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Author: Andrei Bremzen
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Languages : en
Pages : 71
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(Cont.) the auctioneer are analyzed.
Author: Andrei Bremzen
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Category :
Languages : en
Pages : 71
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(Cont.) the auctioneer are analyzed.
Author: BYEONGHYEON JEONG
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Languages : en
Pages : 74
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This dissertation studies market design and auction theory. Chapter 1 studies the impact of school choice on segregation. It shows that the popular school choice mechanisms lead to substantially different school and residential segregation, an important and overlooked aspect of choosing among school choice mechanisms. We show that open enrollment policy in public school choice program can decrease diversity of individual schools and increase segregation depending on which student allocation mechanism is used. Without open enrollment, we study the model of location choice and show that segregation is mainly associated with income. In comparing mechanisms, we show that Boston mechanism fosters segregation more than the deferred acceptance. With open enrollment, the difference between BM and DA becomes more drastic. We show that BM can actually intensify segregation when open enrollment policy is adopted, while DA is more resilient to segregation. The deferred acceptance with multi tie breaking creates maximally diverse schools. Chapter 2 considers conventional auctions when the seller can design bid spaces. Any symmetric equilibrium in a second price auction with bid spaces can be replicated with an equilibrium in a first price auction with bid spaces, but the converse doesn't hold. First price auctions with designed bid spaces revenue dominates second price auction with designed bid spaces, and well-designed first price auction is an optimal selling mechanism. Chapter 3 studies one-to-one matching environment without transfer in the presence of incomplete information on one-side. The existing notions of stability under incomplete information are studied and two alternatives are proposed. Weak Bayesian stability requires that the beliefs of the agents are dervided from a common prior via Bayes' rule and are internally consistent with the presumption that the given matching is stable. Strong Bayesian stability refines weak Bayesian stability by requiring the beliefs of agents are also externally consistent in the sense that the beliefs are narrowed down only when there is a valid reason.
Author: Seungwon (Eugene) Jeong
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Languages : en
Pages :
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This dissertation consists of three essays on market design and auction theory. In Chapter 1, I introduce new multidimensional auction mechanisms. In many auctions, because of externalities, each bidder has a different maximum willingness to pay in order to beat each specific competitor, which causes the following new problem. When there are three bidders, two bidders might compete against each other unnecessarily and have worse payoffs than if they had lost to the third bidder, i.e., the two bidders have "group winner regret, " which can also lead to inefficiency. While no one-dimensional-bid mechanism is efficient, the Vickrey-Clarke-Groves (VCG) may require losers to pay. This paper introduces a novel mechanism, the "multidimensional second-price" (MSP) auction (and its open ascending version), and characterizes it. MSP is free of a loser's payment, pairwise stable, and has good incentive properties, including no group winner regret. Moreover, the winner cannot win at any different price by any misreport, and a loser cannot be better off winning by any misreport. MSP is strategyproof for a bidder without externalities imposed by others, and it reduces to the second-price auction when there are no externalities. Simulations suggest that MSP outperforms the second-price auction in terms of both revenue and efficiency. In Chapter 2, I study properties of VCG when externalities exist, and introduce shill bidding strategies that weakly dominate truthful bidding. When externalities exist, VCG is efficient, incentive compatible, and individually rational. However, as occurs in package auctions without externalities, VCG outcomes may not be in the core. Moreover, VCG is not pairwise stable. Due to externalities, several additional problems occur. VCG may require losing bidders to pay, which might be undesirable. Also, it might be budget infeasible, and the auctioneer might need to pay the winner a subsidy. The subsidy problem can occur even when all bids are positive. Furthermore, unlike package auctions without externalities, there exists a shill bidding strategy that weakly dominates truthful bidding. In addition, when this shill bidding is used, there is no Nash equilibrium. Each bidder is better off using an infinite number of shills, which eventually makes VCG undefined. In Chapter 3, I study properties of VCG in the advertising auction setting. Even though VCG is incentive compatible (IC) in the advertising auction setting, the actual implementation of VCG in practice is not VCG per se. The main reason is that the price needs to be determined when the billing event happens at the same time as the estimation of click-through rate (CTR) or position discount (PD) is occurring. After all, advertising auctions charge the estimate of externalities. However, even in this "estimated" VCG (eVCG), CTR miscalibration does not ruin IC. Even when PD miscalibration exists, IC still holds with "perfect competition." Regarding efficiency and revenue, both CTR and PD miscalibrations matter. Interestingly, however, the revenue of the auctioneer does not necessarily decrease by underbidding.
