College of Behavioral & Social Sciences
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The collections in this community comprise faculty research works, as well as graduate theses and dissertations..
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Item Essays on Matching Markets and Their Equilibria(2016) Utgoff, Naomi M.; Ausubel, Lawrence M; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Matching theory and matching markets are a core component of modern economic theory and market design. This dissertation presents three original contributions to this area. The first essay constructs a matching mechanism in an incomplete information matching market in which the positive assortative match is the unique efficient and unique stable match. The mechanism asks each agent in the matching market to reveal her privately known type. Through its novel payment rule, truthful revelation forms an ex post Nash equilibrium in this setting. This mechanism works in one-, two- and many-sided matching markets, thus offering the first mechanism to unify these matching markets under a single mechanism design framework. The second essay confronts a problem of matching in an environment in which no efficient and incentive compatible matching mechanism exists due to matching externalities. I develop a two-stage matching game in which a contracting stage facilitates subsequent conditionally efficient and incentive compatible Vickrey auction stage. Infinite repetition of this two-stage matching game enforces the contract in every period. This mechanism produces inequitably distributed social improvement: parties to the contract receive all of the gains and then some. The final essay demonstrates the existence of prices which stably and efficiently partition a single set of agents into firms and workers, and match those two sets to each other. This pricing system extends Kelso and Crawford's general equilibrium results in a labor market matching model and links one- and two-sided matching markets as well.Item Essays in Behavioral and Experimental Economics(2015) Lopez Vargas, Kristian Miguel; Ozbay, Erkut; Filiz-Ozbay, Emel; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)My dissertation consists of three essays on behavioral and experimental economics. In Chapter 1, I introduce an integrated model of risk attitudes and other-regarding preferences that extends the standard notion of inequity discount to lotteries. In this model, a decision maker perceives inequity partly by comparing the marginal risks she and others face. It predicts that fairness considerations will alter risk attitudes, in particular, a higher tolerance to positively correlated (fair) risks compared to negatively correlated (unfair) risks. It is also capable of explaining the behavior by which people help others probabilistically (known as ex ante fairness). Furthermore, in contrast with the existing view of ex ante fairness based on expected outcomes, my model does not imply that stronger ex ante fairness behavior is associated with less risk sensitivity. I study these predictions with evidence from an experiment. I find that subjects take more risks when outcomes are ex post fair compared to when they are ex post unfair. I confirm ex ante fairness behavior is a common choice pattern and document how, according to the model, it responds to its relative price. Finally, I reject the implication of existing models that stronger ex ante fairness behavior correlates with less risk sensitivity. Chapter 2 is a joint work with Professor Brit Grosskopf (University of Exeter, UK). People communicate in economic interactions either aiming to alter material outcomes or because they derive direct satisfaction from expressing. In our study, we focus on the latter, the non-instrumental motivates, and find that this less researched aspect of expression has important economic implications. In particular, we experimentally study ex-post verbal expression in a modified Power-to-Take game and document people's willingness to pay for this kind of expression possibility. Our experiment contributes to previous studies discussing the role of mood-emotional states. We find that purely expressive as well as reciprocal motives are both non-trivial components of the valuation for non-instrumental expression. We demonstrate that expression possibilities have important impacts on welfare beyond what our standard economic view predicts. In Chapter 3, Emel Filiz-Ozbay, Erkut Ozbay and I study multi-object auctions in the presence of post-auction trade opportunities among bidders who have either single- or multi-object demand. We focus on two formats: Vickrey auctions where package bidding is possible and simultaneous second-price auctions. We show that, under complementarities, the Vickrey format has an equilibrium where the objects are allocated efficiently at the auction stage whether resale markets are present or not. The simultaneous second-price, on the other hand, leads to inefficiency with or without resale possibility. Our experimental findings show that the possibility of resale in second-price auctions decreases the efficiency rate at the auction stage compared to the no resale case. However, after resale, the efficiency rate in second-price is as high as that of Vickrey auction without resale outcomes in the experiment. Preventing resale neither benefits nor hurts auction revenues in a second-price format. This last chapter has been recently published in Games and Economic Behavior, Volume 89, Pages 1-16, January 2015.Item Essays on Matching and Auction Theory(2011) Johnson, Terence R.; Ausubel, Lawrence; Vincent, Daniel; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation uses mechanism design theory to show how a matchmaker should design two-sided matching markets when agents are privately informed about their qualities or characteristics as a partner and can make monetary payments. Chapter Two uses a mechanism design approach to derive sufficient conditions for assortative matching to be profit-maximizing for the matchmaker or maximize social welfare, and then shows how to implement the optimal match and payments through two-sided position auctions as a Bayesian Nash equilibrium. Chapter Three broadens these results by showing how the implementation concept can be relaxed to ex post equilibrium through the use of market designs similar to the Vickrey-Clarke-Groves mechanism, as well as implemented through the use of dynamic games. Chapter Four shows how the ideas used in Chapters Two and Three can be extended to a multi-dimensional type framework, moving away from the supermodular paradigm that is the workhorse of models of matching with incomplete information.Item Design of Discrete Auction(2010) Sujarittanonta, Pacharasut; Cramton, Peter; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Chapter 1: Efficient Design of an Auction with