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Articles 31 - 60 of 186
Full-Text Articles in Economic Theory
Getting Dynamic Implementation To Work, Yi-Chun Chen, Richard Holden, Takashi Kunimoto, Yifei Sun, Tom Wilkening
Getting Dynamic Implementation To Work, Yi-Chun Chen, Richard Holden, Takashi Kunimoto, Yifei Sun, Tom Wilkening
Research Collection School Of Economics
We develop a new class of two-stage mechanisms, which fully implement any social choice function under initial rationalizability in complete information environments. We show theoretically that our Simultaneous Report (SR) mechanisms are robust to small amounts of incomplete information about the state of nature. We also highlight the robustness of the mechanisms to a wide variety of reasoning processes and behavioral assumptions. We show experimentally that a SR mechanism performs well in inducing truth-telling in both complete and incomplete information environments and that it can induce efficient investment in a two-sided hold-up problem with ex-ante investment. The SR mechanism also …
Decentralizability Of Efficient Allocations With Heterogenous Forecasts, Shurojit Chatterji, Atsushi Kajii
Decentralizability Of Efficient Allocations With Heterogenous Forecasts, Shurojit Chatterji, Atsushi Kajii
Research Collection School Of Economics
Do price forecasts of rational economic agents need to coincide in perfectly competitive complete markets? To address this question, we define an efficient temporary equilibrium (ETE) within the framework of a two period economy. Although an ETE allocation is intertemporally efficient and is obtained by perfect competition, it can arise without the agents forecasts being completely coordinated on a perfect foresight price. Nevertheless, it entails price forecasts delicately related with each other: we show that regardless of the number of agents, there is a one dimensional set of such Pareto efficient allocations for generic endowments.
A Taxonomy Of Non-Dictatorial Unidimensional Domains, Shurojit Chatterji, Huaxia Zeng
A Taxonomy Of Non-Dictatorial Unidimensional Domains, Shurojit Chatterji, Huaxia Zeng
Research Collection School Of Economics
Non-dictatorial preference domains allow the design of unanimous social choice functions (henceforth, rules) that are non-dictatorial and strategy-proof. On a class of preference domains called unidimensional domains, we show that the unique seconds property characterizes all non-dictatorial domains. Subsequently, we provide an exhaustive classification of all non-dictatorial, unidimensional domains, based on a simple property of two-voter rules called invariance. The domains constituting the classification are semi-single-peaked domains and semi-hybrid domains (introduced here) which are two appropriate weakenings of single-peaked domains and shown to allow strategy-proof rules to depend on non-peak information of voters' preferences; the canonical strategy-proof rules for these …
Maskin Meets Abreu And Matsushima, Yi-Chun Chen, Takashi Kunimoto, Yifei Sun, Siyang Xiong
Maskin Meets Abreu And Matsushima, Yi-Chun Chen, Takashi Kunimoto, Yifei Sun, Siyang Xiong
Research Collection School Of Economics
The theory of full implementation has been criticized for using integer/modulo games, which admit no equilibrium (Jackson (1992)). To address the critique, we revisit the classical Nash implementation problem due to Maskin (1977, 1999) but allow for the use of lotteries and monetary transfers as in Abreu and Matsushima (1992, 1994). We unify the two well-established but somewhat orthogonal approaches in full implementation theory. We show that Maskin monotonicity is a necessary and sufficient condition for (exact) mixed-strategy Nash implementation by a finite mechanism. In contrast to previous papers, our approach possesses the following features: finite mechanisms (with no integer …
The Embodiment Controversy: On The Policy Implications Of Vintage Capital Models, Roberto M. Samaniego, Juliana Yu Sun
The Embodiment Controversy: On The Policy Implications Of Vintage Capital Models, Roberto M. Samaniego, Juliana Yu Sun
Research Collection School Of Economics
We explore the long-run impact of policy on the level of economic activity through changes in the vintage distribution of capital, in a model where different vintages coexist in production. Because firms can choose the vintage of capital in which they invest, investment subsidies do not affect the vintage structure of capital. In contrast, vintage-specific taxes or subsidies that target the newest vintages of capital can significantly affect output and welfare in the long run, mainly downward. Transition dynamics are rapid, so that steady-state comparisons give an accurate picture of the welfare impact of vintage tax wedges.
