Mihai Manea

Incentives in the probabilistic serial mechanism

The probabilistic serial mechanism (Bogomolnaia and Moulin, 2001 [9]) is ordinally efficient but not strategy-proof. We study incentives in the probabilistic serial mechanism for large assignment problems. We establish that for a fixed set of object types and an agent with a given expected utility function, if there are sufficiently many copies of each object type, then reporting ordinal preferences truthfully is a weakly dominant strategy for the agent (regardless of the number of other agents and their preferences). The non-manipulability and the ordinal efficiency of the probabilistic serial mechanism support its implementation instead of random serial dictatorship in large assignment problems.

Axioms for Deferred Acceptance

The deferred acceptance algorithm is often used to allocate indivisible objects when monetary transfers are not allowed. We provide two characterizations of agent-proposing deferred acceptance allocation rules. Two new axioms-individually rational monotonicity and weak Maskin monotonicity-are essential to our analysis. An allocation rule is the agent-proposing deferred acceptance rule for some acceptant substitutable priority if and only if it satisfies non-wastefulness and individually rational monotonicity. An alternative characterization is in terms of non-wastefulness, population monotonicity, and weak Maskin monotonicity. We also offer an axiomatization of the deferred acceptance rule generated by an exogenously specified priority structure. We apply our results to characterize efficient deferred acceptance rules. Copyright 2010 The Econometric Society.

Bargaining and Efficiency in Networks

We study an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain over a unit surplus. Players who reach agreement are removed from the network without replacement. The global logic of efficient matchings and the local nature of bargaining, in combination with the irreversible exit of player pairs following agreements, create severe hurdles to the attainment of efficiency in equilibrium. For many networks all Markov perfect equilibria of the bargaining game are inefficient, even as players become patient. We investigate how incentives need to be structured in order to achieve efficiency via subgame perfect, but non-Markovian, equilibria. The analysis extends to an alternative model in which individual players are selected according to some probability distribution, and a chosen player can select a neighbor with whom to bargain.

Markov equilibria in a model of bargaining in networks

We study the Markov perfect equilibria (MPEs) of an infinite horizon game in which pairs of players connected in a network are randomly matched to bargain. Players who reach agreement are removed from the network without replacement. We establish the existence of MPEs and show that MPE payoffs are not necessarily unique. A method for constructing pure strategy MPEs for high discount factors is developed. For some networks, we find that all MPEs are asymptotically inefficient as players become patient.

A constructive proof of the ordinal efficiency welfare theorem

We provide a non-geometric constructive short proof of the ordinal efficiency welfare theorem.

Random serial dictatorship and ordinally efficient contracts

For any preference profile at which the random serial dictatorship allocation is ordinally inefficient there exists an ordering exchange contract inducing an ordinally efficient random allocation that ordinally dominates the random serial dictatorship allocation.

Serial dictatorship and Pareto optimality

Abstract In a deterministic allocation problem in which each agent is entitled to receive exactly one object, an allocation is Pareto optimal if and only if it is the outcome of a serial dictatorship. We extend the definition of serial dictatorship to settings in which some agents may be entitled to receive more than one object, and study the efficiency and uniqueness properties of the equilibrium allocations. We prove that subgame perfect equilibrium allocations of serial dictatorship games are not necessarily Pareto optimal; and generally not all Pareto optima can be implemented as subgame perfect equilibrium allocations of serial dictatorship games, except in the 2-agent separable preference case. Moreover, serial dictatorship games do not necessarily have unique subgame perfect equilibrium allocations, except in the 2-agent case, hence their outcomes are indeterminate and manipulable.

Intermediation and Resale in Networks

I study intermediation via sequential bilateral bargaining in markets with a network structure. A partition of the network into layers captures intermediation power. Competition governs trade within layers, and hold-ups generate intermediation rents in transactions between layers. Each trader’s intermediation power reflects the competition among intermediation chains as measured by the number of layers separating the trader from buyers. Trade does not maximize welfare or minimize intermediation. The interplay between competition and hold-ups determines the level of inefficiency. Eliminating middlemen or transferring intermediation costs downstream increases seller profits. Downstream and upstream competition respond oppositely to either horizontal or vertical integration.

Bargaining in dynamic markets

We study non-stationary markets in which traders are randomly matched to bargain over the price of a heterogeneous good or the terms of a partnership. The economy consists of a continuum of players drawn from a finite set of types. Players exogenously enter the market over time and exit upon trading. At every date, matching probabilities for each pair of types are determined by the endogenous distribution of trader types in the market. The balance of bargaining power at any stage depends on variations in potential gains from trade, the inflows of new traders, the structure of agreements at future dates, and the induced frequency of trading opportunities. We establish that an equilibrium always exists. Moreover, all equilibria that lead to the same evolution of the economy are payoff equivalent. However, we show that multiple self-fulfilling expectations about the trajectory of the economy, generating distinct equilibrium dynamics and payoffs, may coexist.

Steady states in matching and bargaining

We establish the existence of steady states in two classic matching and bargaining models with general trader asymmetries, search processes, and production functions.