We are at the dawn of a significant transformation in the electric industry. Renewable generation and customer participation in grid operations and markets have been growing at tremendous rates in recent years and these trends are expected to continue. These trends are likely to be accompanied by both engineering and market integration challenges. Therefore, to incorporate these resources efficiently into the grid, it is important to deal with the inefficiencies in existing markets. The goal of this thesis is to contribute new insights towards improving the design of electricity markets.
\r\n\r\nThis thesis makes three main contributions. First, we provide insights into how the economic dispatch mechanism could be designed to account for price-anticipating participants. We study this problem in the context of a networked Cournot competition with a market maker and we give an algorithm to find improved market clearing designs. Our findings illustrate the potential inefficiencies in existing markets and provides a framework for improving the design of the markets. Second, we provide insights into the strategic interactions between generation flexibility and forward markets. Our key insight is an observation that spot market capacity constraints can significantly impact the efficiency and existence of equilibrium in forward markets, as they give producers incentives to strategically withhold offers from the markets. Third, we provide insights into how optimization decomposition theory can guide optimal design of the architecture of power systems control. In particular, we illustrate a context where decomposition theory enables us to jointly design market and control mechanisms to allocate resources efficiently across both the economic dispatch and frequency regulation timescales.\r\n
", "doi": "10.7907/Z9BG2KZG", "publication_date": "2016", "thesis_type": "phd", "thesis_year": "2016" }, { "id": "thesis:7698", "collection": "thesis", "collection_id": "7698", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:05112013-002045817", "primary_object_url": { "basename": "dissertation.pdf", "content": "final", "filesize": 871823, "license": "other", "mime_type": "application/pdf", "url": "/7698/1/dissertation.pdf", "version": "v2.0.0" }, "type": "thesis", "title": "Essays in Mechanism Design", "author": [ { "family_name": "Pereira de Freitas", "given_name": "Guilherme", "clpid": "Pereira-de-Freitas-Guilherme" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" }, { "family_name": "Rosenthal", "given_name": "Jean-Laurent", "clpid": "Rosenthal-J-L" }, { "family_name": "Shum", "given_name": "Matthew S.", "clpid": "Shum-M-S" }, { "family_name": "Sherman", "given_name": "Robert P.", "clpid": "Sherman-R-P" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This dissertation contains three essays on mechanism design. The common goal of these essays is to assist in the solution of different resource allocation problems where asymmetric information creates obstacles to the efficient allocation of resources. In each essay, we present a mechanism that satisfactorily solves the resource allocation problem and study some of its properties. In our first essay, \u201dCombinatorial Assignment under Dichotomous Preferences\u201d, we present a class of problems akin to time scheduling without a pre-existing time grid, and propose a mechanism that is efficient, strategy-proof and envy-free. Our second essay, \u201dMonitoring Costs and the Management of Common-Pool Resources\u201d, studies what can happen to an existing mechanism \u2014 the individual tradable quotas (ITQ) mechanism, also known as the cap-and-trade mechanism \u2014 when quota enforcement is imperfect and costly. Our third essay, \u201dVessel Buyback\u201d, coauthored with John O. Ledyard, presents an auction design that can be used to buy back excess capital in overcapitalized industries.", "doi": "10.7907/KC2M-1Q94", "publication_date": "2013", "thesis_type": "phd", "thesis_year": "2013" }, { "id": "thesis:7247", "collection": "thesis", "collection_id": "7247", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:10272012-131405182", "primary_object_url": { "basename": "Boosey_PhDThesis_2013.pdf", "content": "final", "filesize": 3958111, "license": "other", "mime_type": "application/pdf", "url": "/7247/1/Boosey_PhDThesis_2013.pdf", "version": "v4.0.0" }, "type": "thesis", "title": "Essays on Information, Competition, and Cooperation", "author": [ { "family_name": "Boosey", "given_name": "Luke Anthony", "clpid": "Boosey-Luke-Anthony" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Echenique", "given_name": "Federico", "clpid": "Echenique-F" }, { "family_name": "Yariv", "given_name": "Leeat", "clpid": "Yariv-L" }, { "family_name": "Rosenthal", "given_name": "Jean-Laurent", "clpid": "Rosenthal-J-L" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis consists of three papers that study the relationships between information, competition, and cooperation in two novel environments. We first examine the competitive behavior of firms with private information in two-sided matching markets. This part of the thesis employs purely game-theoretic tools. Second, we study voluntary contributions towards a linear public good by players who are connected through a network. In this environment, we use experimental and theoretical techniques to examine the effects of different information treatments and network structures on contributions.