Weak Identification Of Long Memory With Implications For Inference, Jia Li, Peter C. B. Phillips, Shuping Shi, Jun Yu
Weak Identification Of Long Memory With Implications For Inference, Jia Li, Peter C. B. Phillips, Shuping Shi, Jun Yu
Research Collection School Of Economics
This paper explores weak identification issues arising in commonly used models of economic and financial time series. Two highly popular configurations are shown to be asymptotically observationally equivalent: one with long memory and weak autoregressive dynamics, the other with antipersistent shocks and a near-unit autoregressive root. We develop a data-driven semiparametric and identification-robust approach to inference that reveals such ambiguities and documents the prevalence of weak identification in many realized volatility and trading volume series. The identification-robust empirical evidence generally favors long memory dynamics in volatility and volume, a conclusion that is corroborated using social-media news flow data.
Probabilistic Fixed Ballot Rules And Hybrid Domains, Shurojit Chatterji, Souvik Roy, Soumyarup Sadhukhan, Arunava Sen, Huaxia Zeng
Probabilistic Fixed Ballot Rules And Hybrid Domains, Shurojit Chatterji, Souvik Roy, Soumyarup Sadhukhan, Arunava Sen, Huaxia Zeng
Research Collection School Of Economics
We study a class of preference domains that satisfies the familiar properties of minimal richness, diversity and no-restoration. We show that a specific preference restriction, hybridness, has been embedded in these domains so that the preferences are single-peaked at the “extremes” and unrestricted in the “middle”. We also study the structure of strategy-proof and unanimous Random Social Choice Functions on these domains. We show them to be special cases of probabilistic fixed ballot rules (introduced by Ehlers, Peters, and Storcken (2002)).
Correlation-Robust Auction Design, Wei He, Jiangtao Li
Correlation-Robust Auction Design, Wei He, Jiangtao Li
Research Collection School Of Economics
We study the design of auctions when the auctioneer has limited statistical information about the joint distribution of the bidders' valuations. More specifically, we consider an auctioneer who has an estimate of the marginal distribution of a generic bidder's valuation but does not have reliable information about the correlation structure. We analyze the performance of mechanisms in terms of the revenue guarantee, that is, the greatest lower bound of revenue across all joint distributions that are consistent with the marginals. A simple auction format, the second-price auction with no reserve price, is shown to be asymptotically optimal, as the number …
Are Simple Mechanisms Optimal When Agents Are Unsophisticated?, Jiangtao Li, Piotr Dworczak
Are Simple Mechanisms Optimal When Agents Are Unsophisticated?, Jiangtao Li, Piotr Dworczak
Research Collection School Of Economics
We study the design of mechanisms involving agents that have limited strategic sophistication. We define a mechanism to be simple if—given the assumed level of strategic sophistication—agents can determine their optimal strategy. We examine whether it is optimal for the mechanism designer who faces strategically unsophisticated agents to offer a simple mechanism. We show that when the designer uses a mechanism that is not simple, while she loses the ability to predict play, she may nevertheless be better off no matter how agents resolve their strategic confusion
Mechanism Design By Observant And Informed Planners, Shurojit Chatterji, Arunava Sen
Mechanism Design By Observant And Informed Planners, Shurojit Chatterji, Arunava Sen
Research Collection School Of Economics
We study the mechanism design problem where the planner can observe ex-post the first-ranked alternatives or peaks of voter preferences. We contrast this with the design problem where the planner has ex-ante information regarding the peaks of voter preferences.
Equal-Quantile Rules In Resource Allocation With Uncertain Needs, Yan Long, Jay Sethuraman, Jingyi Xue
Equal-Quantile Rules In Resource Allocation With Uncertain Needs, Yan Long, Jay Sethuraman, Jingyi Xue
Research Collection School Of Economics
A group of agents have uncertain needs on a resource, which must be allocated before uncertainty re-solves. We propose a parametric class of division rules we call equal-quantile rules. The parameter lambda of an equal-quantile rule is the maximal probability of satiation imposed on agents - for each agent, the prob-ability that his assignment is no less than his realized need is at most lambda. It determines the extent to which the resource should be used to satiate agents. If the resource is no more than the sum of the agents' lambda-quantile assignments, it is fully allocated and the rule …
Are Simple Mechanisms Optimal When Agents Are Unsophisticated?, Jiangtao Li, Piotr Dworczak
Are Simple Mechanisms Optimal When Agents Are Unsophisticated?, Jiangtao Li, Piotr Dworczak
Research Collection School Of Economics
We study the design of mechanisms involving agents that have limited strategic sophistication. The literature has identified several notions of simple mechanisms in which agents can determine their optimal strategy even if they lack cognitive skills such as predicting other agents' strategies (strategy-proof mechanisms), contingent reasoning (obviously strategy-proof mechanisms), or foresight (strongly obviously strategy-proof mechanisms). We examine whether it is optimal for the mechanism designer who faces strategically unsophisticated agents to offer a mechanism from the corresponding class of simple mechanisms. We show that when the designer uses a mechanism that is not simple, while she loses the ability to …
