Showing posts with label game theory. Show all posts
Showing posts with label game theory. Show all posts

Friday, December 8, 2023

Computers in Econ (and in market design)

 The current issue of the journal Œconomia. is devoted to The Computerization of Economics. Computers, Programming, and the Internet in the History of Economics

It includes this surprisingly grumpy-sounding take on market design, particularly on its intersection with game theory:

 Nik-Khah, Edward. "The Closed Market: Platform Design and the Computerization of Economics." Œconomia. History, Methodology, Philosophy 13-3 (2023): 877-905.

Here's a paragraph that caught my eye:

"In his book Who Gets What—And Why, the market designer Alvin Roth pronounced firms such as Google, Amazon, and Uber to be “markets,” proclaiming, “Successful designs depend greatly on the details of the market, including the culture and psychology of the participants” (Roth, 2015). One need not actually find an example of an economist counseling advisees to skip that additional course in game theory and take up cultural anthropology to arrive at the sense that matters had taken a surprising turn: only a decade before one regularly encountered brash claims that all social science worth its salt must be reducible to game theory, with market design cited as evidence for why this must be so (e.g., Binmore, 2004)."

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Here's the table of contents of the issue:

Monday, October 30, 2023

Simple Proofs of Important Results in Market Design-- (video of my talk at Berkeley's Simons Institute)

Here's a video of the talk I gave on Friday at the Simons Institute, on simple proofs of important theorems about matching, that have had impact on practical market design.

Wednesday, July 5, 2023

Eric van Damme is moving on

 It appears that the great Dutch game theorist Eric van Damme is retiring from Tilburg.

Here's the announcement from Tilburg:

Outgoing professor Van Damme: Economics serves people, 20th June 2023

"Game theory supports design markets

"Game theory is a mathematical theory that allows us to better understand how people resolve conflicts and can benefit from cooperation. Game theory is used in designing markets so that they function well, and auctions (such as this summer's auction of FM radio frequencies) to ensure that predetermined goals are met. The theory is also important in competition policy, such as in detecting cartels and preventing the abuse of dominant positions.

"In his speech, Van Damme discusses three examples from his own work: the theory of "Global Games," which predicts how coordination problems are solved and provides insights for regulating financial markets. Also, work on platform markets that played a role in a US Supreme Court ruling on the credit-card market. And finally recent research for the Ministry of Economic Affairs on the effectiveness of legislation on abuse of dominance.   

"Eric van Damme worked at Tilburg University since 1989. He started as a research professor at the then newly founded CentER and later served as director of TILEC, the Tilburg Law and Economics Center. He is a Fellow of the Econometric Society (1993) and has been a member of the Royal Netherlands Academy of Arts and Sciences, KNAW, since 2003. In 2009 he was appointed Knight of the Order of the Dutch Lion for his scholarly achievements."

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And below is a link to and some excerpts from his valedictory speech, in which (among other things) he explains game theory and economics to non-economists, and gives very eloquent thanks to those who have influenced him.  Among those are Stef Tijs, his undergraduate mentor, who he calls "the Godfather of Game Theory in the Netherlands," and later Reinhard Selten. (Selten wrote in his 1994 Nobel autobiography that  "Eric van Damme needed very little advice and is now a well known game theorist.").

Eric's lecture has a bilingual title:

The beauty and the beast; Het spel en de knikkers, Prof. dr. Eric van Damme

"I should still explain the first part of the title. The “beauty” refers to the world of science, and the “beast” is reality (including the economy).

...

"In this lecture, I will talk about how I tried to navigate between the beauty and the beast.

...

