scholarly journals Auction theory and a note on game mechanisms

2021 ◽  
Vol 7 (1) ◽  
pp. 43-59
Author(s):  
Dushko Josheski ◽  
Elena Karamazova
Keyword(s):  
Mechanism Design ◽  
Private Information ◽  
Design Theory ◽  
Bilateral Trade ◽  
Incentive Compatibility ◽  
Auction Theory ◽  
General Idea ◽  
Revenue Comparison ◽  
Price Auction ◽  
Second Price Auction

Abstract This paper will review important topics on the subject of auction theory and mechanism design, these include: efficiency first and foremost, also revenue comparison between different types of auctions and the issue of incentive compatibility, individual rationality with the general idea and proof that bilateral trade is inefficient. Mechanism design theory tells us that if buyers and sellers both have private information full efficiency is impossible, however Vickrey auction (single unit auction) will be efficient i.e. will put the goods in the hands of the buyers that value them most. However, the conclusion from this paper is that because of overvaluation of bidders the main result is inefficient, i.e. bids are too high. When weak and strong bidders are compared the main conclusion is that strong bidders’ expected payoff is higher in second price auction (SPA), while weak bidder prefers first price auction (FPA) bid.

scholarly journals Obviousness around the clock

2021 ◽  
Author(s):  
Yves Breitmoser ◽  
Sebastian Schweighofer-Kodritsch
Keyword(s):  
Mechanism Design ◽  
Behavioral Effect ◽  
Dominant Strategy ◽  
Drop Out ◽  
Behavioral Differences ◽  
Feedback Effects ◽  
Private Values ◽  
Price Auction ◽  
Second Price Auction ◽  
Auction Formats

AbstractLi (Am Econ Rev 107(11):3257–3287, 2017) introduces a theoretical notion of obviousness of a dominant strategy, to be used as a refinement in mechanism design. This notion is supported by experimental evidence that bidding is closer to dominance in the dynamic ascending-clock auction than the static second-price auction (private values), noting that dominance is theoretically obvious in the former but not the latter. We replicate his experimental study and add three intermediate auction formats that decompose the designs’ differences to quantify the cumulative effects of (1) simply seeing an ascending-price clock (after bid submission), (2) bidding dynamically on the clock, and (3) getting (theoretically irrelevant) drop-out information about other bidders. The theory predicts dominance to become obvious through (2), dynamic bidding. We find no significant behavioral effect of (2), however, while the feedback effects (1) and (3) are highly significant. We conclude that behavioral differences between second-price and ascending-clock auctions offer rather limited support for the theory of obviousness and that framing has surprisingly large potential in mechanism design.

scholarly journals Study on the Pricing Mechanism of Deductive Right License Transfer Based on Mechanism Design Theory

2021 ◽  
Vol 9 (4) ◽  
Author(s):  
Ting Tang
Keyword(s):  
Information Asymmetry ◽  
Mechanism Design ◽  
Transaction Cost ◽  
Design Theory ◽  
Incentive Compatibility ◽  
Reference Value ◽  
Quantitative Model ◽  
Pricing Mechanism ◽  
Laws And Regulations

The relevant laws and regulations in our country only provide in principle for the license transfer of deductive right. In practice, we often encounter two major problems: First, there is information asymmetry between the original author and the deductive author, and there is a large transaction cost. The second is how to give consideration to the interests of the original author and the deductive author to achieve incentive compatibility. To solve these two problems, build a quantitative model. It has a certain reference value to the practice of deduction right license transfer.

scholarly journals Mechanism Design for Fair and Efficient DSO Flexibility Markets

2020 ◽  
Author(s):  
Georgios Tsaousoglou ◽  
Juan Sebastian Giraldo ◽  
Pierre Pinson ◽  
Nikolaos Paterakis
Keyword(s):  
Social Welfare ◽  
Mechanism Design ◽  
Design Theory ◽  
Distribution Systems ◽  
Incentive Compatibility ◽  
Distributed Energy ◽  
Modern Distribution ◽  
Local Flexibility ◽  
Safe Limits ◽  
Energy Assets

The proliferation of distributed energy assets necessitates the provision of flexibility to efficiently operate modern distribution systems. In this paper, we propose a flexibility market through which the DSO may acquire flexibility services from asset aggregators in order to maintain network voltages and currents within safe limits. A max-min fair formulation is proposed for the allocation of flexibility. Since the DSO is not aware of each aggregator's local flexibility costs, we show that strategic misreporting can lead to severe loss of efficiency. Using mechanism design theory, we provide a mechanism that makes it a payoff-maximizing strategy for each aggregator to make truthful bids to the flexibility market. While typical truthful mechanisms only work when the objective is the maximization of Social Welfare, the proposed mechanism lets the DSO achieve incentive compatibility and optimality for the the max-min fairness objective.

scholarly journals Mechanism Design for Fair and Efficient DSO Flexibility Markets

2020 ◽  
Author(s):  
Georgios Tsaousoglou ◽  
Juan Sebastian Giraldo ◽  
Pierre Pinson ◽  
Nikolaos Paterakis
Keyword(s):  
Social Welfare ◽  
Mechanism Design ◽  
Design Theory ◽  
Distribution Systems ◽  
Incentive Compatibility ◽  
Distributed Energy ◽  
Modern Distribution ◽  
Local Flexibility ◽  
Safe Limits ◽  
Energy Assets

