On the Equivalence of Bayesian and Dominant Strategy Implementation

We consider a standard social choice environment with linear utilities and independent, one‐dimensional, private types. We prove that for any Bayesian incentive compatible mechanism there exists an equivalent dominant strategy incentive compatible mechanism that delivers the same interim expected utilities for all agents and the same ex ante expected social surplus. The short proof is based on an extension of an elegant result due to Gutmann, Kemperman, Reeds, and Shepp (1991). We also show that the equivalence between Bayesian and dominant strategy implementation generally breaks down when the main assumptions underlying the social choice model are relaxed or when the equivalence concept is strengthened to apply to interim expected allocations.     

An Efficient Dynamic Mechanism

This paper constructs an efficient, budget‐balanced, Bayesian incentive‐compatible mechanism for a general dynamic environment with quasilinear payoffs in which agents observe private information and decisions are made over countably many periods. First, under the assumption of “private values” (other agents' private information does not directly affect an agent's payoffs), we construct an efficient, ex post incentive‐compatible mechanism, which is not budget‐balanced. Second, under the assumption of “independent types” (the distribution of each agent's private information is not directly affected by other agents' private information), we show how the budget can be balanced without compromising agents' incentives. Finally, we show that the mechanism can be made self‐enforcing when agents are sufficiently patient and the induced stochastic process over types is an ergodic finite Markov chain.     

Dynamic Mechanism Design: A Myersonian Approach

We study mechanism design in dynamic quasilinear environments where private information arrives over time and decisions are made over multiple periods. We make three contributions. First, we provide a necessary condition for incentive compatibility that takes the form of an envelope formula for the derivative of an agent's equilibrium expected payoff with respect to his current type. It combines the familiar marginal effect of types on payoffs with novel marginal effects of the current type on future ones that are captured by “impulse response functions.” The formula yields an expression for dynamic virtual surplus that is instrumental to the design of optimal mechanisms and to the study of distortions under such mechanisms. Second, we characterize the transfers that satisfy the envelope formula and establish a sense in which they are pinned down by the allocation rule (“revenue equivalence”). Third, we characterize perfect Bayesian equilibrium‐implementable allocation rules in Markov environments, which yields tractable sufficient conditions that facilitate novel applications. We illustrate the results by applying them to the design of optimal mechanisms for the sale of experience goods (“bandit auctions”).     

The Dynamic Pivot Mechanism

We consider truthful implementation of the socially efficient allocation in an independent private‐value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex post incentive and ex post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex post incentive, ex post participation, and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns over time her true valuation of the object. The dynamic pivot mechanism here is equivalent to a modified second price auction.     

土地使用权机制的实现与执行

机制设计者的目的是想最优化一个基于环境参数空间的社会福利函数,但是有关环境参数的相关信息分散于经济之中,因此机制设计者既想收集尽可能多的相关信息,又想充分利用这些信息制定一个社会决策。机制通常在两个框架下讨论,分为实现和执行,两者本质区别在于后者利用了对策性思维方式。本文给出了土地使用权机制在二维信息传递空间下的实现问题,将激励相容条件引入信息有效的机制实现中,给出了占优均衡下的机制执行。研究发现:在实话实说假设下,能够降低信息传递空间维度,并且通过一个信息有效的机制来实现政府目标函数;参与人能够利用私有信息时,实话实说不能成为一个纳什均衡,但在占优均衡下可以通过机制来执行。     

The Limits of ex post Implementation

The sensitivity of Bayesian implementation to agents' beliefs about others suggests the use of more robust notions of implementation such as ex post implementation, which requires that each agent's strategy be optimal for every possible realization of the types of other agents. We show that the only deterministic social choice functions that are ex post implementable in generic mechanism design frameworks with multidimensional signals, interdependent valuations, and transferable utilities are constant functions. In other words, deterministic ex post implementation requires that the same alternative must be chosen irrespective of agents' signals. The proof shows that ex post implementability of a nontrivial deterministic social choice function implies that certain rates of information substitution coincide for all agents. This condition amounts to a system of differential equations that are not satisfied by generic valuation functions.     

Information Acquisition and Efficient Mechanism Design

We consider a general mechanism design setting where each agent can acquire (covert) information before participating in the mechanism. The central question is whether a mechanism exists that provides the efficient incentives for information acquisition ex‐ante and implements the efficient allocation conditional on the private information ex‐post. It is shown that in every private value environment the Vickrey‐Clark‐Groves mechanism guarantees both ex‐ante as well as ex‐post efficiency. In contrast, with common values, ex‐ante and ex‐post efficiency cannot be reconciled in general. Sufficient conditions in terms of sub‐ and supermodularity are provided when (all) ex‐post efficient mechanisms lead to private under‐ or over‐acquisition of information.     

Bayesian and Dominant‐Strategy Implementation in the Independent Private‐Values Model

We prove—in the standard independent private‐values model—that the outcome, in terms of interim expected probabilities of trade and interim expected transfers, of any Bayesian mechanism can also be obtained with a dominant‐strategy mechanism.     