"An example: school choice

"Let me give an example of a “market” on which I did not work on myself, but which is important and which the non-economists among you might not view as a market. The question that we want to address: how, in a given city (or region), to allocate children to (high) schools? Schools differ in quality and parents prefer their children go to good schools. Furthermore, everything else equal, a school that is closer by is more attractive. It can easily happen that some schools are oversubscribed, i.e., there are more applications than there is capacity. Hence, there is scarcity of positions. In such a case, which kids should be allowed to enter their preferred school and which one not? There will be some criteria, which will be reflected in allocation rules. But what should these rules be? Lotteries are simple but may not lead to a good allocation. We also do not want to give the places to the kids of which the parents are willing to pay the most. What should we do? Note that if we really want a good solution, we should look at all the schools in the region or city together. How can we solve this problem? And what criteria should we use for judging allocations?

"There is an active line of research on these questions, with important contributions from economists from Amsterdam, who influenced the way the allocation is done there. (De Haan et al, 2023). The current literature is based on a pure mathematics paper, Gale and Shapley (1962) that was inspired by the process by which teenagers taking their first dancing lesson were matched: the girls standing on the side and the boys asking them to dance, with each boy moving on to another girl after a rejection until he found a partner or was rejected by all. Two very different situations, but with the same solution. Based on the ideas developed in this literature, we can now also match donor organs to patients in a more efficient way, and can save more lives; see Roth (2015) for a popular account. "


...

"I thank my parents. They always stimulated me to get the best out of myself and stressed the importance of education to get a better life than had been possible for them. For somebody in my generation and coming from Koewacht (Zeeuws Vlaanderen) it certainly was not common to go to university. I am grateful that my mother can be here today, healthy and strong, and still caring, not only for me, but also for the rest of our (extended) family. If I recall well, my parents’ dream was that I would become an engineer. Being all thumbs (met twee linkerhanden), this was impossible for me, but with a PhD
from Eindhoven University of Technology and with Nobel Prize Winner Al Roth speaking about “The economist as engineer” (Roth, 2002), I think I have come reasonably close.

"My headmaster of elementary school, Meester Lammens, told my parents that my Cito-toets was not representative of my capabilities and urged them to not take it too seriously. I was fortunate that, when I went to high-school, the Mammoetwet had just entered into force so that I could go from Mavo, through Havo and Atheneum, to the university without delay.

"Studying mathematics in Nijmegen showed me its beauty and taught me the importance of learning by doing. After the lectures, we had tutorials to practice the material, but, at first, it frequently seemed that the questions had nothing to do with what had been taught. But then discovering the link and the corresponding solution by oneself (with only a little bit of help) was always exciting. I am immensely grateful to Stef Tijs, the Godfather of Game Theory
in the Netherlands. Everybody who has interacted with Stef knows what an inspirational figure he was. After having followed his courses, it was clear that Game Theory would be my area and I wrote my thesis under his supervision. Stef also helped me on many other occasions and more than could be expected, and he also ensured that I got my first job in Eindhoven to do my PhD there.

"In Eindhoven, I had the privilege to work in the Operations Research Group of Jaap Wessels. This was a fantastic environment offering excellent conditions for research and stimulating supervision. The research culture forced me to go out at an early stage and present my work at conferences. When it became clear that I preferred to work on Game Theory problems rather than things like inventory management, Jaap allowed me to follow my interests, although it was only a side interest of the group. Jaap, however and rightly, insisted that I should find a “true expert” who was willing to testify that my work was indeed pushing the research frontier forward. When I met Reinhard Selten at a conference in Oberwolfach (Germany), he was willing to act as a second supervisor, even if at first I had tried to convince him that his concept of subgame perfect equilibrium did not make sense
and had thus demonstrated how much I still had to learn. Reinhard and I had many discussions, for which he also invited me to his home in Rheda-Wiedenbrück. I think these were the most intensive discussions I ever had. I am very, very grateful to Reinhard. Throughout my career I have kept Reinhard, Jaap and Stef in mind and I tried to treat my students as they (my teachers) had treated me."

Friday, June 30, 2023

Lloyd Shapley (1923-2016) Centennial

 Lloyd Harlow Shapley was born in 1923: he would be (and I guess is) 100 years old this year.  His family is assembling a website honoring his centennial. (It's part of a family of web pages devoted to the life and work of Lloyd's dad, the astronomer Harlow Shapley.)

