Decision Sciences › Management Science and Operations Research

Auction Theory and Applications

Works Count: 49075

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Description

This cluster of papers focuses on the theory and practice of auction design, mechanism design, and procurement contracts. It covers topics such as combinatorial auctions, incentives, winner determination, reputation systems, bid rotation, and regret information in various auction settings.

Keywords

Auction Theory; Mechanism Design; Procurement Contracts; Combinatorial Auctions; Incentives; Internet Auctions; Winner Determination; Reputation Systems; Bid Rotation; Regret Information

A Theory of Auctions and Competitive Bidding

1982-09-01

Paul Milgrom , Robert J. Weber

Abstract : In Section 2, we review some important results of the received auction theory, introduce a new general auction model, and summarize the results of our analysis. Section 3 … Abstract : In Section 2, we review some important results of the received auction theory, introduce a new general auction model, and summarize the results of our analysis. Section 3 contains a formal statement of our model, and develops the properties of affiliated random variables. The various theorems are presented in Sections 4-8. In Section 9, we offer our views on the current state of auction theory. Following Section 9 is a technical appendix dealing with affiliated random variables.

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Governing the commons — the evolution of institutions for collective action

1992-05-01

Erich Weede

BEHAVIOR OF THE FIRM UNDER REGULATORY CONSTRAINT

2016-01-01

Harvey A. Averch , Leland L. Johnson

A recent article by Akira Takayama discusses an earlier paper by Harvey Averch and Leland L. Johnson on fair rate of return regulation of public utilities. Although Takayama (p. 255) … A recent article by Akira Takayama discusses an earlier paper by Harvey Averch and Leland L. Johnson on fair rate of return regulation of public utilities. Although Takayama (p. 255) agrees with Averch and Johnson's general conclusions a firm will tend to increase its investment with the introduction of an active constraint on its rate of return, he criticizes the argument as being confusing, ambiguous, and in error. Takayama then attempts a clarification, and presents a new formulation which leads to the result quoted above. This comment will discuss several of Takayama's criticisms in addition to showing that the so-called A-J cannot be derived from the basic assumptions made by both Averch and Johnson and Takayama.1 We will show that the very assumptions used to prove the Effect, by defining the region of X, require an assumption that the Effect exists in the first place.

Multiagent systems: algorithmic, game-theoretic, and logical foundations

2009-06-01

Yoav Shoham , Kevin Leyton‐Brown

Groves mechanisms 288 10.4.2The VCG mechanism 292 10.4.3 VCG and individual rationality 295 10.4.4 VCG and weak budget balance 296 10.4.5 Drawbacks of VCG 297 10.4.6 Budget balance and efficiency … Groves mechanisms 288 10.4.2The VCG mechanism 292 10.4.3 VCG and individual rationality 295 10.4.4 VCG and weak budget balance 296 10.4.5 Drawbacks of VCG 297 10.4.6 Budget balance and efficiency 301 10.4.7 The AGV mechanism 302 10.5 Beyond efficiency 303 10.5.1 What else can be implemented in dominant strategies?303 10.5.2 Tractable Groves mechanisms 305 10.6 Computational applications of mechanism design 307 10.6.1 Task scheduling 307 10.6.2Bandwidth allocation in computer networks 309 10.6.3Multicast cost sharing 312 10.

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Good News and Bad News: Representation Theorems and Applications

1981-01-01

Paul Milgrom

This is an article about modeling methods in information economics. A notion of favorableness of news is introduced, characterized, and applied to four simple models. In the equilibria of these … This is an article about modeling methods in information economics. A notion of favorableness of news is introduced, characterized, and applied to four simple models. In the equilibria of these models, (1) the arrival of good news about a firm's prospects always causes its share price to rise, (2) more favorable evidence about an agent's effort leads the principal to pay a larger bonus, (3) buyers expect that any product information withheld by a salesman is unfavorable to his product, and (4) bidders figure that low bids by their competitors signal a low value for the object being sold.

Auctions and Bidding

1986-01-01

R. Preston McAfee , John McMillan

Dealership market

1980-03-01

Yakov Amihud , Haim Mendelson

The Impact of Information Technology on the Organization of Economic Activity: The “Move to the Middle” Hypothesis

1993-09-01

Eric K. Clemons , Sashidhar P. Reddi , Michael C. Row

:Investments to increase the level of explicit coordination with outside agents have generally resulted in increased risk to the firm; firms have traditionally avoided this increased risk by becoming vertically … :Investments to increase the level of explicit coordination with outside agents have generally resulted in increased risk to the firm; firms have traditionally avoided this increased risk by becoming vertically integrated or by underinvesting in coordination. This paper argues that information technology (11) has the ability to lower coordination cost without increasing the associated transactions risk, leading to more outsourcing and less vertically integrated firms. Lower relationship-specificity of IT investments and a better monitoring capability imply that firms can more safely invest in information technology for interfirm coordination than in traditional investments for explicit coordination such as co-Iocated facilities or specialized human resources; firms are therefore more likely to coordinate with suppliers without requiring ownership to reduce their risk. This enables them to benefit from production economies of large specialized suppliers. Moreover, rapid reduction in the cost of IT and reduction in the transactions risk of explicit coordination makes possible substantially more use of explicit coordination with suppliers. The resulting transaction economies of scale, learning curve effects, and other factors favor a move toward long-term relationships with a smaller set of suppliers. We call this combination-a move to more outsourcing, but from a reduced set of stable partnerships-the "move to the middle" hypothesis.

Menu Auctions, Resource Allocation, and Economic Influence

1986-02-01

B. Douglas Bernheim , Michael D. Whinston

Journal Article Menu Auctions, Resource Allocation, and Economic Influence Get access B. Douglas Bernheim, B. Douglas Bernheim Stanford University Search for other works by this author on: Oxford Academic Google … Journal Article Menu Auctions, Resource Allocation, and Economic Influence Get access B. Douglas Bernheim, B. Douglas Bernheim Stanford University Search for other works by this author on: Oxford Academic Google Scholar Michael D. Whinston Michael D. Whinston Harvard University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 101, Issue 1, February 1986, Pages 1–31, https://doi.org/10.2307/1884639 Published: 01 February 1986

Methods for task allocation via agent coalition formation

1998-05-01

Onn Shehory , Sarit Kraus

Using Cost Observation to Regulate Firms

1986-06-01

Jean‐Jacques Laffont , Jean Tirole

The paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier (1) has superior information about the cost of the project and (2) invests in … The paper emphasizes the use of accounting data in regulatory or procurement contracts when the supplier (1) has superior information about the cost of the project and (2) invests in cost reduction. The main result states that, under risk neutrality, the supplier announces an expected cost and is given an incentive contract linear in cost overruns. This (optimal) contract moves toward a fixed-price contract as the announced cost decreases. An investment choice is then introduced and the use of a rate-of-return regulation is studied.

