理论论文

We theoretically and experimentally study centralized college admissions in which colleges evaluate students under a ‘translucent’ admission system and students can learn each college’s suitability through costly information acquisition. In centralized matching via Gale and Shapley’s deferred acceptance algorithm, students decide whether to acquire information before submitting their rank-order lists. However, uncertainty about the final assignment lowers the expected gain from learning, thereby reducing social welfare, compared to a scenario without such uncertainty. Our experiments demonstrate that the welfare loss is greater with more opaque admission systems. The empirical social welfare obtained in our experimental treatments is consistently lower than the theoretical welfare, and we identify non-equilibrium learning as a main contributor.

We provide a strategic model of the formation of production networks that subsumes the standard general equilibrium approach. The objective of firms in our setting is to choose their supply relationships so as to maximize their profit at the general equilibrium that unfolds. We show that this objective is equivalent to the maximization by the firms of their eigenvector centrality in the production network. As is common in network formation games based on centrality, there are multiple Nash equilibria in our setting. We have investigated the characteristics and the social efficiency of these equilibria in a stylized version of our model representing international trade networks. We show that the impact of network structure on social welfare is firstly determined by a trade-off between costs of increasing process complexity and positive spillovers on productivity induced by the diversification of the input mix. We further analyze a variant of our model that accounts for the risks of disruption of supply relationships. In this setting, we characterize how social welfare depends on the structure of the production network, the spatial distribution of risks, and the process of shock aggregation in supply chains. We finally show that simple trade policies characterized by sets of links that are either prevented or catalyzed can be a powerful equilibrium selection device.

We examine a unique auction format used in the Istanbul flower market, which could transform into either Dutch or English auction depending on bidders’ bidding behaviors. By introducing a time cost that reduces the value of a perishable good as time passes, we explore how this hybrid auction format accommodates the desire for speed via an adaptive starting price. We show that the Istanbul Flower Auction outperforms both the Dutch and English auctions in terms of the auctioneer’s utility. With numerical analysis, we also illustrate the Istanbul Flower Auction’s superiority in terms of social welfare and auction duration. Our results highlight the critical role of auction design in improving welfare when the duration of the auction process matters.

We prove a Folk theorem when players with bounded rationality learn as they play a repeated potential game. We use a dynamic generalization of smooth fictitious play with bounded $m$-memory strategies to model learning with bounded rationality that is consistent with learning by algorithms. In a repeated potential game with perfect monitoring, we use this learning model to show that for any feasible and individually rational payoff profile, if players have sufficient memory, are sufficiently patient, and best respond with sufficiently few mistakes, then the players have a non-zero probability of learning an $m$-memory strategy profile that achieves an average payoff close to the specified payoff profile for an appropriate continuation game. Moreover, the strategy profile learned is an $m$-memory $\epsilon$-subgame perfect equilibrium of the repeated game. This finding demonstrates that competition authorities are correct in their concern about algorithmic collusion.

This paper analyzes the welfare properties of the mechanism Taiwan uses to match students to high schools. I study the Taiwan mechanism under a theoretical model where students share the same ordinal rankings, and a single lottery determines schools’ preferences. In this setting, all Taiwan mechanisms ex ante weakly Pareto dominate deferred acceptance for strategizing students. Additionally, in my model, there always exists a Taiwan mechanism that provides greater welfare than deferred acceptance to students who do not strategize. Using Cambridge Public School data, I demonstrate that the Taiwan mechanism outperforms deferred acceptance for a range of deduction rules.