Here's the page for the Lloyd Shapley Centennial

It appears to be a work in progress, with many links. It begins this way:

"Lloyd Shapley (1923-2016) was a Nobel prizewinning mathematician. Shapley’s "intellectual life and career ... was among the most fertile of the 20th century." For the Centennial of Lloyd’s birth the Harlow Shapley Project offers this easy-access guide to Lloyd's WORK, his favorite GAME Kriegspiel, personal STORIES not published before and his four PRIZES.

"Lloyd Shapley was one of the founding giants of game theory. He shared the 2012 Nobel Prize in Economics for his seminal work with the late David Gale on stable matching – situations in which there are no two agents who would prefer one another over their current counterparts. But "he could have won a Nobel for any of a number of his papers that initiated whole literatures,” wrote Alvin E. Roth, Lloyd’s Nobel co-winner (right).

"Mathematical giant John von Neumann (right) invited Lloyd to leave RAND for Princeton on the basis of a two-page paper Lloyd sent him. After getting his Princeton PhD Lloyd returned to RAND full-time. He was a very productive member of the fabled Mathematics Division. Lloyd was almost unbeatable in the Division’s lunchtime Kriegspiel matches. 

"The Work page has summaries of Lloyd’s main contributions prepared by Dr. Bruce E. Krell, a game theorist who was a colleague of Lloyd’s at RAND. The Work page also offers a bibliography of selected descriptions of his work. The Work includes the 1962 “marriage problem” paper with David Gale (right), which won the Nobel."

Friday, June 16, 2023

Ehud Kalai, interviewed on the past and future of game theory

Here's a half-hour video interview of Ehud Kalai, by Sandeep Baliga, that touches on the history of game theory at Northwestern and elsewhere, his work on axiomatic models of bargaining, Econ-CS (and the Kalai Prize), and more.

 

Saturday, December 10, 2022

Amnon Rapoport (1936-2022)

 Amnon Rapoport, a pioneer of experimental game theory, has died. 

Here's a brief obituary:

Amnon Rapoport, Distinguished Professor Emeritus of Management and Organizations at the University of Arizona, passed away on December 6th

I don't find his date of birth on the web, but in August of 1996 I participated in a conference in honor of his 60th birthday, at the University of North Carolina at Chapel Hill, where he had both studied and taught in the Department of Psychology.  Amnon had already had several heart attacks by then, and his students, who loved him, thought it prudent to have a celebration of his work at that relatively young age, but that caution proved unnecessary. 

Here's the volume of papers presented at that conference, edited by three of his students:

Budescu, David V., Ido Erev, and Rami Zwick, eds. Games and human behavior: Essays in honor of Amnon Rapoport. Erlbaum, 1999.

I first learned of his work when, as a grad student, I took a course in game theory taught by Michael Maschler, who told us about Amnon's experiments on the bargaining set.

He was a man ahead of his time, and maybe situated in the wrong discipline.  It seemed to him natural that psychologists should take a leading role in the experimental study of game theory, and he noted with some regret that instead that literature had been ceded to economists. Here's a paragraph from the introduction to 

Rapoport, Amnon. Experimental studies of interactive decisions. Vol. 5. Springer Science & Business Media, 2012.

"The history of experimentation in psychology is rich and old. It would have been quite natural and highly desirable for psychologists to extend their scope of research and assume a major role in the study of economic decision behavior. Psychology professes to be the general study of human behavior. Most psychologists are trained to regard their discipline as an observational science; they do not have to overcome the conditioning of many economists who think of economics as an a priori science. Psychologists' knowledge of experimental techniques is comprehensive. and their experience in conducting experiments. analyzing data. and discovering empirical regularities exceeds that of most economists. However. with the exception of research on individual choice behavior - where psychologists like Tversky, Kahneman, and Slovic have played a major role - psychologists have not contributed in any significant way to the growing research in experimental economics. Social psychologists for whom interactive behavior is the core of their discipline, have virtually abandoned the study of economic decisions in small groups to their colleagues in economics and related disciplines. "

Here's his cv as of 2017, and his google scholar page.