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The New Economics of Organization

1984-11-01

Terry M. Moe

Over the last ten years or so, an important approach to the study of organizations has emerged within economics. It is perhaps best characterized by three elements: a contractual perspective … Over the last ten years or so, an important approach to the study of organizations has emerged within economics. It is perhaps best characterized by three elements: a contractual perspective on organizational relationships, a theoretical focus on hierarchical control, and formal analysis via principal-agent models. This paper provides political scientists with an overview of the new economics of organization and explores its implications for the study of public bureaucracy. So far, positive political theory has not contributed much to our understanding of public bureaucracy. In part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration. The other side of the coin, however, is that positive theorists have not made much of an effort to develop theories of bureaucracy. Their concerns have centered around two basic mechanisms of social choice, voting and markets, and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions. This third and relatively unexplored mechanism is hierarchy. Movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature, while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy, indeed of all organizations. In fact, significant steps toward a positive theory of hierarchies have very recently been taken-but by economists, not political scientists. In small numbers, of course, economists made contributions to the study of public bureaucracy some time ago with the pioneering works of Downs (1967), Tullock (1965), and Niskanen (1971). But this wave of theoretical work is different. It is already a large, complex body of literature that is the focus of innovation and excitement among a growing number of economists, and it reflects an unusual degree of theoretical coherence and cumulative effort. Work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations, an approach perhaps best characterized by three elements: a contractual perspective on organizational relationships, a focus on hierarchical control, and formal analysis via principal-agent models. This approach has emerged from recent attempts to move beyond the neoclassical theory of the firm, which assumes away all organizational considerations, to a theory of economic organizations that can explain why firms, corporations, and other enterprises behave as they do. Propo

The Economics of Information

1976-01-01

George J. Stigler

Relational Incentive Contracts

2003-05-01

Jonathan Levin

Standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced. This paper studies the design of self-enforced relational contracts. I … Standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced. This paper studies the design of self-enforced relational contracts. I show that optimal contracts often can take a simple stationary form, but that self-enforcement restricts promised compensation and affects incentive provision. With hidden information, it may be optimal for an agent to supply the same inefficient effort regardless of cost conditions. With moral hazard, optimal contracts involve just two levels of compensation. This is true even if performance measures are subjective, in which case optimal contracts terminate following poor performance.

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Algorithmic Mechanism Design

2001-04-01

Noam Nisan , Amir Ronen

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Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality

1993-02-01

Dhananjay K. Gode , Shyam Sunder

We report market experiments in which human traders are replaced by "zero-intelligence" programs that submit random bids and offers. Imposing a budget constraint (i.e., not permitting traders to sell below … We report market experiments in which human traders are replaced by "zero-intelligence" programs that submit random bids and offers. Imposing a budget constraint (i.e., not permitting traders to sell below their costs or buy above their values) is sufficient to raise the allocative efficiency of these auctions close to 100 percent. Allocative efficiency of a double auction derives largely from its structure, independent of traders' motivation, intelligence, or learning. Adam Smith's invisible hand may be more powerful than some may have thought; it can generate aggregate rationality not only from individual rationality but also from individual irrationality.

Testing alternative theories of the firm: transaction cost, knowledge-based, and measurement explanations for make-or-buy decisions in information services

1998-09-01

Laura Poppo , Todd Zenger

Firms boundary choices have undergone careful examination in recent years, particularly in information services. While transaction cost economics provides a widely tested explanation for boundary choice, more recent theoretical work … Firms boundary choices have undergone careful examination in recent years, particularly in information services. While transaction cost economics provides a widely tested explanation for boundary choice, more recent theoretical work advances competing knowledge-based and measurement cost explanations. Similar to transaction cost economics, these theories examine the impact of exchange attributes on the performance of markets and hierarchies as institutions of governance. These theories, however, offer alternative attributes to those suggested by transaction cost economics or offer alternative mechanisms through which similar attributes influence make–buy choices. Traditional empirical specifications of make–buy models are unable to comparatively test among these alternative theories. By developing and testing a model of comparative institutional performance rather than institutional choice, we examine the degree of support for these competing explanations of boundary choice. Hypotheses are tested using data on the governance of nine information services at 152 companies. Our results suggest that a theory of the firm and a theory of boundary choice is likely to be complex, requiring integration of transaction cost, knowledge-based, and measurement reasoning. © 1998 John Wiley & Sons, Ltd.

Optimal Auction Design

1981-02-01

Roger B. Myerson

This paper considers the problem faced by a seller who has a single object to sell to one of several possible buyers, when the seller has imperfect information about how … This paper considers the problem faced by a seller who has a single object to sell to one of several possible buyers, when the seller has imperfect information about how much the buyers might be willing to pay for the object. The seller's problem is to design an auction game which has a Nash equilibrium giving him the highest possible expected utility. Optimal auctions are derived in this paper for a wide class of auction design problems.

Incentive Contracts and Performance Measurement

1992-06-01

George P. Baker

This paper examines the characteristics of incentive contracts in which the agent's payoff is not based on the principal's objective. I show that contracts based on such performance measures will … This paper examines the characteristics of incentive contracts in which the agent's payoff is not based on the principal's objective. I show that contracts based on such performance measures will not in general provide first-best incentives, even when the agent is risk neutral. The form of the optimal contract and the efficiency of this contract depend on the relationship between the performance measure used and the principal's objective. The model provides a simple and intuitive statistical measure that serves as a metric for the efficiency of a performance measure. Applications to various incentive contracting situations, including the "gaming" of performance measures, the use of revenue-based sales commissions, and relative performance evaluation, are presented.

An Equilibrium Queuing Model of Bribery

1985-08-01

Francis T. Lui

The Role of Market Forces in Assuring Contractual Performance

1981-08-01

Benjamin Klein , Keith B. Leffler

The conditions under which transactors can use the market (repeat-purchase) mechanism of contract enforcement are examined. Increased price is shown to be a means of assuring contractual performance. A necessary … The conditions under which transactors can use the market (repeat-purchase) mechanism of contract enforcement are examined. Increased price is shown to be a means of assuring contractual performance. A necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance. This will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm-specific assets. Advertising investments thereby become a positive indicator of likely performance.