国有土地拍卖机制研究

本文基于贝叶斯均衡上的执行问题,讨论了参与人参数环境空间受机制设计者影响时,不同机制选择的执行条件,给出了目标函数不变时机制对偶等价性的充分必要条件。并比较了中国国有土地拍卖三大机制的效率,给出了土地拍卖机制在实话实说可执行下对的社会福利影响,研究发现：当参与者可以策略性选择行动,实现政府利益最大时,选择限房价或者限地价机制是等价的;非市场机制和市场机制相比,关键还是土地财政和消费者利益之间的权衡;实话实说可执行机制直接显示了政府利益、开发商利润与消费者利益三者之间的权衡关系,但并未改进社会福利。     

When Are Local Incentive Constraints Sufficient?

We study the question of whether local incentive constraints are sufficient to imply full incentive compatibility in a variety of mechanism design settings, allowing for probabilistic mechanisms. We give a unified approach that covers both continuous and discrete type spaces. On many common preference domains—including any convex domain of cardinal or ordinal preferences, single‐peaked ordinal preferences, and successive single‐crossing ordinal preferences—local incentive compatibility (suitably defined) implies full incentive compatibility. On domains of cardinal preferences that satisfy a strong nonconvexity condition, local incentive compatibility is not sufficient. Our sufficiency results hold for dominant‐strategy and Bayesian Nash solution concepts, and allow for some interdependence in preferences.     

On the Existence of Monotone Pure‐Strategy Equilibria in Bayesian Games

We generalize Athey's (2001) and McAdams' (2003) results on the existence of monotone pure‐strategy equilibria in Bayesian games. We allow action spaces to be compact locally complete metric semilattices and type spaces to be partially ordered probability spaces. Our proof is based on contractibility rather than convexity of best‐reply sets. Several examples illustrate the scope of the result, including new applications to multi‐unit auctions with risk‐averse bidders.     

Information Independence and Common Knowledge

In Bayesian environments with private information, as described by the types of Harsanyi, how can types of agents be (statistically) disassociated from each other and how are such disassociations reflected in the agents' knowledge structure? Conditions studied are (i) subjective independence (the opponents' types are independent conditional on one's own) and (ii) type disassociation under common knowledge (the agents' types are independent, conditional on some common‐knowledge variable). Subjective independence is motivated by its implications in Bayesian games and in studies of equilibrium concepts. We find that a variable that disassociates types is more informative than any common‐knowledge variable. With three or more agents, conditions (i) and (ii) are equivalent. They also imply that any variable which is common knowledge to two agents is common knowledge to all, and imply the existence of a unique common‐knowledge variable that disassociates types, which is the one defined by Aumann.     

Implementation with Near‐Complete Information

Many refinements of Nash equilibrium yield solution correspondences that do not have closed graph in the space of payoffs or information. This has significance for implementation theory, especially under complete information. If a planner is concerned that all equilibria of his mechanism yield a desired outcome, and entertains the possibility that players may have even the slightest uncertainty about payoffs, then the planner should insist on a solution concept with closed graph. We show that this requirement entails substantial restrictions on the set of implementable social choice rules. In particular, when preferences are strict (or more generally, hedonic), while almost any social choice function can be implemented in undominated Nash equilibrium, only monotonic social choice functions can be implemented in the closure of the undominated Nash correspondence.     

Policy Incentives for Dangerous (But Necessary) Operations

In industries where firms perform dangerous (but necessary) operations, liability costs—due to potential harm to third parties—can be significant. Firms may therefore find it optimal to exit the market, and this may lead to an inefficiently low number of incumbents. A social planner can discourage exit by offering appropriately designed subsidies. Ex ante subsidies defray the costs associated with making operations safer (e.g., funds to subsidize the purchase of safety equipment). Ex post subsidies mitigate the financial damages caused by an accident (e.g., funds to defray the cost of cleaning up a toxic spill). We consider a model where (i) firms have private information about their ability to improve reliability and (ii) reliability investments are unobservable. We demonstrate that when the social value of reliability outweighs the benefit of increased competition, it is optimal to offer ex ante subsidies alone (i.e., to subsidize the cost of making operations safer). Conversely, when the benefits of competition outweigh the benefits of reliability, a combination of ex ante and ex post subsidies is optimal (i.e., not only to subsidize safer operations, but also to share the costs of a potential accident).     

Behavioral Identification in Coalitional Bargaining: An Experimental Analysis of Demand Bargaining and Alternating Offers

Alternating‐offer and demand bargaining models of legislative bargaining make very different predictions in terms of both ex ante and ex post distribution of payoffs, as well as in the role of the order of play. The experiment shows that actual bargaining behavior is not as sensitive to the different bargaining rules as the theoretical point predictions, whereas the comparative statics are in line with both models. We compare our results to studies that attempt to distinguish between these two approaches using field data, finding strong similarities between the laboratory and field data regardless of the underlying bargaining process.     