**********

Update: here's an email that Rami Zwick sent to the Economic Science Association (ESA):

"Dear ESA community,

It is with great sadness that we announce the passing of our teacher, mentor, colleague, co-author and friend, Professor Amnon Rapoport, in Tucson Arizona on December 6, 2022. 

Professor Rapoport served on the faculty of the University of California, Riverside School of Business; University of Arizona; UNC Chapel Hill; University of Haifa, Israel; and the Hebrew University of Jerusalem, Israel. He earned his Bachelor of Arts degree in psychology and philosophy from the Hebrew University of Jerusalem, then went on to earn his M.A. and Ph.D. in quantitative psychology at UNC Chapel Hill. 

Professor Rapoport was one of the pioneers and leaders in the experimental study and quantitative modeling of human decisions in social and interactive contexts. During his distinguished career, he published four books (and edited others) and more than 300 research papers and chapters in leading psychological, management, operation, marketing, decision theory, economics, and political science journals, and is recognized as a leading authority in many of these areas. His most important and influential work was on experimental studies of interactive decision-making behavior. This includes theoretical and empirical research on: 

Coalition formation 

Bargaining 

Social dilemmas 

Behavioral operations management 

Behavioral game theory 

Dynamic pricing 

Directed networks 

 Professor Rapoport’s work was theory-driven, and, in most cases, the theory was represented formally by mathematical (primarily, but not exclusively, game theoretical) models. At the same time, he was a meticulous and rigorous, yet imaginative and creative experimentalist. In fact, he was one of the pioneers of computerized experimentation in the domain of individual and group decision making. 

With a career spanning over 60 years, Professor Rapoport nurtured and supported the careers of generations of scholars and researchers. He will be greatly missed by his family, friends, colleagues, co-authors, and students."


Tuesday, October 18, 2022

My Morse Lecture at INFORMS 2022, tomorrow

 Tomorrow, Wednesday October19, from 8-9am Eastern time, I'll be giving the Morse Lecture at the INFORMS 2022 annual meeting in Indianapolis

Market Design: The Dialog Between Simple Abstract Models and Practical Implementation

I’ll review some of the elegantly simple models that underlie the initial designs for matching processes like the medical residency Match, school choice and kidney exchange, and the modifications, complications and  computations that were needed to get new designs adopted, implemented and maintained over the years.

You can read about the occasion of this lecture, my Philip McCord Morse Lectureship Award here.

Monday, October 17, 2022

Jacques Drèze (1929-2022)

Jacques Drèze, the eminent Belgian economist who was the founding director of the Center for Operations Research and Econometrics (CORE) at UCLouvain has died.

Aside from his considerable professional contributions as a researcher, he was an institution builder.  CORE was a center of game theory when game theory was young, and played an important role in its development.


Here is the Econometric Society memorium: IN MEMORIAM: Jacques Drèze

"CORE and its prestigious visitors’ program, thanks initially to the support from the Ford foundation, was his initiative as well as the European Doctoral Program in Quantitative Economics(EDP)."
 

Friday, March 18, 2022

David Schmeidler (1939-2022)

My old friend David Schmeidler has just passed away. 

We met very shortly after I got my Ph.D.in 1974 and moved to the University of Illinois, where he was a frequent visitor. He was already well known for his work on the nucleolus (a kind of cardinal centroid for games in characteristic function form with sidepayments, which is contained in the (ordinal) bargaining set). 

He was the very model of a modern major game theorist.  At the time we met, I remember being impressed by his breadth of interests, in connection e.g. with his paper with Elisha Pazner on fairness. I asked him how he viewed his work on fairness as connecting with his work on game theory, and as I recall he said something (briefly) to the effect that game theorists should be interested in all aspects of transactions.  I was impressed. (Decades later at dinner in our house in Boston, I told him that, and he replied "Later I decided that was all bullshit."  But I remained, and remain impressed.)