Relying on the Information of Interested Parties

1986-01-01

Paul Milgrom , John Roberts

We investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information. We find that, if the decisionmaker is … We investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information. We find that, if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties, competition may be unnecessary to achieve this result. If the decisionmaker is unsophisticated or not well informed, competition is not generally sufficient. If the interested parties' interests are sufficiently opposed, however, or if the decisionmaker is seeking to advance the parties' welfare, then competition can reduce or even eliminate the decisionmaker's need for prior knowledge about the relevant variables and for strategic sophistication. In other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking.

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Efficient mechanisms for bilateral trading

1983-04-01

Roger B. Myerson , Mark A. Satterthwaite

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Is the Electronic Open Limit Order Book Inevitable?

1994-09-01

Lawrence R. Glosten

ABSTRACT Under fairly general conditions, the article derives the equilibrium price schedule determined by the bids and offers in an open limit order book. The analysis shows: (1) the order … ABSTRACT Under fairly general conditions, the article derives the equilibrium price schedule determined by the bids and offers in an open limit order book. The analysis shows: (1) the order book has a small‐trade positive bid‐ask spread, and limit orders profit from small trades; (2) the electronic exchange provides as much liquidity as possible in extreme situations; (3) the limit order book does not invite competition from third market dealers, while other trading institutions do; (4) If an entering exchange earns nonnegative trading profits, the consolidated price schedule matches the limit order book price schedule.

Trust among strangers in internet transactions: Empirical analysis of eBay' s reputation system

2004-05-19

Paul Resnick , Richard Zeckhauser

One of the earliest and best known Internet reputation systems is run by eBay, which gathers comments from buyers and sellers about each other after each transaction. Examination of a … One of the earliest and best known Internet reputation systems is run by eBay, which gathers comments from buyers and sellers about each other after each transaction. Examination of a large data set from 1999 reveals several interesting features. First, despite incentives to free ride, feedback was provided more than half the time. Second, well beyond reasonable expectation, it was almost always positive. Third, reputation profiles were predictive of future performance, though eBay's net feedback statistic is far from the best predictor available. Fourth, there was a high correlation between buyer and seller feedback, suggesting that the players reciprocate and retaliate.

The Politics of Government Decision-Making: A Theory of Regulatory Capture

1991-11-01

Jean‐Jacques Laffont , J. Tirole

Journal Article The Politics of Government Decision-Making: A Theory of Regulatory Capture Get access Jean-Jacques Laffont, Jean-Jacques Laffont Gremaq, Toulouse Search for other works by this author on: Oxford Academic … Journal Article The Politics of Government Decision-Making: A Theory of Regulatory Capture Get access Jean-Jacques Laffont, Jean-Jacques Laffont Gremaq, Toulouse Search for other works by this author on: Oxford Academic Google Scholar Jean Tirole Jean Tirole Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 106, Issue 4, November 1991, Pages 1089–1127, https://doi.org/10.2307/2937958 Published: 01 November 1991

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Envelope Theorems for Arbitrary Choice Sets

2002-03-01

Paul Milgrom , Ilya Segal

The standard envelope theorems apply to choice sets with convex and topological structure, providing sufficient conditions for the value function to be differentiable in a parameter and characterizing its derivative.This … The standard envelope theorems apply to choice sets with convex and topological structure, providing sufficient conditions for the value function to be differentiable in a parameter and characterizing its derivative.This paper studies optimization with arbitrary choice sets and shows that the traditional envelope formula holds at any differentiability point of the value function.We also provide conditions for the value function to be, variously, absolutely continuous, left-and right-differentiable, or fully differentiable.These results are applied to mechanism design, convex programming, continuous optimization problems, saddle-point problems, problems with parameterized constraints, and optimal stopping problems.

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Decision Analysis: Introductory Lectures on Choices Under Uncertainty.

1969-12-01

Alvin K. Klevorick , Howard Raiffa

Multitask Principal–Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design

1991-01-01

Bengt Holmström , Paul Milgrom

Journal Article Multitask Principal–Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design Get access Bengt Holmstrom, Bengt Holmstrom Yale University Search for other works by this author on: Oxford Academic … Journal Article Multitask Principal–Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design Get access Bengt Holmstrom, Bengt Holmstrom Yale University Search for other works by this author on: Oxford Academic Google Scholar Paul Milgrom Paul Milgrom Stanford University Search for other works by this author on: Oxford Academic Google Scholar The Journal of Law, Economics, and Organization, Volume 7, Issue special_issue, January 1991, Pages 24–52, https://doi.org/10.1093/jleo/7.special_issue.24 Published: 01 January 1991

z-Tree: Zurich toolbox for ready-made economic experiments

2007-02-06

Urs Fischbacher

z-Tree (Zurich Toolbox for Ready-made Economic Experiments) is a software for developing and conducting economic experiments. The software is stable and allows programming almost any kind of experiments in a … z-Tree (Zurich Toolbox for Ready-made Economic Experiments) is a software for developing and conducting economic experiments. The software is stable and allows programming almost any kind of experiments in a short time. In this article, I present the guiding principles behind the software design, its features, and its limitations.

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Real life, real users, and real needs: a study and analysis of user queries on the web

2000-03-01

Bernard J. Jansen , Amanda Spink , Tefko Saračević

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Regulating a Monopolist with Unknown Costs

1982-07-01

David P. Baron , Roger B. Myerson

We consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator. The regulator's objective is to maximize a linear social welfare of the … We consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator. The regulator's objective is to maximize a linear social welfare of the consumers' surplus and the firm's profit. In the optimal regulatory policy, prices and subsidies are designed as functions of the firm's cost report so that expected social welfare is maximized, subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs. We explicitly derive the optimal policy and analyze its properties. IN THEIR CLASSIC PAPERS Dupuit [2] and Hotelling [5] considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost. They demonstrated that the pricing policy that maximizes consumer well-being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost, so that a firm would be willing to provide the bridge. This first-best solution is based on a number of informational assumptions. First, the demand is assumed to be known to both the regulator and to the firm. While the assumption of complete information may be too strong, the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural. A second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm. This assumption is unlikely to be met in reality, since the firm would be expected to have better information about costs than would the regulator. As Weitzman has stated, An essential feature of the regulatory environment I am trying to describe is uncertainty about the exact specification of each firm's cost function. In most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels. Because they are yet removed from the production process, the regulators are likely to be vaguer still about a firm's cost function [12, p. 684]. As this observation suggests, it is natural to expect that a firm would have better information regarding its costs than would a regulator. The purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm. One strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm. In pursuing its own interests, which would then be to maximize the total social surplus, the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

