Army cadets obtain occupations through a centralized process. Three objectives -- increasing retention, aligning talent, and enhancing trust -- have guided reforms to this process since 2006. West Point's mechanism for the Class of 2020 exacerbated challenges implementing Army policy aims. We formulate these desiderata as axioms and study their implications theoretically and with administrative data. We show that the Army's objectives not only determine an allocation mechanism, but also a specific priority policy, a uniqueness result that integrates mechanism and priority design. These results led to a re-design of the mechanism, now adopted at both West Point and ROTC.
{"title":"Mechanism Design meets Priority Design: Redesigning the US Army's Branching Process","authors":"Kyle Greenberg, Parag A. Pathak, T. Sonmez","doi":"10.3386/W28911","DOIUrl":"https://doi.org/10.3386/W28911","url":null,"abstract":"Army cadets obtain occupations through a centralized process. Three objectives -- increasing retention, aligning talent, and enhancing trust -- have guided reforms to this process since 2006. West Point's mechanism for the Class of 2020 exacerbated challenges implementing Army policy aims. We formulate these desiderata as axioms and study their implications theoretically and with administrative data. We show that the Army's objectives not only determine an allocation mechanism, but also a specific priority policy, a uniqueness result that integrates mechanism and priority design. These results led to a re-design of the mechanism, now adopted at both West Point and ROTC.","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114499496","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-08-24DOI: 10.20944/preprints202010.0535.v1
L'aszl'o K'allay, T. Tak'acs, L. Trautmann
The aim of this article is to propose a core game theory model of transaction costs wherein it is indicated how direct costs determine the probability of loss and subsequent transaction costs. The existence of optimum is proven, and the way in which exposure influences the location of the optimum is demonstrated. The decisions are described as a two-player game and it is discussed how the transaction cost sharing rule determines whether the optimum point of transaction costs is the same as the equilibrium of the game. A game modelling dispute between actors regarding changing the share of transaction costs to be paid by each party is also presented. Requirements of efficient transaction cost sharing rules are defined, and it is posited that a solution exists which is not unique. Policy conclusions are also devised based on principles of design of institutions to influence the nature of transaction costs.
{"title":"Transaction Costs: Economies of Scale, Optimum, Equilibrium and Efficiency – A Game Theory-Based Model of Transaction Costs","authors":"L'aszl'o K'allay, T. Tak'acs, L. Trautmann","doi":"10.20944/preprints202010.0535.v1","DOIUrl":"https://doi.org/10.20944/preprints202010.0535.v1","url":null,"abstract":"The aim of this article is to propose a core game theory model of transaction costs wherein it is indicated how direct costs determine the probability of loss and subsequent transaction costs. The existence of optimum is proven, and the way in which exposure influences the location of the optimum is demonstrated. The decisions are described as a two-player game and it is discussed how the transaction cost sharing rule determines whether the optimum point of transaction costs is the same as the equilibrium of the game. A game modelling dispute between actors regarding changing the share of transaction costs to be paid by each party is also presented. Requirements of efficient transaction cost sharing rules are defined, and it is posited that a solution exists which is not unique. Policy conclusions are also devised based on principles of design of institutions to influence the nature of transaction costs.","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2020-08-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131483107","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I study a repeated game in which a patient player (e.g., a seller) wants to win the trust of some myopic opponents (e.g., buyers) but can strictly benefit from betraying them. Her benefit from betrayal is strictly positive and is her persistent private information. I characterize every type of patient player's highest equilibrium payoff. Her persistent private information affects this payoff only through the lowest benefit in the support of her opponents' prior belief. I also show that in every equilibrium which is optimal for the patient player, her on-path behavior is nonstationary, and her long-run action frequencies are pinned down for all except two types. Conceptually, my payoff-type approach incorporates a realistic concern that no type of reputation-building player is immune to reneging temptations. Compared to commitment-type models, the incentive constraints for all types of patient player lead to a sharp characterization of her highest attainable payoff and novel predictions on her behaviors.