Here's a picture I took of him in 2014, speaking at a conference in Brazil organized by Marilda Sotomayor. 


David Schmeidler in Sao Paulo in 2014

He is probably best known today for his work on various models of non-expected utility theory. Here is David on Google Scholar.

 Here's a tribute to him published two years ago by Peter Wakker, who met him as a grad student in 1984, and recalls him as a man of few words, and big insights.

A Personal Tribute to David Schmeidler’s Influence by Peter P. Wakker Dans Revue économique 2020/2 (Vol. 71), pages 387 à 390

Some of his most important work is with Itzhak Gilboa, who speaks about their work here (video and transcript): Non-Bayesian Decision Theory

Itai Ashlagi recommends these of his papers:

Equilibrium points of nonatomic games,

The nucleolus of a characteristic function game

 Maxmin Expected Utility with a Non-Unique Prior,

Subjective probability and expected utility without additivity.  

*****

Update: Ali Kahn and Mark Machina write perceptive short memories here: https://saet.uiowa.edu/wp-content/uploads/sites/18/2022/03/Schmeidler-Consolidated-Copy.pdf 

Tuesday, December 28, 2021

SMBC on economists and money (and game theory)

 Here's Saturday Morning Breakfast Cereal on economists: https://www.smbc-comics.com/comic/econs

And it's a two-fer, economists are hot over at SMBC: https://www.smbc-comics.com/comic/holes



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Friday, December 17, 2021

One Hundred Years of Game Theory: Nobel Symposium in Stockholm

 I'm in Stockholm for a celebration of the 100th anniversary of Emile Borel's 1921 paper on Game Theory.

It's a three day conference, Friday through Sunday, but I gather that only Sunday will be publicly available on Zoom.

Here's the schedule for all three days:

NOBEL SYMPOSIUM “ONE HUNDRED YEARS OF GAME THEORY”, DECEMBER 17-19, 2021

My talk is on "Game theory and economic engineering: Dealing with big strategy sets, including invention of new strategies"

And here's the announcement and Zoom link for Sunday, Dec 19 (the day Borel's paper was presented in 1921)

One Hundred Years of Game Theory: Future Applications and Challenges

"On December 19, 1921, the mathematician Emile Borel published a paper which laid the foundation of game theory. He offered a new framework for analysis in economics, political science, and other social and behavioral sciences. The centennial of this publication is a good occasion to ask where we may look today for the next breakthroughs that will be important for future economics and other social sciences, and for biology and computer science. What are the most promising directions for application? What are the most important challenges?

Start time: 2021-12-19 at 14:30

End time: 2021-12-19 at 16:30

Location: via Zoom. Link will be sent to the email address provide in the registration form."

************

I hear that some of the scheduled speakers who expected to come in person on Sunday will, at the last minute, not be able to do so, due to various outbreaks of Covid, particularly at Cornell.  Fortunately we've become good at using Zoom...

Wednesday, November 17, 2021

John Morgan (1967-2021)

 Here's his obituary from Berkeley Haas, that I learned of only recently:

‘A giant of a person’: Economist John Morgan dies at 53 OCTOBER 29, 2021| BY LAURA COUNTS

"Professor John Morgan, an economist who found elegant new ways to analyze the world through the lens of game theory, and whose popular classes and sage mentorship made a deep impression on his students, passed away Oct. 6 at age 53. He died peacefully at his Walnut Creek home.

"During his nearly two decades at Berkeley Haas, Morgan left his mark through his prolific and wide-ranging research, his unconventional teaching that drew on strategy games he invented, and his generous leadership. He had been struggling with a painful autoimmune disease that put him on medical leave, but he continued with his research and had planned to resume teaching in the spring."

