Lottery Rather than Waiting-line Auction

This paper investigates the allocative efficiency of two non-price allocation mechanisms – the lottery (random allocation) and the waiting-line auction (queue system) – for the cases where consumers possess identical time costs (the homogeneous case), and where time costs are correlated with time valuations (the heterogeneous case). We show that the relative efficiency of the two mechanisms depends critically on a scarcity factor (measured by the ratio of the number of objects available for allocation over the number of participants) and on the shape of the distribution of valuations. We show that the lottery dominates the waiting-line auction for a wide range of situations, and that while consumer heterogeneity may improve the relative allocative efficiency of the waiting-line auction, the ranking on relative efficiency is not reversed.     

Fair Groves mechanisms

We study allocation problems in which a costly task is to be assigned and money transfers are used to achieve fairness among agents. We consider a series of fairness notions (k-fairness for where n is the number of agents) of decreasing restrictiveness that are based on Rawls’ maximin equity criterion and impose welfare lower bounds. These fairness notions were introduced by Porter et al. (J Econ Theory 118:209–228, 2004) who also introduced two classes of Groves mechanisms that are 1-fair and 3-fair, respectively, and generate deficits that are bounded above. We show that these classes are the largest such classes of Groves mechanisms. We generalize these mechanisms for each and show that the corresponding mechanisms generate the smallest deficit for each economy among all k-fair Groves mechanisms. The first draft of this paper was written while we were Ph.D. students at the University of Rochester. We are grateful to William Thomson for his guidance and advice. We also thank two referees and the associate editor for their comments.     

Characterizing Vickrey allocation rule by anonymity

We consider the problem of allocating finitely many units of an indivisible good among a group of agents when each agent receives at most one unit of the good and pays a non-negative price. For example, imagine that a government allocates a fixed number of licenses to private firms, or that it distributes equally divided lands to households. Anonymity in welfare is a condition of impartiality in the sense that it requires allocation rules to treat agents equally in welfare terms from the viewpoint of agents who are ignorant of their own valuations or identities. We show that the Vickrey allocation rule is the unique allocation rule satisfying strategy-proofness, anonymity in welfare, and individual rationality.     

Dissolving (in)effective partnerships

This paper studies the problem of partnership dissolution in the context of asymmetric information. Past work shows that the initial share allocation, interdependence of partners’ valuations, and asymmetric control all affect the possibility of efficient dissolution. In this paper, I show, in a novel class of “cooperative” partnerships characterized by ex ante interdependence of valuations, that effectiveness is significantly more important than the initial share allocation. Intuitively, as the effectiveness of cooperation between partners (and thus partnership value) increases, the gains from dissolving decrease but the informational rents remain constant, so efficient dissolution is more difficult to achieve. For sufficiently high effectiveness, efficient dissolution is impossible for any initial share allocation. For sufficiently low effectiveness, however, efficient dissolution is possible for all initial share allocations. The possibility of efficient bargaining depends on the initial share allocation only for moderately effective partnerships.     

Monetary Policy and the U.S. Stock Market

What is the influence of stock market valuations on monetary policy? We use a forward‐looking Taylor rule model to examine if monetary policy since the 19 October 1987 stock market crash has been influenced by the valuation of the stock market. We estimate the model using revised and real‐time data and find no empirical evidence that the Federal Reserve policy attempted to moderate stock market valuations during the late 1990s despite the “irrational exuberance” comments by Chairman Greenspan. Actually, the empirical evidence suggests that the Fed accommodated the high valuations of the stock market during this period.     

A generalized model of relational similarity

This paper introduces two principles for relational similarity, and based on these principles it proposes a novel geometric representation for similarity. The first principle generalizes earlier measures of similarity such as Pearson-correlation and structural equivalence: while correlation and structural equivalence measure similarity by the extent to which the actors have similar relationships to other actors or objects, the proposed model views two actors similar if they have similar relationships to similar actors or objects. The second principle emphasizes consistency among similarities: not only are actors similar if they have similar relationships to similar objects, but at the same time objects are similar if similar actors relate to them similarly. We examine the behavior of the proposed similarity model through simulations, and re-analyze two classic datasets: the Davis et al. (1941) data on club membership and the roll-call data of the U.S. Senate. We find that the generalized model of similarity is especially useful if (1) the dimensions of comparison are not independent, or (2) the data are sparse, or (3) the boundaries between clusters are not clear.     