Government Support For Smes In Response To Covid-19: Theoretical Model Using Wang Transform, Shaun Shuxun Wang, Jing Rong Goh, Didier Sornette, He Wang, Esther Yang
Government Support For Smes In Response To Covid-19: Theoretical Model Using Wang Transform, Shaun Shuxun Wang, Jing Rong Goh, Didier Sornette, He Wang, Esther Yang
Research Collection School Of Economics
Purpose: Many governments are taking measures in support of small and medium-sized enterprises (SMEs) to mitigate the economic impact of the COVID-19 outbreak. This paper presents a theoretical model for evaluating various government measures, including insurance for bank loans, interest rate subsidy, bridge loans and relief of tax burdens. Design/methodology/approach: This paper distinguishes a firm's intrinsic value and book value, where a firm can lose its intrinsic value when it encounters cash-flow crunch. Wang transform is applied to (1) calculating the appropriate level of interest rate subsidy payable to incentivize banks to issue more loans to SMEs and to extend …
Competitive Information Disclosure In Random Search Markets, Wei He, Jiangtao Li
Competitive Information Disclosure In Random Search Markets, Wei He, Jiangtao Li
Research Collection School Of Economics
We analyze the role of competition in information provision in random search markets. Multiple symmetric senders compete for the receiver’s investment by disclosing information about their respective project qualities, and the receiver conducts random search to learn about the qualities of the projects. We show that in any symmetric Nash equilibrium, each sender chooses a strategy with the lowest possible reservation value. The receiver does not benefit from the competition of the senders, as the receiver’s expected payoff does not change when the number of senders increases.
On The Decomposability Of Fractional Allocations, Shurojit Chatterji, Peng Liu
On The Decomposability Of Fractional Allocations, Shurojit Chatterji, Peng Liu
Research Collection School Of Economics
A common practice in dealing with the allocation of indivisible objects is to treat them as infinitely divisible and specify a fractional allocation, which is then implemented as a lottery on integer allocations that are feasible. The question we study is whether an arbitrary fractional allocation can be decomposed as a lottery on an arbitrary set of feasible integer allocations. The main result is a characterization of decomposable fractional allocations, that is obtained by transforming the decomposability problem into a maximum flow problem. We also provide a separate necessary condition for decomposability.
On Incentive Compatible, Individually Rational Public Good Provision Mechanisms, Takashi Kunimoto, Cuiling Zhang
On Incentive Compatible, Individually Rational Public Good Provision Mechanisms, Takashi Kunimoto, Cuiling Zhang
Research Collection School Of Economics
This paper characterizes mechanisms satisfying incentive compatibility and individual rationality in the classical public good provision problem. Many papers in the literature obtain the results in the so-called standard model of ex ante identical agents with a continuous, closed interval of types. The main contribution of this paper is the characterization of the budget-surplus maximizing mechanism satisfying incentive compatibility and individual rationality (Theorem 1 for Bayesian implementation and Theorem 3 for dominant strategy implementation) that applies to a finite discretization over the standard model. Making use of the proposed budget-surplus maximizing mechanisms, we show that some known results do not …
A Theory Of Revealed Indirect Preference, Gaoji Hu, Jiangtao Li, John K.-H. Quah, Rui Tang
A Theory Of Revealed Indirect Preference, Gaoji Hu, Jiangtao Li, John K.-H. Quah, Rui Tang
Research Collection School Of Economics
A preference over menus is said to be an indirect preference if it is induced by a preference over the objects that make up those menus, i.e., a menu A is ranked over B whenever A contains an object that is preferred to every object in B. The basic question we address in this paper is the following: suppose an observer has partial information of an agent’s ranking over certain menus; what necessary and sufficient conditions on those rankings guarantee the existence of a preference over objects that induces the observed menu rankings? Our basic result has a wide variety …
On Strategy-Proofness And The Salience Of Single-Peakedness In A Private Goods Economy, Shurojit Chatterji, Masso Jordi, Serizawa Shigehiro
On Strategy-Proofness And The Salience Of Single-Peakedness In A Private Goods Economy, Shurojit Chatterji, Masso Jordi, Serizawa Shigehiro
Research Collection School Of Economics