************

A paper of his that springs to mind is this one:

... plus shipping and handling: Revenue (non) equivalence in field experiments on ebay, by Tanjim Hossain and John Morgan, 2006, The B.E. Journal of Economic Analysis & Policy, https://doi.org/10.2202/1538-0637.1429

Abstract: Many firms divide the price a consumer pays for a good into two pieces---the price for the item itself and the price for shipping and handling. With fully rational customers, the exact division between the two prices is irrelevant---only the total price matters. We test this hypothesis by selling matched pairs of CDs and Xbox games in a series of field experiments on eBay. In theory, the ending auction price should vary inversely with the shipping charge to leave the total price paid constant. Contrary to the theory, we find that charging a high shipping cost and starting the auction at a low opening price leads to higher numbers of bidders and higher revenues when the shipping charge is not excessive. We show that these results can be accounted for by boundedly rational bidding behavior such as loss-aversion with separate mental accounts for different attributes of the price or disregard for shipping costs.


Here's his Google Scholar page: John Morgan

Monday, November 8, 2021

Approximating large games

One of the big lessons of market design is that market participants may have big strategy sets.  This means that analyzing naturally occurring strategic settings may exceed our ability to model and analyze them as fully specified games.

Here's a paper that explores an interesting, somewhat related idea:

Christian Kroer, Alexander Peysakhovich, Eric Sodomka, Nicolas E. Stier-Moses (2021) Computing Large Market Equilibria Using Abstractions. Operations Research, Articles in Advance 01 Oct 2021, https://doi.org/10.1287/opre.2021.2163

"Abstract. Computing market equilibria is an important practical problem for market design, for example, in fair division of items. However, computing equilibria requires large amounts of information (typically the valuation of every buyer for every item) and computing power. We consider ameliorating these issues by applying a method used for solving complex games: constructing a coarsened abstraction of a given market, solving for the equilibrium in the abstraction, and lifting the prices and allocations back to the original market. We show how to bound important quantities such as regret, envy, Nash social welfare, Pareto optimality, and maximin share/proportionality when the abstracted prices and allocations are used in place of the real equilibrium. We then study two abstraction methods of interest for practitioners: (1) filling in unknown valuations using techniques from matrix completion and (2) reducing the problem size by aggregating groups of buyers/items into smaller numbers of representative buyers/items and solving for equilibrium in this coarsened market. We find that in real data allocations/prices that are relatively close to equilibria can be computed from even very coarse abstractions."


Sunday, November 7, 2021

Marilda Sotomayor: a career in matching

 Pesquisa FAPESP has a good interview with Marilda Sotomayor, about her career in game theory, and matching theory in particular, and how she came to work with David Gale.  Google translate does a good job (except that it gives her the pronouns he and his...)

Marilda Sotomayor: Uma pensadora dos jogos, by Yuri Vasconcelos, Pesquisa FAPESP, Edition 309, nov. 2021

[GT: Marilda Sotomayor: A game thinker]

[With] Researcher and mathematician Alvin Roth, with whom he wrote a book in 1990



Tuesday, August 17, 2021

Stanford SITE seminar: Dynamic Games, Contracts, and Markets, Aug 18-20

 

Date
 - 
Location
Zoom
ORGANIZED BY
  • Simon Board, University of California, Los Angeles
  • Gonzalo Cisternas, Massachusetts Institute of Technology
  • Mira Frick, Yale University
  • George Georgiadis, Northwestern University
  • Andrzej Skrzypacz, Stanford GSB
  • Takuo Sugaya, Stanford GSB

The idea of this session is to bring together microeconomic theorists working on dynamic games and contracts with more applied theorists working in macro, finance, organizational economics, and other fields. First, this is a venue to discuss the latest questions and techniques facing researchers working in dynamic games and contracts. Second, we wish to foster interdisciplinary discussion between scholars working on parallel topics in different disciplines, in particular, helping raise awareness among theorists of the open questions in other fields.