{"title":"Trust and betrayals: Reputational payoffs and behaviors without commitment","authors":"H. Pei","doi":"10.3982/TE4182","DOIUrl":"https://doi.org/10.3982/TE4182","url":null,"abstract":"I study a repeated game in which a patient player (e.g., a seller) wants to win the trust of some myopic opponents (e.g., buyers) but can strictly benefit from betraying them. Her benefit from betrayal is strictly positive and is her persistent private information. I characterize every type of patient player's highest equilibrium payoff. Her persistent private information affects this payoff only through the lowest benefit in the support of her opponents' prior belief. I also show that in every equilibrium which is optimal for the patient player, her on-path behavior is nonstationary, and her long-run action frequencies are pinned down for all except two types. Conceptually, my payoff-type approach incorporates a realistic concern that no type of reputation-building player is immune to reneging temptations. Compared to commitment-type models, the incentive constraints for all types of patient player lead to a sharp characterization of her highest attainable payoff and novel predictions on her behaviors.","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2020-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134462949","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We propose a novel categorical thinking model (CTM) where the framing of the decision problem affects how the agent categorizes each product, and the product's category affects her evaluation of the product. We show that a number of prominent models of salience, status quo bias, loss-aversion, inequality aversion, and present bias all fit under the umbrella of CTM. This suggests categorization as an underlying mechanism for key departures from the neoclassical model of choice and an account for diverse sets of evidence that are anomalous from its perspective. We specialize CTM to provide a behavioral foundation for the salient thinking model of Bordalo et al. (2013), highlighting its strong predictions and distinctions from other existing models.
我们提出了一种新的分类思维模型(CTM)，其中决策问题的框架影响代理如何对每个产品进行分类，而产品的类别影响代理对产品的评估。我们证明了一些突出的模型，包括突出性、现状偏见、损失厌恶、不平等厌恶和当前偏见，都适合在CTM的保护下。这表明，分类是偏离新古典选择模型的一种潜在机制，也是解释从新古典选择模型角度来看反常的各种证据的一种解释。我们将CTM专业化，为Bordalo et al.(2013)的突出思维模型提供行为基础，突出其强大的预测能力和与其他现有模型的区别。
{"title":"Choice with Endogenous Categorization","authors":"Andrew Ellis, Yusufcan Masatlioglu","doi":"10.1093/RESTUD/RDAB011","DOIUrl":"https://doi.org/10.1093/RESTUD/RDAB011","url":null,"abstract":"We propose a novel categorical thinking model (CTM) where the framing of the decision problem affects how the agent categorizes each product, and the product's category affects her evaluation of the product. We show that a number of prominent models of salience, status quo bias, loss-aversion, inequality aversion, and present bias all fit under the umbrella of CTM. This suggests categorization as an underlying mechanism for key departures from the neoclassical model of choice and an account for diverse sets of evidence that are anomalous from its perspective. We specialize CTM to provide a behavioral foundation for the salient thinking model of Bordalo et al. (2013), highlighting its strong predictions and distinctions from other existing models.","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2020-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114840175","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A committee ranks a set of alternatives by sequentially voting on pairs, in an order chosen by the committee's chair. Although the chair has no knowledge of voters' preferences, we show that she can do as well as if she had perfect information. We characterise strategies with this 'regret-freeness' property in two ways: (1) they are efficient, and (2) they avoid two intuitive errors. One regret-free strategy is a sorting algorithm called insertion sort. We show that it is characterised by a lexicographic property, and is outcome-equivalent to a recursive variant of the much-studied amendment procedure.
{"title":"Agenda-manipulation in ranking","authors":"Gregorio Curello, Ludvig Sinander","doi":"10.1093/restud/rdac071","DOIUrl":"https://doi.org/10.1093/restud/rdac071","url":null,"abstract":"A committee ranks a set of alternatives by sequentially voting on pairs, in an order chosen by the committee's chair. Although the chair has no knowledge of voters' preferences, we show that she can do as well as if she had perfect information. We characterise strategies with this 'regret-freeness' property in two ways: (1) they are efficient, and (2) they avoid two intuitive errors. One regret-free strategy is a sorting algorithm called insertion sort. We show that it is characterised by a lexicographic property, and is outcome-equivalent to a recursive variant of the much-studied amendment procedure.","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2020-01-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130860659","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article is addressing the problem of river sharing between two agents along a river in the presence of negative externalities. Where, each agent claims river water based on the hydrological characteristics of the territories. The claims can be characterized by some international framework (principles) of entitlement. These international principles are appears to be inequitable by the other agents in the presence of negative externalities. The negotiated treaties address sharing water along with the issue of negative externalities imposed by the upstream agent on the downstream agents. The market based bargaining mechanism is used for modeling and for characterization of agreement points.