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Log-concave probability and its applications

2006-04-20

Mark Bagnoli , Ted Bergstrom

The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics

2002-07-01

Alvin E. Roth

Economists have lately been called upon not only to analyze markets, but to design them. Market design involves a responsibility for detail, a need to deal with all of a … Economists have lately been called upon not only to analyze markets, but to design them. Market design involves a responsibility for detail, a need to deal with all of a market's complications, not just its principle features. Designers therefore cannot work only with the simple conceptual models used for theoretical insights into the general working of markets. Instead, market design calls for an engineering approach. Drawing primarily on the design of the entry level labor market for American doctors (the National Resident Matching Program), and of the auctions of radio spectrum conducted by the Federal Communications Commission, this paper makes the case that experimental and computational economics are natural complements to game theory in the work of design. The paper also argues that some of the challenges facing both markets involve dealing with related kinds of complementarities, and that this suggests an agenda for future theoretical research.

Computationally Manageable Combinational Auctions

1998-08-01

Michael H. Rothkopf , Aleksandar Pekeč , Ronald M. Harstad

There is interest in designing simultaneous auctions for situations such as the recent FCC radio spectrum auctions, in which the value of assets to a bidder depends on which other … There is interest in designing simultaneous auctions for situations such as the recent FCC radio spectrum auctions, in which the value of assets to a bidder depends on which other assets he or she wins. In such auctions, bidders may wish to submit bids for combinations of assets. When this is allowed, the problem of determining the revenue maximizing set of nonconflicting bids can be difficult. We analyze this problem, identifying several different structures of permitted combinational bids for which computational tractability is constructively demonstrated and some structures for which computational tractability cannot be guaranteed.

Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet

2002-08-01

Alvin E. Roth , Axel Ockenfels

Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet by Alvin E. Roth and Axel Ockenfels. Published in volume 92, issue … Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet by Alvin E. Roth and Axel Ockenfels. Published in volume 92, issue 4, pages 1093-1103 of American Economic Review, September 2002

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Algorithmic Game Theory

2007-09-24

Noam Nisan , Christos H. Papadimitriou , Éva Tardos +7 more

In recent years game theory has had a substantial impact on computer science, especially on Internet- and e-commerce-related issues. Algorithmic Game Theory, first published in 2007, develops the central ideas … In recent years game theory has had a substantial impact on computer science, especially on Internet- and e-commerce-related issues. Algorithmic Game Theory, first published in 2007, develops the central ideas and results of this exciting area in a clear and succinct manner. More than 40 of the top researchers in this field have written chapters that go from the foundations to the state of the art. Basic chapters on algorithmic methods for equilibria, mechanism design and combinatorial auctions are followed by chapters on important game theory applications such as incentives and pricing, cost sharing, information markets and cryptography and security. This definitive work will set the tone of research for the next few years and beyond. Students, researchers, and practitioners alike need to learn more about these fascinating theoretical developments and their widespread practical application.

Over-the-Counter Markets

2005-10-11

Darrell Duffie , Nicolae Gârleanu , Lasse Heje Pedersen

We study how intermediation and asset prices in over-the-counter markets are aected by illiquidity associated with search and bargaining. We compute explicitly the prices at which investors trade with each … We study how intermediation and asset prices in over-the-counter markets are aected by illiquidity associated with search and bargaining. We compute explicitly the prices at which investors trade with each other as well as marketmakers’ bid and ask prices in a dynamic model with strategic agents. Bid-ask spreads are lower if investors can more easily nd other investors, or have easier access to multiple marketmakers. With a monopolistic marketmaker, bid-ask spreads are higher if investors have easier access to the marketmaker. We characterize endogenous search and welfare, and discuss empirical implications.

Auction Theory: A Guide to the Literature

1999-07-01

Paul Klemperer

This paper provides an elementary, non‐technical, survey of auction theory, by introducing and describing some of the critical papers in the subject. (The most important of these are reproduced in … This paper provides an elementary, non‐technical, survey of auction theory, by introducing and describing some of the critical papers in the subject. (The most important of these are reproduced in a companion book, The Economic Theory of Auctions , Paul Klemperer (ed.), Edward Elgar (pub.), forthcoming.); We begin with the most fundamental concepts, and then introduce the basic analysis of optimal auctions, the revenue equivalence theorem, and marginal revenues. Subsequent sections address risk‐aversion, affiliation, asymmetries, entry, collusion, multi‐unit auctions, double auctions, royalties, incentive contracts, and other topics. Appendices contain technical details, some simple worked examples, and a bibliography for each section.

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Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets

2006-05-01

Xavier Gabaix , David Laibson

Bayesian consumers infer that hidden add-on prices (e.g., the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information … Bayesian consumers infer that hidden add-on prices (e.g., the cost of ink for a printer) are likely to be high prices. If consumers are Bayesian, firms will not shroud information in equilibrium. However, shrouding may occur in an economy with some myopic (or unaware) consumers. Such shrouding creates an inefficiency, which firms may have an incentive to eliminate by educating their competitors' customers. However, if add-ons have close substitutes, a "curse of debiasing" arises, and firms will not be able to profitably debias consumers by unshrouding add-ons. In equilibrium, two kinds of exploitation coexist. Optimizing firms exploit myopic consumers through marketing schemes that shroud high-priced add-ons. In turn, sophisticated consumers exploit these marketing schemes. It is not possible to profitably drive away the business of sophisticates. It is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms. We show that informational shrouding flourishes even in highly competitive markets, even in markets with costless advertising, and even when the shrouding generates allocational inefficiencies.