The proliferation of distributed energy assets necessitates the provision of flexibility to efficiently operate modern distribution systems. In this paper, we propose a flexibility market through which the DSO may acquire flexibility services from asset aggregators in order to maintain network voltages and currents within safe limits. A max-min fair formulation is proposed for the allocation of flexibility. Since the DSO is not aware of each aggregator's local flexibility costs, we show that strategic misreporting can lead to severe loss of efficiency. Using mechanism design theory, we provide a mechanism that makes it a payoff-maximizing strategy for each aggregator to make truthful bids to the flexibility market. While typical truthful mechanisms only work when the objective is the maximization of Social Welfare, the proposed mechanism lets the DSO achieve incentive compatibility and optimality for the the max-min fairness objective.

scholarly journals Ex-post implementation with social preferences

2020 ◽  
Author(s):  
Boaz Zik
Keyword(s):  
Mechanism Design ◽  
Current Literature ◽  
Private Information ◽  
Social Preference ◽  
Social Preferences ◽  
Incentive Compatibility ◽  
Higher Order ◽  
The Other ◽  
Ex Post ◽  
Ex Post Implementation

Abstract The current literature on mechanism design in models with social preferences discusses social-preference-robust mechanisms, i.e., mechanisms that are implementable in any environment with social preferences. The literature also discusses payoff-information-robust mechanisms, i.e., mechanisms that are implementable for any belief and higher-order beliefs of the agents about the payoff types of the other agents. In the present paper, I address the question of whether deterministic mechanisms that are robust in both of these dimensions exist. I consider environments where each agent holds private information about his personal payoff and about the existence and extent of his social preferences. In such environments, a mechanism is robust in both dimensions only if it is ex-post implementable, i.e., only if incentive compatibility holds for every realization of payoff signals and for every realization of social preferences. I show that ex-post implementation of deterministic mechanisms is impossible in such environments; i.e., deterministic mechanisms that are both social-preference-robust and payoff-information-robust do not exist.

scholarly journals Revenue Comparison in Asymmetric Auctions with Discrete Valuations

2013 ◽  
Vol 13 (1) ◽  
pp. 429-461 ◽  
Author(s):  
Nicola Doni ◽  
Domenico Menicucci
Keyword(s):  
The Other ◽  
Unique Equilibrium ◽  
Equilibrium Outcome ◽  
Asymmetric Auctions ◽  
First Order ◽  
Reserve Prices ◽  
Revenue Comparison ◽  
Asymmetric Auction ◽  
Price Auction ◽  
Second Price Auction

AbstractWe consider an asymmetric auction setting with two bidders such that the valuation of each bidder has a binary support. First, we characterize the unique equilibrium outcome in the first price auction for any values of parameters. Then we compare the first price auction with the second price auction in terms of expected revenue. Under the assumption that the probabilities of low values are the same for the two bidders, we obtain two main results: (i) the second price auction yields a higher revenue unless the distribution of a bidder’s valuation first-order stochastically dominates the distribution of the other bidder’s valuation “in a strong sense” and (ii) introducing reserve prices implies that the first price auction is never superior to the second price auction. In addition, in some cases, the revenue in the first price auction decreases when all the valuations increase.

Theory of Mechanism Design (2007 Nobel Prize in Economics)

2008 ◽  
pp. 4-26 ◽  
Author(s):  
S. Izmalkov ◽  
K. Sonin ◽  
M. Yudkevich
Keyword(s):  
Mechanism Design ◽  
Nobel Prize ◽  
Real World ◽  
Design Theory ◽  
Incentive Compatibility ◽  
Institutional Analysis ◽  
World Market ◽  
Market Mechanisms ◽  
The Relationship ◽  
Theoretical Foundations

The paper outlines the basics of the mechanism design theory and describes the defining contribution of Leo Hurwiсz, Eric Maskin, and Roger Myerson, the Nobel prize winners in economics in 2007. It starts by introducing the concepts of economic mechanism, incentive compatibility, and implementation, and provides a non-technical description of main results. Then it explains the relationship between theoretical foundations and real-world market mechanisms such as auctions. Finally, recent applications of the mechanism design theory to institutional analysis are discussed.

Book Reviews

2016 ◽  
Vol 54 (2) ◽  
pp. 589-591
Keyword(s):  
Graduate Students ◽  
Mechanism Design ◽  
Incentive Compatibility ◽  
Dominant Strategy ◽  
University Of Michigan ◽  
Dynamic Mechanism Design ◽  
Temple University ◽  
The University ◽  
Robust Mechanism Design

Dimitrios Diamantaras of Temple University reviews “An Introduction to the Theory of Mechanism Design,” by Tilman Börgers. The Econlit abstract of this book begins: “Presents explanations of classic results in the theory of mechanism design and examines the frontiers of research in mechanism design in a text written for advanced undergraduate and graduate students of economics who have a good understanding of game theory. Discusses screening; examples of Bayesian mechanism design; examples of dominant strategy mechanisms; incentive compatibility; Bayesian mechanism design; dominant strategy mechanisms; nontransferable utility; informational interdependence; robust mechanism design; and dynamic mechanism design. Börgers is Samuel Zell Professor of the Economics of Risk at the University of Michigan.”

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