Discrete Bid Levels This paper studies one of auction design issues: the choice of bid levels. Full efficiency is generally unachievable with a discrete auction. Since there may be more than one bidder who submits the same bid, the auction cannot completely sort bidders by valuation. In effort to maximize efficiency, the social planner tries to choose the partition rule-a rule dictating how type space is partitioned to group bidders who submit the same bid together-to maximize efficiency. With the efficient partition rule, we implement bid levels with sealed-bid and clock auctions. We find that the efficient bid levels in the sealed-bid second-price auction may be non-unique and efficient bid increments in a clock auction with highest-rejected bid may be decreasing. We also show that revealing demand is efficiency-enhancing even in the independent private valuation setting where price discovery is not important. Chapter 2: Pricing Rule in a Clock Auction We analyze a discrete clock auction with lowest-accepted bid (LAB) pricing and provisional winners, as adopted by India for its 3G spectrum auction. In a perfect Bayesian equilibrium, the provisional winner shades her bid while provisional losers do not. Such differential shading leads to inefficiency. An auction with highest-rejected bid (HRB) pricing and exit bids is strategically simple, has no bid shading, and is fully efficient. In addition, it has higher revenues than the LAB auction, assuming profit maximizing bidders. The bid shading in the LAB auction exposes a bidder to the possibility of losing the auction at a price below the bidder's value. Thus, a fear of losing at profitable prices may cause bidders in the LAB auction to bid more aggressively than predicted assuming profit-maximizing bidders. We extend the model by adding an anticipated loser's regret to the payoff function. Revenue from the LAB auction yields higher expected revenue than the HRB auction when bidders' fear of losing at profitable prices is sufficiently strong. This would provide one explanation why India, with an expressed objective of revenue maximization, adopted the LAB auction for its upcoming 3G spectrum auction, rather than the seemingly superior HRB auction. Chapter 3: Discrete Clock Auctions: An Experimental Study We analyze the implications of different pricing rules in discrete clock auctions. The two most common pricing rules are highest-rejected bid (HRB) and lowest-accepted bid (LAB). Under HRB, the winners pay the lowest price that clears the market; under LAB, the winners pay the highest price that clears the market. Both the HRB and LAB auctions maximize revenues and are fully efficient in our setting. Our experimental results indicate that the LAB auction achieves higher revenues. This also is the case in a version of the clock auction with provisional winners. This revenue result may explain the frequent use of LAB pricing. On the other hand, HRB is successful in eliciting true values of the bidders both theoretically and experimentally.Item Open Bid Auctions: A Theoretical and an Experimental Study(2008-02-21) ghosh, dipan; Cramton, peter; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)For centuries, auctions have been used as an efficient market mechanism for selling or procuring goods. Over time, auctions have evolved from its very basic price call-out form to the much more sophisticated simultaneous multi goods design, the bulk of this dramatic evolution taking place in the later part of the twentieth century. Even though the earliest use of auction dates back to around 500 B.C. in history, proper scientific research aiming at improving the effectiveness or expanding the scope of this versatile market mechanism started around the 1960's. The pioneering work of William Vickrey in 1961 opened the floodgates for mathematicians and economists alike, to study this fascinating market mechanism, and within a very short period of time, both the understanding of the mechanism and the scope of its application improved vastly. Over these years, a huge mass of theoretical and empirical research has produced results that introduce newer auction designs and characterize the existing ones. This has also allowed scope for continued research in the field of auctions, thriving for improvements and solutions to yet-to-be answered questions. The main goal of this study is to accomplish just that; present improvements that try to address issues that have not been addressed yet. The dissertation is structured as follows. The first chapter highlights the progress that has been made in the field of auctions and introduces the advancements made in the more recent field of auction experiments. This serves as an introduction to the other chapters and briefly outlines the important findings both in the traditional theoretical literature, the more recent operational research literature and the alternative experimental literature. The second chapter introduces a new auction model designed to tackle a specific problem encountered in multiple homogeneous goods auctions, which has not been dealt with satisfactorily thus far. The last chapter presents an extension of the existing auction experiment methodologies in an attempt to reveal possible weaknesses in earlier auction experiments and to improve our understanding of important differences between open and sealed-bid auction formats.Item Collusive Bidding: Lessons from the FCC Spectrum Auctions(Springer-Verlag, 2000-05) Cramton, Peter; Schwartz, Jesse A.The Federal Communications Commission (FCC) spectrum auctions use a simultaneous ascending auction design. Bidders bid on numerous communication licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to bid higher on any license. With full revelation of bidding information, simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. These strategies can help bidders coordinate a division of the licenses, and enforce the proposed division by directed punishments. We examine solutions to mitigate collusive bidding in the spectrum auctions, and then apply these ideas to the design of daily electricity auctions.Item Vickrey Auctions with Reserve Pricing(Springer-Verlag, 2004-04) Ausubel, Lawrence M.; Cramton, PeterWe generalize the Vickrey auction to allow for reserve pricing in a multi-unit auction with interdependent values. In the Vickrey auction with reserve pricing, the seller determines the quantity to be made available as a function of the bidders’ reports of private information, and then efficiently allocates this quantity among the bidders. Truthful bidding is a dominant strategy with private values and an ex post equilibrium with interdependent values. If the auction is followed by resale, then truthful bidding remains an equilibrium in the auction-plus-resale game. In settings with perfect resale, the Vickrey auction with reserve pricing maximizes seller revenues.