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Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords

2007-02-01

Benjamin Edelman , Michael Ostrovsky , Michael Schwarz

We investigate the “generalized second-price” (GSP) auction, a new mechanism used by search engines to sell online advertising. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are … We investigate the “generalized second-price” (GSP) auction, a new mechanism used by search engines to sell online advertising. Although GSP looks similar to the Vickrey-Clarke-Groves (VCG) mechanism, its properties are very different. Unlike the VCG mechanism, GSP generally does not have an equilibrium in dominant strategies, and truth-telling is not an equilibrium of GSP. To analyze the properties of GSP, we describe the generalized English auction that corresponds to GSP and show that it has a unique equilibrium. This is an ex post equilibrium, with the same payoffs to all players as the dominant strategy equilibrium of VCG. (JEL D44, L81, M37)

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Evidence of the Effect of Trust Building Technology in Electronic Markets: Price Premiums and Buyer Behavior

2002-09-01

Sulin Ba , Paul A. Pavlou

Despite the wide use of reputational mechanisms such as eBay's Feedback Forum to promote trust, empirical studies have shown conflicting results as to whether online feedback mechanisms induce trust and … Despite the wide use of reputational mechanisms such as eBay's Feedback Forum to promote trust, empirical studies have shown conflicting results as to whether online feedback mechanisms induce trust and lead to higher auction prices. This study examines the extent to which trust can be induced by proper feedback mechanisms in electronic markets, and how some risk factors play a role in trust formation. Drawing from economic, sociological, and marketing theories and using data from both an online experiment and an online auction market, we demonstrate that appropriate feedback mechanisms can induce calculus-based credibility trust without repeated interactions between two transacting parties. Trust can mitigate information asymmetry by reducing transaction-specific risks, therefore generating price premiums for reputable sellers. In addition, the research also examines the role that trust plays in mitigating the risks inherent in transactions that involve very expensive products.

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The Winner's Curse, Reserve Prices, and Endogenous Entry: Empirical Insights from eBay Auctions

2003-01-01

Patrick Bajari , Alı Hortaçsu

Online auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce.We examine a dataset of eBay coin auctions to explore features of online … Online auctions have recently gained widespread popularity and are one of the most successful forms of electronic commerce.We examine a dataset of eBay coin auctions to explore features of online bidding and selling behavior.We address three main issues.First, we measure the extent of the winner's curse.We find that for a representative auction in our sample, a bidder's expected profits fall by 3.2 percent when the expected number of bidders increases by one.Second, we document that costly entry is a key component in understanding observed bidding behavior.For a representative auction in our sample, a bidder requires $3.20 of expected profit to enter the auction.Third, we study the seller's choice of reserve prices.We find that items with higher book value tend to be sold using a secret as opposed to posted reserve price with a low minimum bid.We find that this is, to a first approximation, consistent with maximizing behavior.We also develop new techniques for structurally estimating common value auction models.

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Moral Hazard in Teams

1982-01-01

Bengt Holmström

This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a … This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a new role for the principal: administering incentive schemes that do not balance the budget. This new role is essential for controlling incentives and suggests that firms in which ownership and labor are partly separated will have an advantage over partnerships in which output is distributed among agents. A new characterization of informative (hence valuable) monitoring is derived and applied to analyze the value of relative performance evaluation. It is shown that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally. Competition per se is worthless. The role of aggregate measures in relative performance evaluation is also explored, and the implications for investment rules are discussed.

The value of reputation on eBay: A controlled experiment

2006-05-31

Paul Resnick , Richard Zeckhauser , John Swanson +1 more

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The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms

2003-10-01

Chrysanthos Dellarocas

Online feedback mechanisms harness the bidirectional communication capabilities of the Internet to engineer large-scale, word-of-mouth networks. Best known so far as a technology for building trust and fostering cooperation in … Online feedback mechanisms harness the bidirectional communication capabilities of the Internet to engineer large-scale, word-of-mouth networks. Best known so far as a technology for building trust and fostering cooperation in online marketplaces, such as eBay, these mechanisms are poised to have a much wider impact on organizations. Their growing popularity has potentially important implications for a wide range of management activities such as brand building, customer acquisition and retention, product development, and quality assurance. This paper surveys our progress in understanding the new possibilities and challenges that these mechanisms represent. It discusses some important dimensions in which Internet-based feedback mechanisms differ from traditional word-of-mouth networks and surveys the most important issues related to their design, evaluation, and use. It provides an overview of relevant work in game theory and economics on the topic of reputation. It discusses how this body of work is being extended and combined with insights from computer science, management science, sociology, and psychology to take into consideration the special properties of online environments. Finally, it identifies opportunities that this new area presents for operations research/management science (OR/MS) research.

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Double Auctions: Formalization and Automated Checkers

2025-06-24

Mohit Garg , N. Kannaiya Raja , Suneel Sarswat +1 more | Journal of Automated Reasoning

Machine-learning regression methods for American-style path-dependent contracts

2025-06-23

Matteo Gambara , Giulia Livieri , Andrea Pallavicini | Quantitative Finance

Oh the Prices You’ll See: Designing a Fair Exchange System to Mitigate Personalized Pricing

2025-06-23

Aditya Karan , Naina Balepur , Hari Sundaram

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Tight bounds on the weak price of anarchy for the randomized externality policy in scheduling games with multi-job players

2025-06-21

Po‐An Chen , Ling-Wei Wang , Bertrand M.T. Lin +2 more | Journal of the Operational Research Society

EXPRESS: Optimal Bidding, Allocation, and Budget Spending for a Demand-Side Platform with Generic Auctions

2025-06-20

Paul Grigas , Alfonso Lobos , Zheng Wen +1 more | Production and Operations Management

We develop a practical optimization model for the management of a demand-side platform (DSP), which is applicable in static planning situations where the DSP acquires valuable impressions for high-volume advertiser … We develop a practical optimization model for the management of a demand-side platform (DSP), which is applicable in static planning situations where the DSP acquires valuable impressions for high-volume advertiser clients in a real-time bidding environment. We propose a highly flexible model for the DSP to maximize its profit while maintaining acceptable levels of budget spending for its advertisers. Our model achieves flexibility and improved performance primarily through two different aspects: (i) we replace standard budget constraints with a more general budget utilization proxy function over budget spending levels, and (ii) we can accommodate arbitrary auction types by directly modeling the interactions between the DSP and the auctions. Our proposed formulation leads to a non-convex optimization problem due to the joint optimization over both impression allocation and bid price decisions. Using Fenchel duality theory, we obtain a convex dual problem that can be efficiently solved with subgradient based algorithms and from which a primal solution may be recovered efficiently. Under a natural and intuitive "increasing marginal cost" condition, as well as under a more general condition, we show that there is zero duality gap between the dual problem and the original non-convex primal problem. Under the same conditions, we also demonstrate convergence of our algorithm to an optimal solution of the non-convex formulation as the dual problem is solved to near optimality. We conduct experiments on both synthetic data as well as data from a real DSP, and our results demonstrate how our algorithm allows the DSP to better trade off between profitability and budget spending as compared to a widely used "greedy" heuristic approach.

