these, N are symmetric and N+1 is "sufficiently strong'' relative to the others. The auction is a "tournament'' in which the first N players bid to win the right to compete with N+1. The bids of the first N players are binding and the highest bidder proceeds to a second-price competition with N+1. When N+1's values converge in distribution to an atom above the upper end of the distribution of the N bidders and the rest of the distribution is drained away from low values sufficiently slowly, the auction's expected revenue is arbitrarily close to the one obtained in a Myerson (1981) optimal auction. The tournament design is "detail free'' in the sense that no specific knowledge of the distributions is needed in addition to the fact that bidder N+1 is stronger than the others as required. In particular, no additional information about the value of the atom is needed. This is important since mis-calibrating by a small amount an attempt to implement the optimal auction can lead to large losses in revenue. We provide an interpretation of these results as possibly providing guidelines to a seller on how to strategically "populate'' auctions with a single bidder even when only weaker bidders are available. |
| Keywords: | Strong Insider, Tournament Auction, Approximate Optimality |
| JEL: | C70 C72 C79 |
| Date: | 2024–09–17 |
| URL: | https://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~24-24-04 |
| By: | Gan, Tan; Hu, Ju; Weng, Xi |
| Abstract: | This paper investigates a two-agent mechanism design problem without transfers, where the principal must decide one action for each agent. In our framework, agents only care about their own adaptation, and any deterministic dominant incentive compatible decision rule is equivalent to contingent delegation: the delegation set offered to one agent depends on the other's report. By contrast, the principal cares about both adaptation and coordination. We provide sufficient conditions under which contingent interval delegation is optimal and solve the optimal contingent interval delegation under fairly general conditions. Remarkably, the optimal interval delegation is completely determined by combining and modifying the solutions to a class of simple single-agent problems, where the other agent is assumed to report truthfully and choose his most preferred action. |
| Keywords: | adaptation; contingent delegation; coordination; dominant strategy mechanism design |
| JEL: | J1 |
| Date: | 2023–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125399 |
| By: | Vincent Meisner; Pascal Pillath |
| Abstract: | We design the profit-maximizing mechanism to sell an excludable and non-rival good with network effects. Buyers have heterogeneous private values that depend on how many others also consume the good. We characterize an algorithm that implements the optimal allocation in dominant strategies. We apply our insights to digital content creation, and we are able to rationalize features seen in monetization schemes in this industry such as voluntary contributions, community subsidies, and exclusivity bids. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.15196 |
| By: | James Albrecht (Georgetown University); Xiaoming Cai (Peking University HSBC Business School); Pieter Gautier (Vrije Universiteit Amsterdam); Susan Vroman (Georgetown University) |
| Abstract: | This paper considers competitive search equilibrium in a market for a good whose quality differs across sellers. Each seller knows the quality of the good that he or she is offering for sale, but buyers cannot observe quality directly. We thus have a “market for lemons†with competitive search frictions. In contrast to Akerlof (1970), we prove the existence of a unique equilibrium, which is separating. Higher-quality sellers post higher prices, so price signals quality. The arrival rate of buyers is lower in submarkets with higher prices, but this is less costly for higher-quality sellers given their higher continuation values. For some parameter values, higher-quality sellers post the full-information price; for other values these sellers have to post a higher price to keep lower-quality sellers from mimicking them. In an extension, we show that if sellers compete with auctions, the reserve price can also act as a signal. |
| Keywords: | Competitive Search, Signaling |
| JEL: | C78 D82 D83 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240054 |
| By: | Zhang Xu; Wei Zhao |
| Abstract: | Two issues of algorithmic collusion are addressed in this paper. First, we show that in a general class of symmetric games, including Prisoner's Dilemma, Bertrand competition, and any (nonlinear) mixture of first and second price auction, only (strict) Nash Equilibrium (NE) is stochastically stable. Therefore, the tacit collusion is driven by failure to learn NE due to insufficient learning, instead of learning some strategies to sustain collusive outcomes. Second, we study how algorithms adapt to collusion in real simulations with insufficient learning. Extensive explorations in early stages and discount factors inflates the Q-value, which interrupts the sequential and alternative price undercut and leads to bilateral rebound. The process is iterated, making the price curves like Edgeworth cycles. When both exploration rate and Q-value decrease, algorithms may bilaterally rebound to relatively high common price level by coincidence, and then get stuck. Finally, we accommodate our reasoning to simulation outcomes in the literature, including optimistic initialization, market design and algorithm design. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.01147 |