Generating random weak orders and the probability of a Condorcet winner

We present an algorithm for generating a random weak order of m objects in which all possible weak orders are equally likely. The form of the algorithm suggests analytic expressions for the probability of a Condorcet winner both for linear and for weak preference orders. Received: 6 April 2000/Accepted: 31 January 2001     

Cooperative production with unequal skills: The solidarity approach to compensation

We consider a simple production model and we assume that agents have unequal production skills which can in no way be attributed to their responsibility. We study how it is possible, if at all, to compensate for differential skills by applying Rawls's idea of a collective sharing in the benefits of skills. For this purpose, we introduce an axiom of solidarity, according to which agents should all be affected in the same direction if the profile of personal skills changes. We show that particular allocation rules are characterized be combining this axiom with a requirement of non-discrimination among preferences, or with a property capturing Nozick's idea of guaranteeing a minimal benefit from one's own skill. Received: 1 July 1996/Accepted: 25 May 1998     

The replacement principle in economies with indivisible goods

 We consider the problem of allocating a list of indivisible goods and some amount of an infinitely divisible good among agents with equal rights on these resources, and investigate the implications of the following requirement on allocation rules: when the preferences of some of the agents change, all agents whose preferences are fixed should (weakly) gain, or they should all (weakly) lose. This condition is an application of a general principle of solidarity discussed in Thomson (1990b) under the name “replacement principle”. We look for selections from the no-envy solution satisfying this property. We show that in the general case, when the number of objects is arbitrary, there is no such selection. However, in the one-object case (a single prize), up to Pareto-indifference, there is only one selection from the no-envy solution satisfying the property. Such a solution always selects an envy-free allocation at which the winner of the prize is indifferent between his bundle and the losers’ common bundle. Received: 15 May 1995 / Accepted: 5 June 1996     

Topological aggregation of preferences: the case of a continuum of agents

 This paper studies the topological approach to social choice theory initiated by G. Chichilnisky (1980), extending it to the case of a continuum of agents. The social choice rules are continuous anonymous maps defined on preference spaces which respect unanimity. We establish that a social choice rule exists for a continuum of agents if and only if the space of preferences is contractible. We provide also a topological characterization of such rules as generalized means or mathematical expectations of individual preferences. Received: 30 November 1994/Accepted: 22 April 1996     

Using Suggested Contributions in Fundraising for Public Good

This article presents a provision point mechanism experiment designed to investigate the impact of suggested contributions in a public-good contribution process. We find that suggesting contributions is ineffective if subjects value the public good equally. However, if valuations for the public good differ among individuals, as they do in the real world, we find that contribution suggestions increase the likelihood of providing the public good, increase the fraction of individuals contributing their suggested share, and improve the equity of the distribution of contributions.     

VOLUNTARY CONTRIBUTION GAMES: EFFICIENT PRIVATE PROVISION OF PUBLIC GOODS

This paper reports on a series of laboratory experiments designed to evaluate a mechanism for the voluntary provision of public good. The public good is provided if the total contributions meet or exceed a threshold and all contributions are returned if the public good is not provided. The members of the group all know the threshold, the incomes, and the valuations assigned the public good by all other members. The results support the prediction that this mechanism will yield Pareto efficient outcomes and suggest that economic agents adopt strategies which form equilibria satisfying certain refinements to the Nash equilibrium.     

Graph monotonic values

A disturbing feature of most of the solution concepts for TU games with incomplete communication is that payments of players may decrease when they activate a new link. That can be considered as a drawback which does not occur for the Myerson value (Math Oper Res 2:225–229, 1977) of superadditive games. The present article offers a new axiomatic characterization of the Myerson value. We show that the Myerson value is the unique solution for games with communication structures verifying a set of properties including monotonicity with respect to the graph and coinciding with the Shapley value when the communication is complete.     