Knowledge brokers at the science–policy interface: Insights from biosecurity and environmental management

2025-06-19

Alejandro Bortolus , Chad L. Hewitt , Veli Mitova +7 more | AMBIO

Deep mechanism design: Learning social and economic policies for human benefit

2025-06-16

Andrea Tacchetti , Raphaël Koster , Jan Balaguer +6 more | Proceedings of the National Academy of Sciences

Human society is coordinated by mechanisms that control how prices are agreed, taxes are set, and electoral votes are tallied. The design of robust and effective mechanisms for human benefit … Human society is coordinated by mechanisms that control how prices are agreed, taxes are set, and electoral votes are tallied. The design of robust and effective mechanisms for human benefit is a core problem in the social, economic, and political sciences. Here, we discuss the recent application of modern tools from AI research, including deep neural networks trained with reinforcement learning (RL), to create more desirable mechanisms for people. We review the application of machine learning to design effective auctions, learn optimal tax policies, and discover redistribution policies that win the popular vote among human users. We discuss the challenge of accurately modeling human preferences and the problem of aligning a mechanism to the wishes of a potentially diverse group. We highlight the importance of ensuring that research into “deep mechanism design” is conducted safely and ethically.

Allocating Public Goods via Dynamic Max-Min Fairness: Long-Run Behavior and Competitive Equilibria

2025-06-16

Chido Onyeze , Siddhartha Banerjee , Giannis Fikioris +1 more | ACM SIGMETRICS Performance Evaluation Review

Dynamic max-min fair allocation (DMMF) is a simple and popular mechanism for the repeated allocation of a shared resource among competing agents: in each round, each agent can choose to … Dynamic max-min fair allocation (DMMF) is a simple and popular mechanism for the repeated allocation of a shared resource among competing agents: in each round, each agent can choose to request or not for the resource, which is then allocated to the requesting agent with the least number of allocations received till then. Recent work has shown that under DMMF, a simple threshold-based request policy enjoys surprisingly strong robustness properties, wherein each agent can realize a significant fraction of her optimal utility irrespective of how other agents' behave. While this goes some way in mitigating the possibility of a 'tragedy of the commons' outcome, the robust policies require that an agent defend against arbitrary (possibly adversarial) behavior by other agents. This however may be far from optimal compared to real world settings, where other agents are selfish optimizers rather than adversaries. Therefore, robust guarantees give no insight on how agents behave in an equilibrium, and whether outcomes are improved under one. Our work aims to bridge this gap by studying the existence and properties of equilibria under DMMF. To this end, we first show that despite the strong robustness guarantees of threshold based strategies, no Nash equilibrium exists when agents participate in DMMF using such strategies. On the positive side, however, we show that for the symmetric case, a simple data-driven request policy guarantees that no agent benefits from deviating to a different fixed threshold policy. In our proposed policy agents aim to match the historical allocation rate with a vanishing drift towards the rate optimizing overall welfare for all users. Furthermore, the resulting equilibrium outcome can be significantly better compared to what follows from the robustness guarantees. Our results are built on a complete characterization of the steady-state distribution under DMMF, as well as new techniques for analyzing strategic agent outcomes under dynamic allocation mechanisms; we hope these may prove of independent interest in related problems.

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Implementation of welfare maximizing networks

2025-06-16

Jens Leth Hougaard , Mich Tvede | Social Choice and Welfare

Tractable Agreement Protocols

2025-06-15

Natalie Collina , Surbhi Goel , Varun Gupta +1 more

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Intelligent Automation for Fdi Facilitation: Optimizing Tariff Exemption Processes With OCR and Large Language Models

2025-06-13

Muhammad Sukri Bin Ramli | Research Square (Research Square)

<title>Abstract</title> Tariff exemptions are fundamental to attracting Foreign Direct Investment (FDI) into the manufacturing sector, though the associated administrative processes present areas for optimization for both investing entities and the … <title>Abstract</title> Tariff exemptions are fundamental to attracting Foreign Direct Investment (FDI) into the manufacturing sector, though the associated administrative processes present areas for optimization for both investing entities and the national tax authority. This paper proposes a conceptual framework to empower tax administration by leveraging a synergistic integration of Optical Character Recognition (OCR) and Large Language Model (LLM) technologies. The proposed system is designed to first utilize OCR for intelligent digitization, precisely extracting data from diverse application documents and key regulatory texts such as tariff orders. Subsequently, the LLM would enhance the capabilities of administrative officers by automating the critical and time-intensive task of verifying submitted HS Tariff Codes for machinery, equipment, and raw materials against official exemption lists. By enhancing the speed and precision of these initial assessments, this AI-driven approach systematically reduces potential for non-alignment and non-optimized exemption utilization, thereby streamlining the investment journey for FDI companies. For the national administration, the benefits include a significant boost in operational capacity, reduced administrative load, and a strengthened control environment, ultimately improving the ease of doing business and solidifying the nation's appeal as a premier destination for high-value manufacturing FDI.

Enhancing Efficiency and Flexibility in Audits through Bayesian Optional Stopping

2025-06-13

Lotte Mensink , jacques de swart , Koen Derks +1 more

To verify the accuracy of organizations’ financial statements, auditors collect and evaluate audit evidence. Often, it is too time-consuming or expensive to analyze the entire population of audit evidence. In … To verify the accuracy of organizations’ financial statements, auditors collect and evaluate audit evidence. Often, it is too time-consuming or expensive to analyze the entire population of audit evidence. In such cases, auditors may use statistical sampling to evaluate a sample of the evidence and extrapolate the findings to the rest of the population. When statistically extrapolating the findings from the sample to the population, auditors can choose between the frequentist or Bayesian statistical paradigm. The two paradigms differ on various aspects, but one crucial difference is that the frequentist paradigm requires the auditor to determine the sample size before collecting any data, whereas the Bayesian paradigm does not. Consequently, auditors employing a Bayesian method can monitor evidence as it comes in and stop whenever sufficient evidence has been gathered. This practice, also known as Bayesian optional stopping, enhances efficiency and flexibility in audits.