Collusion in Second‐Price Auctions under Minimax Regret Criterion

Collusion in auctions, with different assumptions on distributions of bidders' private valuation, has been studied extensively over the years. With the recent development of on‐line markets, auctions are becoming an increasingly popular procurement method. The emergence of Internet marketplaces makes auction participation much easier and more convenient, since no physical presence of bidders is required. In addition, bidders in on‐line auctions can easily switch their identities. Thus, it may very well happen that the bidders in an auction have very little, if any, prior knowledge about the distributions of other bidders' valuations. We are proposing an efficient distribution of collusive profit for second‐price sealed bid auctions in such an environment. Unlike some known mechanism, which balance the budget only in expectation, our approach (which we call Random k) balances the budget ex‐post. While truth‐telling is not a dominant strategy for Random k, it is a minimax regret equilibrium.     

Comparison of Subsidy Schemes for Reducing Waiting Times in Healthcare Systems

This study analyzes subsidy schemes that are widely used in reducing waiting times for public healthcare service. We assume that public healthcare service has no user fee but an observable delay, while private healthcare service has a fee but no delay. Patients in the public system are given a subsidy s to use private service if their waiting times exceed a pre‐determined threshold t. We call these subsidy schemes (s, t) policies. As two extreme cases, the (s, t) policy is called an unconditional subsidy scheme if t = 0, and a full subsidy scheme if s is equal to the private service fee. There is a fixed budget constraint so that a scheme with larger s has a larger t. We assess policies using two criteria: total patient cost and serviceability (i.e., the probability of meeting a waiting time target for public service). We prove analytically that, if patients are equally sensitive to delay, a scheme with a smaller subsidy outperforms one with a larger subsidy on both criteria. Thus, the unconditional scheme dominates all other policies. Using empirically derived parameter values from the Hong Kong Cataract Surgery Program, we then compare policies numerically when patients differ in delay sensitivity. Total patient cost is now unimodal in subsidy amount: the unconditional scheme still yields the lowest total patient cost, but the full subsidy scheme can outperform some intermediate policies. Serviceability is unimodal too, and the full subsidy scheme can outperform the unconditional scheme in serviceability when the waiting time target is long.     

Repeated Games Where the Payoffs and Monitoring Structure Are Unknown

This paper studies repeated games with imperfect public monitoring where the players are uncertain both about the payoff functions and about the relationship between the distribution of signals and the actions played. We introduce the concept of perfect public ex post equilibrium (PPXE), and show that it can be characterized with an extension of the techniques used to study perfect public equilibria. We develop identifiability conditions that are sufficient for a folk theorem; these conditions imply that there are PPXE in which the payoffs are approximately the same as if the monitoring structure and payoff functions were known. Finally, we define perfect type‐contingently public ex post equilibria (PTXE), which allows players to condition their actions on their initial private information, and we provide its linear programming characterization.     

Robust trading mechanisms over 0/1 polytopes

The problem of designing a trade mechanism (for an indivisible good) between a seller and a buyer is studied in the setting of discrete valuations of both parties using tools of finite-dimensional optimization. A robust trade design is defined as one which allows both traders a dominant strategy implementation independent of other traders’ valuations with participation incentive and no intermediary (i.e., under budget balance). The design problem which is initially formulated as a mixed-integer non-linear non-convex feasibility problem is transformed into a linear integer feasibility problem by duality arguments, and its explicit solution corresponding to posted price optimal mechanisms is derived along with full characterization of the convex hull of integer solutions. A further robustness concept is then introduced for a central planner unsure about the buyer or seller valuation distribution, a corresponding worst-case design problem over a set of possible distributions is formulated as an integer linear programming problem, and a polynomial solution procedure is given. When budget balance requirement is relaxed to feasibility only, i.e., when one allows an intermediary maximizing the expected surplus from trade, a characterization of the optimal robust trade as the solution of a simple linear program is given. A modified VCG mechanism turns out to be optimal.     

4 The Physical Environment in Organizations

Abstract

We review empirical research on the physical environment in professional, organizational work settings (i.e., offices, meeting rooms, and design work spaces) from the past several decades. This research reveals no common elements of the physical environment (e.g., enclosures and barriers in work spaces, adjustable work arrangements, personalized work spaces, and ambient surroundings) that are consistently and exclusively associated with desired outcomes in these work settings. Instead, these elements are routinely associated with both desired and undesired outcomes. Based on these findings, we suggest that understanding the role of physical environments in organizations requires an understanding of common trade-offs in organizational life. Further, we suggest that the prevalence of such trade-offs is grounded in tensions that are inherent to the functions that physical environments serve (i.e., aesthetic, instrumental, and symbolic functions). We provide an outline of these tensions and trade-offs in relation to common elements of the physical environment, and suggest that researchers consider these tensions and trade-offs in their future research.