This is a continuation of successful SITE annual sessions 2013-2020. In previous years, we attracted people from economics, finance, operations research, political economy, and other related fields, ranging from Ph.D. students to senior professors. We hope to have a similar number of attendees this year as in the past. Specific topics likely to be covered include repeated and stochastic games, dynamic optimal contracts, dynamic market pricing, reputation, search, and learning and experimentation.

In This Session

Wednesday, August 18, 2021

AUG 18
9:00 AM - 9:45 AM

Wealth Dynamics in Communities

Presented by: Daniel Barron (Northwestern University)
Co-author(s): Yingni Guo (Northwestern University) and Bryony Reich (Northwestern University)

This paper develops a model to explore how favor exchange in communities influences wealth dynamics. We identify a key obstacle to wealth accumulation: wealth crowds out favor exchange. Therefore, low-wealth households are forced to choose between growing their wealth and accessing favor exchange within their communities. The outcome is that some communities are left behind, with wealth disparities that persist and sometimes even grow worse. Using numerical simulations, we show that place-based policies encourage both favor exchange and wealth accumulation and so have the potential to especially benet such communities.

AUG 18
9:45 AM - 10:00 AM

Break

AUG 18
10:00 AM - 10:45 AM

Optimal Dynamic Allocation: Simplicity through Information Design

Presented by: Faidra Monachou (Stanford University)
Co-author(s): Itai Ashlagi (Stanford University) and Afshin Nikzad (University of Southern California)

We study dynamic nonmonetary markets where objects are allocated to unit-demand agents with private types. An agent’s value for an object is supermodular in her type and the quality of the object, and her payoff is quasilinear in her waiting cost. We analyze direct-revelation mechanisms that elicit agents’ types and assign them to objects over time. We identify the welfare-maximizing mechanism and show that it can be implemented by a first-come first-served wait-list with deferrals when the
marketmaker can design the information disclosed to agents about the objects. The optimal disclosure policy pools adjacent object types.

AUG 18
10:45 AM - 11:00 AM

Break

AUG 18
11:00 AM - 11:45 AM

Probabilistic Assortative Matching under Nash Bargaining

Presented by: Nicolas Bonneton (University of Mannheim)
Co-author(s): Christopher Sandmann (London School of Economics)

This paper re-visits the canonical random search and matching model with Nash bargaining. By introducing pair-specific production shocks, our framework generates meeting-contingent match outcomes that are random. We provide a robust characterization of probabilistic matching patterns for any non-stationary environment, generalizing results by Shimer and Smith (2000). We nd that, although their prediction of single-peaked preferences over meetings is robust, search frictions upset positive assortative matching across well-assorted pairs. As a second contribution, we show that the non-stationary random search matching model is a mean eld game, and admits a representation as a system of forward-backward stochastic differential equations. This representation affords a novel existence and uniqueness result, casting doubt on the robustness of multiple self-fulfilling equilibrium paths frequently reported in the literature.

Thursday, August 19, 2021

AUG 19
9:00 AM - 9:45 AM

Price Experimentation in Confidential Negotiations

Presented by: Jangwoo Lee (McCombs School of Business, University of Texas at Austin)

I develop a model in which a long-lived seller concurrently negotiates with multiple long-lived buyers over two periods. Within this framework, I consider two protocols: a public negotiation process and a confidential negotiation process. In the confidential negotiation process, buyers competitively engage in “price experimentation”: they sacrifice initial profits so that they can enjoy informational advantages over competitors later. Due to this channel, the seller benefits from (1) maintaining confidentiality over past offers and (2) reducing the number of buyers in the confidential negotiation process, even without any entry cost.