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Undominated monopoly regulation

2025-06-01

Debasis Mishra , Sanket Patil | Journal of Economic Theory

Pricing and Information Acquisition in Networks

2025-06-01

Yu-lin Xiong , Guo-Peng Li , Youze Lang | Games and Economic Behavior

Spiteful bidding in first-price all-pay auctions

2025-06-01

Oliver Kirchkamp , Shulin Liu , Wladislaw Mill +1 more | Economics Letters

The Frontier of Intractability for EFX with Two Agents

2025-06-01

Paul W. Goldberg , Kasper Høgh , Alexandros Hollender | Theoretical Computer Science

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Full surplus extraction and consideration sets

2025-05-30

Nicolas Pastrian | Economic Theory

Late payments, higher prices? An experimental investigation of competitive procurement

2025-05-29

Matthew J. Walker , Kyle Hyndman | Decision Sciences

Abstract The decision to pay one's supplier late is commonplace across global supply chains and, arguably, a key challenge for many businesses. In a multiple‐methods study, we contribute to the … Abstract The decision to pay one's supplier late is commonplace across global supply chains and, arguably, a key challenge for many businesses. In a multiple‐methods study, we contribute to the literature by documenting important empirical and anecdotal features about the likelihood and severity of late payments, formulating and solving a theoretical model grounded in these features, which suggests a policy tool to reduce late payments and then validating the model through a rigorous laboratory experiment. Grounded in our direct interactions with buyer‐side and supplier‐side organizations and our analysis of regulatory payment reports, we construct a game‐theoretic model to analyze the qualitative effect through which uncertainty about the date payment will be received influences suppliers’ pricing decisions. We then examine whether an economic incentive (penalty for late payment) deters buyers from reneging upon an announced payment term. The effectiveness of introducing a penalty for late payment is not obvious because some buyers may choose to circumvent the penalty by announcing a longer payment term up front, and the penalty may influence suppliers’ bidding strategies. We find analytically and validate experimentally that setting the highest penalty for late payment is an effective deterrent mechanism and leads to the highest expected buyer profit through its effect on supplier competition. Thus, establishing a credible commitment to pay one's suppliers within a shorter payment term is a cost‐effective managerial strategy for buyers. However, a welfare loss arises if the penalty is not set high enough because it fails to align incentives for a subset of buyers.

The Choice among Sales Mechanisms: Auction v. Negotiated Sales of Private Timber

2025-05-28

Randal R. Rucker , Keith B. Leffler , Ian A. Munn | Forest Science

Abstract For many non-industrial private forest (NIPF) landowners, the standing timber on their property is an important component of their investment portfolios. The value of their timber is determined not … Abstract For many non-industrial private forest (NIPF) landowners, the standing timber on their property is an important component of their investment portfolios. The value of their timber is determined not only by the biological and physical attributes of their timber tracts, but also by the transaction costs associated with different contracting practices, pricing schemes, and sales mechanisms. In this paper, we examine the determinants of the choice by landowners between the two predominant sales mechanisms for selling standing timber—auctions and negotiations. Our examination provides industry participants with a framework for thinking about the benefits and costs of the choice between these two alternatives. Further, it provides them with information on empirical relationships among sales mechanisms and their determinants. We also discuss potential implications of our results for the USDA Forest Service (Forest Service), which is required to sell almost all of its tracts through auctions.

Robust Contracting Under Distributional Uncertainty

2025-05-28

Jiangtao Li , Kexin Wang | International Economic Review

ABSTRACT We study contract design when the principal has limited information about the output distributions induced by the agent's actions. In a baseline model where only the means are known, … ABSTRACT We study contract design when the principal has limited information about the output distributions induced by the agent's actions. In a baseline model where only the means are known, we show that increasing affine contracts are robustly optimal. The mean restrictions accommodate a wide range of output distributions, including extreme cases that help establish this optimality. We then extend the analysis to environments with additional constraints on the distributions. Our main result shows that the robust optimality of increasing affine contracts persists even when the principal knows more—for example, that each action induces a distribution with full support.

Enhancing Differential Evolution: A Dual Mutation Strategy with Majority Dimension Voting and New Stopping Criteria

2025-05-28

Anna Maria Gianni , Ioannis G. Tsoulos , Vasileios Charilogis +1 more | Symmetry

This paper presents an innovative optimization algorithm based on differential evolution that combines advanced mutation techniques with intelligent termination mechanisms. The proposed algorithm is designed to address the main limitations … This paper presents an innovative optimization algorithm based on differential evolution that combines advanced mutation techniques with intelligent termination mechanisms. The proposed algorithm is designed to address the main limitations of classical differential evolution, offering improved performance for symmetric or non-symmetric optimization problems. The core scientific contribution of this research focuses on three key aspects. First, we develop a hybrid dual-strategy mutation system where the first strategy emphasizes exploration of the solution space through monitoring of the optimal solution, while the second strategy focuses on exploitation of promising regions using dynamically weighted differential terms. This dual mechanism ensures a balanced approach between discovering new solutions and improving existing ones. Second, the algorithm incorporates a novel majority dimension mechanism that evaluates candidate solutions through dimension-wise comparison with elite references (best sample and worst sample). This mechanism dynamically guides the search process by determining whether to intensify local exploitation or initiate global exploration based on majority voting across all the dimensions. Third, the work presents numerous new termination rules based on the quantitative evaluation of metric value homogeneity. These rules extend beyond traditional convergence checks by incorporating multidimensional criteria that consider both the solution distribution and evolutionary dynamics. This system enables more sophisticated and adaptive decision-making regarding the optimal stopping point of the optimization process. The methodology is validated through extensive experimental procedures covering a wide range of optimization problems. The results demonstrate significant improvements in both solution quality and computational efficiency, particularly for high-dimensional problems with numerous local optima. The research findings highlight the proposed algorithm’s potential as a high-performance tool for solving complex optimization challenges in contemporary scientific and technological contexts.

Does increasing auctioning in the EU ETS increase companies' search efforts for favourable trading options?