| By: | Bary S. R. Pradelski; Bassel Tarbush |
| Abstract: | In a $\textit{satisficing equilibrium}$ each agent plays one of their $k$ best pure actions, but not necessarily their best action. We show that satisficing equilibria in which agents play only their best or second-best action exist in almost all games. In fact, in almost all games, there exist satisficing equilibria in which all but one agent best-respond and the remaining agent plays at least a second-best action. By contrast, more than one third of games possess no pure Nash equilibrium. In addition to providing static foundations for satisficing equilibria, we show that a parsimonious dynamic converges to satisficing equilibria in almost all games. We apply our results to market design and show that a mediator who can control a single agent can enforce stability in most games. Finally, we use our results to study the existence of $\epsilon$-equilibria. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.00832 |
| By: | Zhang, Shuo (Northeastern University); Kuhn, Peter J. (University of California, Santa Barbara) |
| Abstract: | We audit the job recommender algorithms used by four Chinese job boards by creating fictitious applicant profiles that differ only in their gender. Jobs recommended uniquely to the male and female profiles in a pair differ modestly in their observed characteristics, with female jobs advertising lower wages, requesting less experience, and coming from smaller firms. Much larger differences are observed in these ads' language, however, with women's jobs containing 0.58 standard deviations more stereotypically female content than men's. Using our experimental design, we can conclude that these gender gaps are generated primarily by content-based matching algorithms that use the worker's declared gender as a direct input. Action-based processes like item-based collaborative filtering and recruiters' reactions to workers' resumes contribute little to these gaps. |
| Keywords: | recommender system, algorithm, gender, job platform |
| JEL: | C93 J71 J16 O33 M50 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17245 |
| By: | Clinton Gubong Gassi (Université de Franche-Comté, CRESE, UR3190, F-25000 Besançon, France); Eric Kamwa (Université de Lorraine, BETA, F-54000 Nancy, France) |
| Abstract: | This paper introduces the q-fixed majority property for committee selection rules, which extends the traditional fixed majority principle to a flexible framework. We examine conditions under which the committee scoring rules satisfy the q-fixed majority property. Focusing on (weakly) separable rules, we find that the Bloc rule is the only which satisfies it for all q > 1/2. In addition, the q-bottom majority property is introduced, highlighting conditions under which committees can be excluded based on voter consensus. |
| Keywords: | Voting, multiwinner elections, committee scoring rules, q-fixed majority. |
| JEL: | D71 D72 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:crb:wpaper:2024-17 |
| By: | Imas, Alex; Madarász, Kristóf |
| Abstract: | We propose that a person's desire to consume an object or possess an attribute increases in how much others want but cannot have it. We term this motive imitative superiority-seeking and show that it generates preferences for exclusion that help explain a host of market anomalies and make novel predictions in a variety of domains. In bilateral exchange, trade becomes more zero-sum, leading to an endowment effect. People's value of consuming a good increases in its scarcity, which generates a motive for firms and organizations to engage in exclusionary policies. A monopolist producing at constant marginal cost can increase profits by randomly excluding buyers relative to the standard optimal mechanism of posting a common price. In the context of auctions, a seller can extract greater revenues by randomly barring a subset of consumers from bidding. Moreover, such non-price-based exclusion leads to higher revenues than the classic optimal sales mechanism. A series of experiments provides direct support for these predictions. In basic exchange, a person's willingness to pay for a good increases as more people are explicitly barred from the opportunity to acquire it. In auctions, randomly excluding people from the opportunity to bid substantially increases bids amongst those who retain this option. Consistent with our predictions, exclusion leads to bigger gains in expected revenue than increasing competition through inclusion. Our model of superiority-seeking generates "Veblen effects, "rationalizes attitudes against redistribution and provides a novel motive for social exclusion and discrimination. |
| Keywords: | social preferences; ownership; pricing; exclusivity; marketing; political economy; inequality; stratification; discrimination; OUP deal |
| JEL: | D90 D40 C90 P00 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:120207 |