Author: Christoph Schwaiger
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Languages : en
Pages : 0
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Author: Youngwoo Koh
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Languages : en
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Under the first-price auction, we show that any equilibrium converges to an equilibrium as the randomness diminishes and provide a characterization of the limit equilibrium. We also provide a constructive example of a mixed-strategy equilibrium with two firms when the randomness is moderate.
Author: Phuong Chi Le
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Languages : en
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This dissertation studies two problems in market design: the random assignment with fractional endowments, and combinatorial auction with budget-constrained bidders. In the random assignment problem, a number of objects has to be assigned to a number of agents. Though the objects are indivisible, an assignment can be probabilistic: it can give an agent some probability of getting an object. I first formulate an exchange economy that resembles the random assignment problem and prove the existence of competitive equilibrium in this economy. I then propose a pseudo-market mechanism for the random assignment problem that is based on the competitive equilibrium. This mechanism is individually rational, Pareto Optimal and justified envy-free. The mechanism is, however, not incentive compatible. Budget constraints of the bidders are a very relevant feature in combinatorial auctions. I show that they pose serious challenges to many prominent existing auction formats. Given the limitations of existing mechanisms, it is useful to know what mechanisms can accommodate budget constraints. I restrict my search to mechanisms that are reasonable: they must be incentive compatible, individually rational, symmetric, non-wasteful and non-bossy. First focusing on the greedy domain, in which a bidder's marginal values, if non-zero, always exceeds his budget, I show that there exists an unique reasonable mechanism, called the Iterative Second Price Auction. For the general domain, however, no reasonable mechanism exists. I propose a mechanism that is a partial solution, called budget VCG. It is based on the principle that a winning bidder must be able to pay the externality that he imposes on other bidders. The budget VCG mechanism partially attains Pareto optimality and has some good incentive properties.
Author: Edward Gilbert Augenblick
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Languages : en
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This dissertation is the combination of three distinct papers on Behavioral Economics and Market Design. In the first paper, I theoretically and empirically analyze consumer and producer behavior in a relatively new auction format, in which each bid costs a small amount and must be a small increment above the current high bid. I describe the set of equilibrium hazard functions over winning bids and identify a unique function with desirable conditions. Then, I examine bidder behavior using two datasets of 166,000 auctions and 13 million individual bids, captured with a real-time collection algorithm from a company called Swoopo. I find that players overbid significantly in aggregate, yielding average revenues of 150% of the good's value and generating profits of €18 million over four years. While the empirical hazard rate is close to the predicted hazard rate at the beginning of the auction, it deviates as the auction progresses, matching the predictions of my model when agents exhibit a sunk cost fallacy. I show that players' expected losses are mitigated by experience. Finally, I estimate both the current and optimal supply rules for Swoopo using high frequency data, demonstrating that the company achieves 98.6% of potential profit. The analysis suggests that over-supplying auctions in order to attract a larger userbase is costly in the short run, creating a large structural barrier to entrants. I support this conclusion using auction-level data from five competitors, which establishes that entrants collect relatively small or negative daily profits. The second paper (joint with Scott Nicholson) addresses the impact of making multiple previous choices on decision making, which we call "choice fatigue." We exploit a natural experiment in which different voters in San Diego County are presented with the same contest decision at different points on the ballot, providing variation in the number of previous decisions made by the voters. We