Isa Emin Hafalir

Efficiency in coalition games with externalities

A natural extension of superadditivity is not sufficient to imply that the grand coalition is efficient when externalities are present. We provide a condition, analogous to convexity, that is sufficient for the grand coalition to be efficient and show that this also implies that the (appropriately defined) core is nonempty. Moreover, we propose a mechanism which implements the most efficient partition for all coalition formation games and characterizes the resulting payoff division.

Stability of marriage with externalities

In many matching problems, it is natural to consider that agents may have preferences not only over the set of potential partners but also over what other matches occur. Once such externalities are considered, the set of stable matchings will depend on what agents believe will happen if they deviate. In this paper, we introduce endogenously generated beliefs (which depend on the preferences). We introduce a particular notion of endogenous beliefs, called sophisticated expectations, and show that with these beliefs, stable matchings always exist.

A near Pareto optimal auction with budget constraints

In a setup where a divisible good is to be allocated to a set of bidders with budget constraints, we introduce a mechanism in the spirit of the Vickrey auction. In the mechanism we propose, understating budgets or values is weakly dominated. Since the revenue is increasing in budgets and values, all kinds of equilibrium deviations from true valuations turn out to be beneficial to the auctioneer. We also show that ex-post Nash equilibrium of our mechanism is near Pareto optimal in the sense that all full winnersʼ values are above all full losersʼ values.

Expertise in Online Markets

We examine the effect of the presence of knowledgeable buyers (experts) in online markets where auctions with a hard close and posted prices are widely used. We model buyer expertise as the ability to accurately predict the quality, or condition, of an item. In auctions with a hard close, sniping – submitting bids in the last minute – emerges as an equilibrium strategy for experts. We show that non-experts bid more aggressively as the proportion of experts increases. As a consequence, we establish that the auction platform may obtain a higher revenue by (i) enforcing a hard close and allowing sniping, and (ii) withholding information regarding the quality of the item. Moreover, in online markets where both auctions and posted prices are available, we show that the presence of experts allows the sellers of high quality items to signal their quality by choosing to sell via auctions.

Matching with Aggregate Externalities

Certain aggregate externalities, like those due to knowledge and public goods, do not change very much in response to changes in two individuals’ actions. Thus, individuals rationally regard the level of the externality as fixed in their negotiations with each other. We leverage this observation to develop a general framework for the existence of stable matchings in moderately sized one-to-one matching games, and we characterize intuitive restrictions on preferences that are sufficient for existence

Multi-Unit Auctions with Budget Constraints

Motivated by sponsored search auctions, we study multi-unit auctions with budget constraints. In the mechanism we propose, Sort-Cut, understating budgets or values is weakly dominated. Since Sort-Cuts revenue is increasing in budgets and values, all kinds of equilibrium deviations from true valuations turn out to be beneficial to the auctioneer. We show that the revenue of Sort-Cut can be an order of magnitude greater than that of the natural Market Clearing Price mechanism, and we discuss the efficiency properties of its ex-post Nash equilibrium.

Core Deviation Minimizing Auctions

In a stylized environment with complementary products, we study a class of dominant strategy implementable direct mechanisms and focus on the objective of minimizing the expected surplus from core deviations. For this class of mechanisms, we formulate the core deviation minimization problem as a calculus of variations problem and numerically solve it for some interesting special cases. We then compare the core deviation surplus in the optimal auction (CDMA) to that in Vickrey-Clark-Groves mechanism (VCG) and core-selecting auctions (CSAs). We find that the expected surplus from core deviations can be significantly smaller in CDMA than that in both VCG and CSAs. Copyright Springer-Verlag Berlin Heidelberg 2015

Parallel Innovation Contests

With the advancements in information technology and the Internet, organizations have started to look beyond their boundaries in their search for innovations (Chesbrough 2003). For example, 85% of top global brands have used crowdsourcing in the last ten years (Chen et al. 2018). A prominent way of crowdsourcing is the innovation contest . In an innovation contest, an organizer elicits innovative solutions to challenging problems from a group of agents, and gives awards to the agent who submits the best solution. Innovation contests have evolved into an industry where billions of dollars are awarded by contest organizers annually. With the increased popularity of contests, crowdsourcing platforms such as InnoCentive and Topcoder now organize numerous contests, and generate

Call Auctions with Contingent Orders

1 billion in revenue with an annual growth rate of 37.1% (Chen et al. 2018). For example, InnoCentive organizes around 200 contests annually for its customers in subject categories such as business and chemistry. These contests are often run in parallel, and InnoCentive members (agents) often participate in multiple contests to win cash awards ranging from

Selling Goods of Unknown Quality: Forward versus Spot Auctions

5000 to