We consider strategy-proof rules operating on a rich domain of preference profiles in a set up where multiple private goods have to be assigned to a set of agents with entitlements where preferences display satiation. We show that if the rule is in addition "desirable", in that it is tops-only, continuous, same-sided and individually rational with respect to the entitlements, then the preferences in the domain have to satisfy a variant of single-peakedness (referred to as smilattice single-peakedness). We also provide a converse of this main finding. It turns our that this domain coincides with the one already identified in …
Robust Virtual Implementation With Almost Complete Information, Takashi Kunimoto
Robust Virtual Implementation With Almost Complete Information, Takashi Kunimoto
Research Collection School Of Economics
Artemov, Kunimoto, and Serrano (2013a,b, henceforth, AKS) study a mechanism design problem where arbitrary restrictions are placed on the set of first-order beliefs of agents. Calling these restrictions Δ, they adopt Δ-rationalizability (Battigalli and Siniscalchi, 2003) and show that Δ-incentive compatibility and Δ-measurability are necessary and sufficient conditions for robust virtual implementation, which implies that virtual implementation is possible uniformly over all type spaces consistent with Δ-restrictions. By appropriately defining Δ in order to restrict attention to complete information environments and thereafter explicitly modelling the assumption of complete information in the language of type spaces, I re-establish the permissive implementation …
The Revealed Preference Theory Of Stable Matchings With One-Sided Preferences, Gaoji Hu, Jiangtao Li, Rui Tang
The Revealed Preference Theory Of Stable Matchings With One-Sided Preferences, Gaoji Hu, Jiangtao Li, Rui Tang
Research Collection School Of Economics
We investigate the testable implications of the theory of stable matchings in two-sided matching markets with one-sided preferences. Our main result connects the revealed preference analysis to the well-known lattice structure of the set of stable matchings, and tests the rationalizability of a data set by analyzing the joins and meets of matchings.
Interim Rationalizable Implementation Of Functions, Takashi Kunimoto, Rene Saran, Roberto Serrano
Interim Rationalizable Implementation Of Functions, Takashi Kunimoto, Rene Saran, Roberto Serrano
Research Collection School Of Economics
This paper investigates rationalizable implementation of social choice functions (SCFs) in incomplete information environments. We identify weak interim rationalizable monotonicity (weak IRM) as a novel condition and show that weak IRM is a necessary and almost sufficient condition for rationalizable implementation. We show by means of an example that interim rationalizable monotonicity (IRM), found in the literature, is strictly stronger than weak IRM as its name suggests, and that IRM is not necessary for rationalizable implementation, as had been previously claimed. The same example also demonstrates that Bayesian monotonicity, the key condition for full Bayesian implementation, is not necessary for …
A Taxonomy Of Non-Dictatorial Domains, Shurojit Chatterji, Huaxia Zeng
A Taxonomy Of Non-Dictatorial Domains, Shurojit Chatterji, Huaxia Zeng
Research Collection School Of Economics
We provide an exhaustive classification of all preference domains that allow the design of unanimous social choice functions (henceforth, rules) that are non-dictatorial and strategy-proof. This taxonomy is based on a richness assumption and employs a simple property of two-voter rules called invariance. The preference domains that form the classification are semi-single-peaked domains (introduced by Chatterji et al. (2013)) and semi-hybrid domains (introduced here) which are two appropriate weakenings of the single-peaked domains, and which, more importantly, are shown to allow strategy-proof rules to depend on non-peak information of voters’ preferences. As a refinement of the classification, single-peaked domains and …
Order On Types Based On Monotone Comparative Statics, Takashi Kunimoto, Takuro Yamashita
Order On Types Based On Monotone Comparative Statics, Takashi Kunimoto, Takuro Yamashita
Research Collection School Of Economics
This paper introduces a novel concept of orders on types by which the so-called monotone comparative statics is valid in all supermodular games with incomplete information. We fully characterize this order in terms of what we call common optimism, providing a sense in which our order has a sharp epistemic interpretation. We say that type ti′ is higher than type ti in the order of the common optimism if ti′ is more optimistic about state than ti; ti′ is more optimistic that all players are more optimistic about state than ti; and so on, ad infinitum. First, we show that …
Efficiency, Quality Of Forecasts And Radner Equilibria, Shurojit Chatterji, Atsushi Kajii
Efficiency, Quality Of Forecasts And Radner Equilibria, Shurojit Chatterji, Atsushi Kajii
Research Collection School Of Economics
We study a simple two period economy with no uncertainty and complete markets where agents trade based on forecasts about the second period spot price. We propose as our solution concept a set of forecasts with the following properties: there exist (heterogenous) forecasts contained in this set that lead to efficient allocations, the set contains only those forecasts that correspond to some efficient equilibrium, and Önally that the forecasts assign positive probability to the actual market clearing spot price. We call such a set of prices an efficient equilibrium with ambiguity, and interpret it as a generalization of Radner equilibrium …