find that increasing the position of a contest on the ballot increases the tendency to abstain and to rely on decision shortcuts, such as voting for the status-quo or the first candidate listed in a contest. Our estimates suggest that if an average contest was placed at the top of the ballot (when voters are "fresh"), abstentions would decrease by 10%, the percentage of "no" votes on propositions (a vote for the status-quo) would fall by 2.9 percentage points, and the percentage of votes for the first candidate would fall by .5 percentage points. Interestingly, if this occurred, our results suggests that 22 (6.25%) of the 352 propositions in our dataset would have passed rather than failed. Implications of the results range from the dissemination of information by firms and policy makers to the design of electoral institutions and the strategic use of ballot propositions. The third paper (joint with Jesse Cuhna) paper presents evidence from a field experiment on the impact of inter-group competition on intra-group contributions to a public good. We sent political solicitations to potential congressional campaign donors that contained either reference information about the past donations of those in the same party (cooperative treatment), those in the competing party (competition treatment), or no information (the control group). The donation rate in the competitive and cooperative treatment groups was 85% and 42% above that in the control, respectively. Both treatments contained a monetary reference point, which influenced the distribution of donations. While the cooperative treatment induced more contributions concentrated near the mentioned reference point, the competitive treatment induced more contributions at nearly twice the level of the given reference point, leading to a higher total contributed amount. This suggests that both cooperative and "pro-social" motives can drive higher contribution rates and total contributions, but the elicitation of competitive behavior can be more profitable in certain fundraising situations.
Author: Deddy Priatmodjo Koesrindartoto
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Languages : en
Pages : 346
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Three papers in this dissertation are entirely self-contained. The papers are linked both through the methodologies used and through the issues addressed. Each of the paper seeks to understand the complexity effects of market design issues by using agent-based computational economic approach. The first essay addresses the question of which auction pricing rule should Treasury use that yields the highest revenue, especially whether the Treasury should use a discriminatory-price rule or a uniform-price one. Computational experiments are carefully designed based on four treatment factors: (1) the buyers' learning representation; (2) the number of buyers participating in the auction; (3) the total security demand capacity of buyers relative to the Treasury offered security supply (4) volatility of security prices in the secondary market. Key findings in this study show that Treasury revenue varies systematically with changes of treatments factor. The second essay tries to answer the question of what is the best bidding rule for multi-unit sealed-bid double auctions. Extending the earlier theoretical work which suggested that submitting supply offers in the form of price-quantity supply functions P(Q) will benefit the seller under one-sided auction with uncertain demand. However, this study results show that under double-sided multi-unit auction in which seller face a similar uncertain demand, submitting P(Q) supply offers not necessarily benefited sellers. Moreover, strategic interaction effects among players using P(Q) rules can lower sellers profit and overall market efficiency. Such insights are critical, especially to market designers who are concerned about the detailed aspects of market design implementation. The third essay addresses the experimental testing of the recently proposed wholesale power market design by Federal Energy Regulatory Commission. This Wholesale Power Market Platform (WPMP) is a complex market that requires market participants to simultaneously bid into real-time, day-ahead, ancillary, and transmission rights markets. The study main goals are to gain understanding the nature of this complex market design, at the same time to test whether WPMP design results in efficient, fair, robust market operations overtime, especially under conditions in which participants' strive to gain market power through strategic pricing, capacity withholding, and any other imaginable strategies.