AUG 19
9:45 AM - 10:00 AM

Break

AUG 19
10:00 AM - 11:45 AM

Large-Sample Rankings of Information Structures in Games

Presented by: Mira Frick (Yale University)
Co-author(s): Ryota Iijima (Yale University) and Yuhta Ishii (Pennsylvania State University)

 

 

AUG 19
10:45 AM - 11:00 AM

Break

AUG 19
11:00 AM - 11:45 AM

The Cost of Optimally Acquired Information

Presented by: Alexander W. Bloedel (Stanford University)
Co-author(s): Weijie Zhong, (Stanford Graduate School of Business)

This paper develops a theory for the expected cost of optimally acquired information when information can be acquired sequentially and there is no explicit cost of delay. We study the “reduced-form” Indirect Cost functions for information generated by sequential minimization of a “primitive” Direct Cost function. The class of Indirect Costs is characterized by a recursive condition called Sequential Learning-Proofness. This condition is inconsistent with Prior Invariance: Indirect Costs must depend on the decision-maker’s prior beliefs. 

We show that Sequential Learning-Proofness provides partial optimality foundations for the Uniformly Posterior Separable (UPS) cost functions used in the rational inattention literature: a cost function is UPS if and only if it is an Indirect Cost that (i) satisfies a mild regularity condition or, equivalently, (ii) is generated (only) by Direct Costs for which the op timal sequential strategy involves observing only Gaussian diffusion signals. We characterize the unique UPS cost function that is generated by a Prior-Invariant Direct Cost; it exists only when there are exactly two states. 

We also propose two specific UPS cost functions based on additional optimality principles. We introduce and characterize Total Information as the unique Indirect Cost that is Process Invariant when information can be decomposed both sequentially and “simultaneously”: it is uniquely invariant to the “merging” and “splitting” of experiments. Under regularity conditions, Mutual Information is the unique Indirect Cost that is Compression-Invariant when as pects of the state space can be “freely ignored”: it is uniquely invariant to the “merging” and “splitting” of states. We argue that Total Information and Mutual Information represent the normatively ideal costs of, respectively, “producing” and “processing” information. 

 

Friday, August 20, 2021

AUG 20
9:00 AM - 9:45 AM

Optimal Feedback in Contests

Presented by: George Georgiadis (Northwestern University)
Co-author(s): Jeffrey Ely (Northwestern University), Sina Khorasani (UC San Diego), and Luis Rayo (Northwestern University)

We derive optimal contests for environments where output takes the form of breakthroughs and the principal has an informational advantage over the contestants. Whether or not the principal is able to provide real-time feedback to contestants, the optimal prize allocation is egalitarian: all agents who have succeeded in a pre-specified time interval share the prize equally. When providing feedback is feasible, the optimal contest takes a stark cyclical form: contestants are fully apprised of their own success, and at the end of each fixed-length cycle, they are informed about peer success as well.

AUG 20
9:45 AM - 10:00 AM

Break

AUG 20
10:00 AM - 10:45 AM

Dynamic Amnesty Programs

Presented by: Sam Kapon (New York University)

A regulator faces a stream of agents each engaged in crime with stochastic returns. The regulator designs an amnesty program, committing to a time path of penalty reductions for criminals who self-report before they are detected. In an optimal time path, the intertemporal variation in the returns from crime can generate intertemporal variation in the generosity of amnesty. I construct an optimal time path and show that it exhibits amnesty cycles. Amnesty becomes increasingly generous over time until it hits a bound, at which point the cycle resets. Agents engaged in high return crime self-report at the end of each cycle, while agents engaged in low return crime self-report always.

AUG 20
10:45 AM - 11:00 AM

Break

AUG 20
11:00 AM - 11:45 AM

Screening for Breakthroughs

Presented by: Ludvig Sinander (Northwestern University)
Co-author(s): Gregorio Curello (University of Bonn)

We identify a new and pervasive dynamic agency problem: that of incentivising the prompt disclosure of productive information. To study it, we introduce a model in which a technological breakthrough occurs at an uncertain time and is privately observed by an agent, and a principal must incentivise disclosure via her control of the agent’s utility. We uncover a striking deadline structure of optimal mechanisms: they have a simple deadline form in an important special case, and a graduated deadline structure in general. We apply our results to the design of unemployment insurance schemes.