Random Assignment Of Bundles, Shurojit Chatterji, Peng Liu
Random Assignment Of Bundles, Shurojit Chatterji, Peng Liu
Research Collection School Of Economics
We propose a model studying the random assignments of bundles with no free disposal. The key difference between our model and the one where objects are allocated (see Bogomolnaia and Moulin (2001)) is one of feasibility. The implications of this difference are significant. Firstly, the characterization of sd-efficient random assignments is more complex. Secondly, we are able to identify a preference restriction, called essential monotonicity, under which the random serial dictatorship rule (extended to the setting with bundles) is equivalent to the probabilistic serial rule (extended to the setting with bundles). This equivalence implies the existence of a rule on …
Random Assignments Of Bundles, Shurojit Chatterji, Liu Peng
Random Assignments Of Bundles, Shurojit Chatterji, Liu Peng
Research Collection School Of Economics
We propose a model studying the random assignments of bundles with no free disposal. The key difference between our model and the one where objects are allocated (see Bogomolnaia and Moulin (2001)) is one of feasibility. The implications of this difference are significant. Firstly, the characterization of sd-efficient random assignments is more complex. Secondly, we are able to identify a preference restriction, called essential monotonicity, under which the random serial dictatorship rule (extended to the setting with bundles) is equivalent to the probabilistic serial rule (extended to the setting with bundles). This equivalence implies the existence of a rule on …
The Relative Price Of Capital And Economic Structure, Roberto Samaniego, Juliana Yu Sun
The Relative Price Of Capital And Economic Structure, Roberto Samaniego, Juliana Yu Sun
Research Collection School Of Economics
Are trends in the price of capital technological in nature? First, we find that trends in the relative price of capital vary significantly across countries. We then show that a multi-industry growth model, calibrated to match differences in economic structure around the world and productivity growth rates across industries, accounts for this variation – mainly due to variation in the composition of capital. The finding indicates that the rate of change in the relative price of capital can be interpreted as investment-specific technical change – the extent to which productivity growth is relatively more rapid in the capital-producing sector. The …
Preferences With Changing Ambiguity Aversion, Jingyi Xue
Preferences With Changing Ambiguity Aversion, Jingyi Xue
Research Collection School Of Economics
We provide two extensions of Gilboa and Schmeidler (J Math Econ 18:141–153, 1989)’s maxmin expected utility decision rule to accommodate a decision maker’s changing ambiguity attitudes. The two rules are, respectively, a weighted maxmin rule and a variant constraint rule. The former evaluates an act by a weighted average of its worst and best possible expected utilities over a set of priors, with the weights depending on the act. The latter evaluates an act by its worst expected utility over a neighborhood of a set of approximating priors, with the size of the neighborhood depending on the act. Canonical representations …
Restricted Probabilistic Fixed Ballot Rules And Hybrid Domains, Shurojit Chatterji, Souvik Roy, Soumyarup Sadhukhan, Arunava Sen, Huaxia Zeng
Restricted Probabilistic Fixed Ballot Rules And Hybrid Domains, Shurojit Chatterji, Souvik Roy, Soumyarup Sadhukhan, Arunava Sen, Huaxia Zeng
Research Collection School Of Economics
We study Random Social Choice Functions (or RSCFs) in a standard ordinal mech-anism design model. We introduce a new preference domain called a hybrid domain which includes as special cases as the complete domain and the single-peaked domain. We characterize the class of unanimous and strategy-proof RSCFs on these domains and refer to them as Restricted Probabilistic Fixed Ballot Rules (or RPFBRs). These RSCFs are not necessarily decomposable, i.e., cannot be written as a convex combina-tion of their deterministic counterparts. We identify a necessary and sufficient condition under which decomposability holds for anonymous RPFBRs. Finally, we provide an axiomatic justification …
Rationalizable Incentives: Interim Implementation Of Sets In Rationalizable Strategies, Takashi Kunimoto, Roberto Serrano
Rationalizable Incentives: Interim Implementation Of Sets In Rationalizable Strategies, Takashi Kunimoto, Roberto Serrano
Research Collection School Of Economics
This paper investigates rationalizable implementation of social choice sets (SCSs) in incomplete information environments. We identify rationalizable incentive compatibility (RIC) as its key condition, argue by means of example that RIC is strictly weaker than the standard Bayesian incentive compatibility (BIC), and show that RIC reduces to BIC when we only consider single-valued SCSs (i.e., social choice functions or SCFs). We next identify additional necessary conditions and, essentially closing the gap be-tween necessity and sufficiency, obtain a sufficiency result for rationalizable implementation in general environments. We also characterize a well-studied class of economic environments in which RIC is essentially the …