{"title":"A Bilateral River Bargaining Problem with Negative Externality","authors":"Shivshanker Singh Patel, Parthasarathy Ramachandran","doi":"10.2139/ssrn.3502675","DOIUrl":"https://doi.org/10.2139/ssrn.3502675","url":null,"abstract":"This article is addressing the problem of river sharing between two agents along a river in the presence of negative externalities. Where, each agent claims river water based on the hydrological characteristics of the territories. The claims can be characterized by some international framework (principles) of entitlement. These international principles are appears to be inequitable by the other agents in the presence of negative externalities. The negotiated treaties address sharing water along with the issue of negative externalities imposed by the upstream agent on the downstream agents. The market based bargaining mechanism is used for modeling and for characterization of agreement points.","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130347696","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-06-06DOI: 10.24425/cejeme.2021.139797
J. Bielawski, Marcin Jakubek
We study the migrants' assimilation, which we conceptualize as forming human capital productive on the labor market of a developed host country, and we link the observed frequent lack of assimilation with the relative deprivation that the migrants start to feel when they move in social space towards the natives. In turn, we presume that the native population is heterogenous and consists of high-skill and low-skill workers. The presence of assimilated migrants might shape the comparison group of the natives, influencing the relative deprivation of the low-skill workers and, in consequence, the choice to form human capital and become highly skilled. To analyse this interrelation between assimilation choices of migrants and skill formation of natives, we construct a coevolutionary model of the open-to-migration economy. Showing that the economy might end up in a non-assimilation equilibrium, we discuss welfare consequences of an assimilation policy funded from tax levied on the native population. We identify conditions under which such costly policy can bring the migrants to assimilation and at the same time increase the welfare of the natives, even though the incomes of the former take a beating.
{"title":"The interplay between migrants and natives as a determinant of migrants' assimilation: A coevolutionary approach","authors":"J. Bielawski, Marcin Jakubek","doi":"10.24425/cejeme.2021.139797","DOIUrl":"https://doi.org/10.24425/cejeme.2021.139797","url":null,"abstract":"We study the migrants' assimilation, which we conceptualize as forming human capital productive on the labor market of a developed host country, and we link the observed frequent lack of assimilation with the relative deprivation that the migrants start to feel when they move in social space towards the natives. In turn, we presume that the native population is heterogenous and consists of high-skill and low-skill workers. The presence of assimilated migrants might shape the comparison group of the natives, influencing the relative deprivation of the low-skill workers and, in consequence, the choice to form human capital and become highly skilled. To analyse this interrelation between assimilation choices of migrants and skill formation of natives, we construct a coevolutionary model of the open-to-migration economy. Showing that the economy might end up in a non-assimilation equilibrium, we discuss welfare consequences of an assimilation policy funded from tax levied on the native population. We identify conditions under which such costly policy can bring the migrants to assimilation and at the same time increase the welfare of the natives, even though the incomes of the former take a beating.","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114312085","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2019-05-13DOI: 10.1016/j.jmateco.2020.11.006
Joseph Whitmeyer, Mark Whitmeyer
{"title":"Mixtures of mean-preserving contractions","authors":"Joseph Whitmeyer, Mark Whitmeyer","doi":"10.1016/j.jmateco.2020.11.006","DOIUrl":"https://doi.org/10.1016/j.jmateco.2020.11.006","url":null,"abstract":"","PeriodicalId":143159,"journal":{"name":"arXiv: Theoretical Economics","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-05-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"118141556","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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