2025-05-27

Sascha Lehmann , Joachim Schleich

The European Emissions Trading System was established in 2005 and regulates greenhouse gas emissions across energy, industry, and aviation sectors in EU Member States. Since 2013, the share of auctioned … The European Emissions Trading System was established in 2005 and regulates greenhouse gas emissions across energy, industry, and aviation sectors in EU Member States. Since 2013, the share of auctioned allowances has increased, and will further increase in the future. A higher share of auctioning is generally considered to improve efficiency of an emissions trading system. However, increased auctioning may increase search activity on the secondary market because it increases companies' financial incentives to find more favourable trading options, potentially undermining efficiency gains of auctioning compared to free allocation. Employing trading and company data from 2005 to 2017, this study empirically examines if increased auctioning affects companies' search for favourable secondary market trading options, specifically in terms of the number of trading partners and trading frequency. Results from estimating panel econometric models suggest that companies with a higher absolute net position value and higher banking stock value indeed intensify their secondary market search activities, ceteris paribus. Because the size effects appear to be rather small, however, any additional search costs are likely to be more than offset by the positive effects of a higher auction share compared to free allocation.

Reinforcement Learning with the Law of Diminishing Marginal Utility: Efficient and Equitable Resource Allocation in Multi-Agent Systems

2025-05-26

Yunsu Lee , Byoung-Tak Zhang

Asymmetric valuations in charity auctions

2025-05-26

Reza Armakan | AEA Randomized Controlled Trials

Asymmetric valuations in charity auctions

2025-05-26

Reza Armakan | AEA Randomized Controlled Trials

Double-Bid Enhanced Auction System in Livestock

2025-05-24

P Dhamayanthi , Sri jayasuryaa GSS , Linga Vishnu R +2 more

Livestock farming plays a crucial role in global agriculture, yet many farmers continue to face major challenges when it comes to marketing and selling their animals. Limited access to markets, … Livestock farming plays a crucial role in global agriculture, yet many farmers continue to face major challenges when it comes to marketing and selling their animals. Limited access to markets, geographic isolation, and a lack of effective marketing or negotiation skills often make the process difficult. Traditional avenues like local auctions and commodity markets are usually inefficient, offering little visibility and limited decision-making support for farmers. To address these issues, this project proposes a digital solution designed to revolutionize the livestock selling experience. The platform will allow farmers to create detailed listings, including important information such as breed, age, weight, health status, and images of the livestock. A key feature of the platform is the integration of live video auctions, enabling farmers to present their livestock in real-time and allowing potential buyers to place bids from anywhere. To build trust and ensure transparency, a quality assurance system with certification badges will be included. Additionally, video consultation services will support direct communication between farmers and buyers, offering virtual farm tours or one-on-one consultations. The platform also prioritizes user convenience and safety, with features like a secure payment gateway, real-time chat, notifications, and a feedback system. Designed to be accessible via mobile devices, it offers flexibility for both buyers and sellers. The solution is developed with a strong focus on legal compliance, scalability, and robust security, aiming to create a reliable and sustainable digital marketplace. By addressing the core challenges in livestock marketing, this platform lays the groundwork for future innovation and broader market reach.

Coordination through Committees and Markets with Option Timing Games

2025-05-24

Laura Delaney , Tarik Driouchi

AI-driven dynamic pricing: Optimizing revenue in digital marketplaces

2025-05-23

KRISHNA CHAITANYA YARLAGADDA

Dynamic pricing represents a transformative approach in modern business strategy, enabling real-time price adjustments based on multiple data inputs through artificial intelligence. This article explores the evolution from static pricing … Dynamic pricing represents a transformative approach in modern business strategy, enabling real-time price adjustments based on multiple data inputs through artificial intelligence. This article explores the evolution from static pricing to sophisticated AI-driven models across diverse industries, examining the theoretical frameworks and technologies that power contemporary pricing systems. The technological foundation of machine learning algorithms, reinforcement learning, predictive analytics, customer segmentation techniques, and elasticity modeling is analyzed in depth. Industry-specific implementation strategies are compared across transportation, hospitality, e-commerce, service sectors, and B2B contexts, highlighting specialized adaptations to unique market conditions. Decision variables critical to dynamic pricing success are examined, including demand patterns, competitive intelligence, customer behavior metrics, inventory integration, and market trend analysis. Ethical considerations and consumer perception factors are addressed, with particular focus on price discrimination concerns, algorithmic transparency, regulatory compliance, trust-building approaches, and value proposition communication. The article provides a structured framework for understanding how AI-powered dynamic pricing creates competitive advantage while navigating ethical and consumer acceptance challenges.

Political Markets

2025-05-22

Oren Bar‐Gill , Cass R. Sunstein

Abstract Chapter 13 ventures into the worlds of politics and democratic theory. It might seem that these worlds have nothing to do with the market contexts—consumer markets and labor markets—on … Abstract Chapter 13 ventures into the worlds of politics and democratic theory. It might seem that these worlds have nothing to do with the market contexts—consumer markets and labor markets—on which the book has focused thus far. There are indeed major differences. Still, it is useful to think about a market for votes and a market for political contributions. More fundamentally, the algorithmic harms the book has identified appear in these political markets, with potentially severe consequences for democracy. The main goal of the chapter is to suggest that the treatment of algorithmic harm presented in this book has close parallels in political markets, and that the same kinds of harms are now occurring, and will likely get worse, in those markets. The remedies sketched to handle algorithmic harm in other markets might well have parallels in political markets as well.

Algorithmic Price Discrimination: Extensions

2025-05-22

Oren Bar‐Gill , Cass R. Sunstein

Abstract The main lesson of the analysis in Chapter 1 is that algorithmic price discrimination is more likely to be harmful in U markets and more likely to be beneficial … Abstract The main lesson of the analysis in Chapter 1 is that algorithmic price discrimination is more likely to be harmful in U markets and more likely to be beneficial in S markets. Chapter 2 presents several extensions of the baseline, Chapter 1 model to explore the robustness of this main result and its limitations. In addition, the analysis of extensions in Chapter 2 allows the formulation of more precise guidelines for policymakers.

Algorithmic Price Discrimination

2025-05-22

Oren Bar‐Gill , Cass R. Sunstein

Abstract Chapter 1 analyzes the positive and normative implications of price discrimination, enabled by AI-powered algorithms. Price discrimination is largely beneficial in S markets but quite harmful in U markets. … Abstract Chapter 1 analyzes the positive and normative implications of price discrimination, enabled by AI-powered algorithms. Price discrimination is largely beneficial in S markets but quite harmful in U markets. In S markets, price discrimination increases the total surplus. The overall consumer surplus is reduced, but poor consumers benefit. In U markets, the harm to consumers from price discrimination is significantly larger, as consumers who overestimate the benefit from the product or service overpay for them. Moreover, total surplus might decrease, as overestimation results in transactions where the actual benefit to the consumer from the product or service is lower than the cost to the seller of providing the product or service.