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Languages : en
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This Ph. D. thesis is composed of four independent research papers in the field of Market Design. It begins with a general introduction for all four papers and ends with a brief conclusion. In this thesis, I study the impact of heterogeneous market participants on allocation outcomes in different market mechanisms; in addition, how to design alternative mechanisms that can more effectively allocate scarce resources with diverse economic and social goals. Chapter 1 studies the impact of affirmative action policies in the context of school choice. It addresses the following two questions: what are the causes of possible perverse consequence of affirmative action policies, and when the designer can effectively implement affirmative actions without unsatisfactory outcomes. Using the minority reserve policy in the student optimal stable mechanism as an example, I show that two acyclicity conditions, type-specific acyclicity and strongly type-specific acyclicity, are crucial for effective affirmative action policies. However, these two cycle conditions are almost impossible to be satisfied in any finite market in practice. Given the limitation of the point-wise effectiveness in finite markets, I further illustrate that the minority reserve policy is approximately effective in the sense that the probability of a random market containing type-specific cycles converges to zero when the copies of schools grow to infinite. Chapter 2 addresses the question of how ex ante asymmetry affects bidders' equilibrium strategies in two popular multi-unit auction rules: uniform-price auction (UPA) and discriminatory-price auction (DPA). I characterize the set of asymmetric monotone Bayes-Nash equilibria in a simple multi-unit auction game in which two units of a homogeneous object are auctioned among a set of bidders. I argue that bidders' strategic behavior essentially comes from their diverse market positions (i.e., the winning probability and the probability of deciding the market-clea
Author: Aaron Luke Bodoh-Creed
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Languages : en
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The focus of this dissertation is the role of information in the determination of market outcomes. The first essay provides a novel framework for studying large market mechanisms with an application to the information aggregation properties of uniform price auctions. The second essay analyzes a model of mood and associative memory and shows that this bias could explain anomalous results in the behavioral finance and organizational behavior literatures. The third and final essay analyzes ambiguity aversion and how it affects outcomes in general mechanisms. The first essay, "Mean Field Approximation of Large Games, " provides a general framework for approximating the equilibria of games with many participants using analytically tractable nonatomic limit games. We prove that if the game is continuous, then the set of equilibria is upper hemicontinuous in the number of agents. This implies that we can use equilibrium strategies of the limit game as an approximation of the equilibrium actions of the agents in the large finite game. We argue that this continuity property implies that generic large, continuous markets are almost competitive in the limit. We use our framework to analyze multi-unit demand uniform price auctions with both a common value component and bidders who value successive units as complements. We show that these auctions fully reveal the state of the world asymptotically and result in ex post efficient allocations with arbitrarily high probability in the asymptotic limit. As a second application, we provide a framework for approximating large stochastic games using dynamic competitive equilibria with applications to macroeconomics, industrial organization, engineering and computer science. The second essay, "Mood and Associative Memory, " examines the biases in memory caused by an agent's affective state. Within the psychology literature, it is a well established fact that decision makers in a positive emotional state are optimistic about the odds of positive random events and agents in a negative emotional state are pessimistic. By building a mathematical model firmly grounded on psychological primitives, we develop a behavioral decision theory framework that can be utilized in a wide range of microeconomic models. We apply our model to study employee morale and clarify a severely conflicted literature on morale within the Organizational Behavior literature. We also show that biases in memory are a potential explanation for a wide range of asset pricing anomalies such as excess volatility, short run underreaction and long run overreaction to news, and the influence of non-fundamental events. Our model provides a tool for policy makers to analyze the effects of biases in memory on the response of agents to firms, markets, and government policies and can be used to identify situations in which either public or private intervention may be required to ameliorate the effects of the agents' errors in judgment. The third and final essay, "Ambiguous Beliefs and Mechanism Design, " explores the effects of ambiguity aversion, also known as Knightian Uncertainty, on mechanism design theory. Knightian uncertainty refers to risk within the economy that is not characterized by a stochastic process commonly known to the agents. Compelling psychological data, such as the classical Ellsberg Paradox, have shown that agents reveal a strong aversion to Knightian Uncertainty above and beyond the risk aversion considered in neoclassical microeconomic theory. Policy makers ought to be especially concerned about the effects of ambiguity aversion, neglected in traditional studies of mechanism and market design, in situations where the agents are unfamiliar with the mechanism and the economic environment the mechanism creates. We unify the Multiple Prior Expected Utility (MEU) model of ambiguity aversion with the tools of contract theory to provide a general framework to analyze the effects of ambiguity aversion in market settings and use these tools to assess the effect of ambiguity aversion on auctions and bargaining problems. We show that the first and second price auction cannot be ranked when the agents are ambiguity averse, derive the optimal auction format, and study the effects of ambiguity on auction entry. We also prove that ambiguity aversion can be efficiency enhancing in ex ante budget balanced mechanisms and revenue enhancing in ex post efficient bargaining mechanisms.