Probabilistic allocation rules and single-dipped preferences

We consider the problem of allocating an infinitely divisible endowment among a group of agents with single-dipped preferences. A probabilistic allocation rule assigns a probability distribution over the set of possible allocations to every preference profile. We discuss characterizations of the classes of Pareto-optimal and strategy-proof probabilistic rules which satisfy in addition replacement-domination or no-envy. Interestingly, these results also apply to problems of allocating finitely many identical indivisible objects – to probabilistic and to deterministic allocation. Received: 23 November 1998/Accepted: 20 October 2000     

The effect of recommended contributions in the voluntary provision of public goods

Recommended contributions are often observed in fundraising campaigns for charitable and other public goods. We present an experiment investigating the impact of recommended contributions in a voluntary threshold public goods process. We find that when valuations for the public good are heterogeneous, recommended contributions significantly increase the likelihood of efficient provision, although when valuations are homogeneous, the effect of recommendations is less compelling. This article represents a first step in understanding recommended contributions and other nonbinding, cheap-talk announcements in public goods provision and charitable contributions.     

FAIR ALLOCATION WHEN PLAYERS' PREFERENCES ARE UNKNOWN

Suppose an arbitrator needs to allocate an asset among two players, whose claims on the asset are incompatible. The allocation outcome is said to be fair if the arbitrator awards an outcome that brings the same utility payoff to the two players whenever the two players' claims are symmetric and the allocation set is symmetric. In conjunction with other natural axioms, this fairness requirement implies a unique allocation outcome for any claims problem. We propose a mechanism which can be used by the arbitrator to implement this allocation outcome, even when the players' preferences are unknown to the arbitrator. (JEL C78, D63, J52)     

Money-egalitarian-equivalent and gain-maximin allocations of indivisible items with monetary compensation

Suppose that a certain quantity M of money and a finite number of indivisible items are to be distributed among n people, all of whom have equal claims on the whole. Different allocations are presented using various criteria of fairness in the special case where each player's utility function is additively separable. An allocation is “money-egalitarian-equivalent” (MEE) if each player's monetary valuation of his or her bundle is a fixed constant. We show that there is an essentially unique allocation that is MEE and Pareto-optimal; it is also envy-free. Alternatively, the “gain” of a player may be defined as the difference between how the player evaluates his bundle and an exact nth part of the whole according to his numerical evaluation of the whole. A “gain-maximin” criterion would maximize the minimum gain obtained by any player. We show that Knaster's procedure finds an allocation which is optimal under the gain-maximin criterion. That allocation is not necessarily envy-free, so we also find the envy-free allocation that is optimal under the gain-maximin criterion among all envy-free allocations. It turns out that, even though there exist allocations that are simultaneously envy-free and Pareto-optimal, this optimal allocation may fail to be Pareto-optimal, and it may also violate monotonicity criteria. Received: 30 September 1996/Accepted: 6 March 2002 The author would like to thank Professor William Thomson for a discussion on this subject; and he would like to thank the anonymous referees, who made many substantive suggestions for improving this paper – shortening it, streamlining the arguments, improving the terminology, making further ties with the literature, and improving the exposition.     

Different least square values,different rankings

The semivalues (as well as the least square values) propose different linear solutions for cooperative games with transferable utility. As a byproduct, they also induce a ranking of the players. So far, no systematic analysis has studied to which extent these rankings could vary for different semivalues. The aim of this paper is to compare the rankings given by different semivalues or least square values for several classes of games. Our main result states that there exist games, possibly superadditive or convex, such that the rankings of the players given by several semivalues are completely different. These results are similar to the ones D. Saari discovered in voting theory: There exist profiles of preferences such that there is no relationship among the rankings of the candidates given by different voting rules. Received: 5 November 2000/Accepted: 12 February 2001