Economics

We study a school choice problem under affirmative action policies where authorities reserve a certain fraction of the slots at each school for specific student groups, and where students have preferences not only over the schools they are matched to but also the type of slots they receive. Such reservation policies might cause waste in instances of low demand from some student groups. To propose a solution to this issue, we construct a family of choice functions, dynamic reserves choice functions, for schools that respect within-group fairness and allow the transfer of otherwise vacant slots from low-demand groups to high-demand groups. We propose the cumulative offer mechanism (COM) as an allocation rule where each school uses a dynamic reserves choice function and show that it is stable with respect to schools' choice functions, is strategy-proof, and respects improvements. Furthermore, we show that transferring more of the otherwise vacant slots leads to strategy-proof Pareto improvement under the COM.

We consider the problem of dynamic information design with one sender and one receiver where the sender observers a private state of the system and takes an action to send a signal based on its observation to a receiver. Based on this signal, the receiver takes an action that determines rewards for both the sender and the receiver and controls the state of the system. In this technical note, we show that this problem can be considered as a problem of dynamic game of asymmetric information and its perfect Bayesian equilibrium (PBE) and Stackelberg equilibrium (SE) can be analyzed using the algorithms presented in [1], [2] by the same author (among others). We then extend this model when there is one sender and multiple receivers and provide algorithms to compute a class of equilibria of this game.

An agent has access to multiple information sources, each of which provides information about a different attribute of an unknown state. Information is acquired continuously -- where the agent chooses both which sources to sample from, and also how to allocate attention across them -- until an endogenously chosen time, at which point a decision is taken. We provide an exact characterization of the optimal information acquisition strategy under weak conditions on the agent's prior belief about the different attributes. We then apply this characterization to derive new results regarding: (1) endogenous information acquisition for binary choice, (2) strategic information provision by biased news sources, and (3) the dynamic consequences of attention manipulation.

A group of experts, for instance climate scientists, is to choose among two policies f and g . Consider the following decision rule. If all experts agree that the expected utility of f is higher than the expected utility of g , the unanimity rule applies, and f is chosen. Otherwise the precautionary principle is implemented and the policy yielding the highest minimal expected utility is chosen. This decision rule may lead to time inconsistencies when an intermediate period of partial resolution of uncertainty is added. We provide axioms that enlarge the initial group of experts with veto power, which leads to a set of probabilistic beliefs that is "rectangular" in a minimal sense. This makes this decision rule dynamically consistent and provides, as a byproduct, a novel behavioral characterization of rectangularity.

I introduce a stability notion, dynamic stability, for two-sided dynamic matching markets where (i) matching opportunities arrive over time, (ii) matching is one-to-one, and (iii) matching is irreversible. The definition addresses two conceptual issues. First, since not all agents are available to match at the same time, one must establish which agents are allowed to form blocking pairs. Second, dynamic matching markets exhibit a form of externality that is not present in static markets: an agent's payoff from remaining unmatched cannot be defined independently of what other contemporaneous agents' outcomes are. Dynamically stable matchings always exist. Dynamic stability is a necessary condition to ensure timely participation in the economy by ensuring that agents do not strategically delay the time at which they are available to match.

In this paper, we study efficiency in truthful auctions via a social network, where a seller can only spread the information of an auction to the buyers through the buyers' network. In single-item auctions, we show that no mechanism is strategy-proof, individually rational, efficient, and weakly budget balanced. In addition, we propose α -APG mechanisms, a class of mechanisms which operate a trade-off between efficiency and weakly budget balancedness. In multi-item auctions, there already exists a strategy-proof mechanism when all buyers need only one item. However, we indicate a counter-example to strategy-proofness in this mechanism, and to the best of our knowledge, the question of finding a strategy-proof mechanism remains open. We assume that all buyers have decreasing marginal utility and propose a generalized APG mechanism that is strategy-proof and individually rational but not efficient. Importantly, we show that this mechanism achieves the largest efficiency measure among all strategy-proof mechanisms.

This paper proposes a simple descriptive model of discrete-time double auction markets for divisible assets. As in the classical models of exchange economies, we consider a finite set of agents described by their initial endowments and preferences. Instead of the classical Walrasian-type market models, however, we assume that all trades take place in a centralized double auction where the agents communicate through sealed limit orders for buying and selling. We find that, under nonstrategic bidding, the double auction clears with zero trades precisely when the agents' current holdings are on the Pareto frontier. More interestingly, the double auctions implement Adam Smith's "invisible hand" in the sense that, when starting from disequilibrium, repeated double auctions lead to a sequence of allocations that converges to individually rational Pareto allocations.

We propose a new method to define trading algorithms in market design environments. Dropping the traditional idea of clearing cycles in generated graphs, we use parameterized linear equations to define trading algorithms. Our method has two advantages. First, our method avoids discussing the details of who trades with whom and how, which can be a difficult question in complex environments. Second, by controlling parameter values in our equations, our method is flexible and transparent to satisfy various fairness criteria. We apply our method to several models and obtain new trading algorithms that are efficient and fair.

We study a model of electoral accountability and selection (EAS) in which voters with heterogeneous horizontal preferences pay limited attention to the incumbent's performance using personalized news aggregators. Extreme voters' aggregators exhibit an own-party bias, which hampers their abilities to discern good and bad performances. While this effect alone could undermine EAS, there is a countervailing effect stemming from partisan disagreements, which make the centrist voter pivotal and could potentially enhance EAS. Overall, increasing mass polarization and shrinking attention spans have ambiguous effects on EAS, whereas correlating voters' news signals unambiguously improves EAS and voter welfare.

We advance empirical equilibrium analysis (Velez and Brown, 2020, arXiv:1907.12408) of the winner-bid and loser-bid auctions for the dissolution of a partnership. We show, in a complete information environment, that even though these auctions are essentially equivalent for the Nash equilibrium prediction, they can be expected to differ in fundamental ways when they are operated. Besides the direct policy implications, two general consequences follow. First, a mechanism designer who accounts for the empirical plausibility of equilibria may not be constrained by Maskin invariance. Second, a mechanism designer who does not account for the empirical plausibility of equilibria may inadvertently design biased mechanisms.