\r\n\r\nIn Chapter 2, we study the behavior of firms in a competitive market for workers. In particular, we study a game in which firms with private information compete for workers by committing to a single salary offer. Workers care only about salary and the matching process follows the deferred-acceptance approach introduced by Gale and Shapley (1962). For a two-firm, two-worker model, there exists a Bayesian-Nash equilibrium in which each firm type chooses a distributional strategy with interval support in the salary space. This equilibrium exhibits a separation of types, in the sense that types with a common most preferred worker choose non overlapping, adjacent supports. The type that makes higher offers is determined by the relative marginal value for the preferred worker. In larger markets, which replicate the two-firm, two-worker case, a comparable Bayesian-Nash equilibrium exists and the separation result endures. In the limit, there is no aggregate uncertainty about the realization of firm types, and competition is confined to the most popular worker type. Numerical results suggest that the finite market equilibrium strategies converge with replication to the corresponding equilibrium strategies in the limit case.
\r\n\r\nChapter 3 studies individual contributions in a repeated public goods experiment. Subjects are connected through a circle network, and consumption of the public good depends on a player's own contribution and the contributions of his neighbors. We study whether contributions depend on the nature of the information players are shown about others between rounds of the repeated game. We extend the approach of Arifovic and Ledyard (2009), which merges a modified model of other-regarding preferences (ORP) with a theory of learning. Our model predicts individual behavior that ranges from free-riding, to conditional cooperation, to unconditional giving. Many subjects switch between these different behavioral strategies across games with different information treatments. Individual contributions are remarkably consistent with our model, which combines other-regarding preferences, learning, and the information treatment. Both the data and model simulations suggest that learning (to play the benchmark Nash equilibrium of the game) is differential and contagious across players. Free-riders and unconditional givers learn faster than conditional cooperators, and provide an anchor that accelerates learning by their neighbors. These results suggest that the network or neighborhood structure may be important for contributions through its effects on learning.
\r\n\r\nIn Chapter 4, we extend the analysis of learning and contributions in network public goods experiments. Using a set of five different network structures, we examine three key aspects of individual behavior. First, we report a negative finding regarding the predictions from our theory of other-regarding preferences. The theory provides certain predictions about how a particular subject should and should not behave across networks. We find several violations of these predictions, particularly in small, complete network groups, but also in the larger, more interesting networks. Second, we report on the average contributions by players in groups that consist of all conditional cooperators. In the one-shot game, these groups have a continuum of equilibria, in which every player contributes the same amount. While one might expect contributions to average half of the endowment, we find in both the data and learning simulations that average contributions decline over time to less than half of the endowment. We conjecture that learning dynamics may provide a method of equilibrium selection, for players trying to coordinate on one equilibrium in the repeated game.
\r\n\r\nOur main finding in this chapter is that learning is contagious in networks other than the circle, which we studied in Chapter 3. We find considerable evidence at the individual match level that free-riders and altruists provide an anchor that stabilizes behavior and accelerates learning by their conditional cooperator neighbors. Our analysis highlights the possibility that, even when the distribution of free-riders, altruists, and conditional cooperators is the same across networks, the different neighborhood structures may affect contributions differently through their effects on learning. Thus, the main contribution of this chapter is the confirmation that learning is contagious across a range of different network structures.
", "doi": "10.7907/CQMD-PQ41", "publication_date": "2013", "thesis_type": "phd", "thesis_year": "2013" }, { "id": "thesis:6871", "collection": "thesis", "collection_id": "6871", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:03262012-183213517", "type": "thesis", "title": "Robust Dynamic Mechanisms", "author": [ { "family_name": "Mostagir", "given_name": "Mohamed", "clpid": "Mostagir-Mohamed" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "McAfee", "given_name": "R. Preston", "clpid": "McAfee-R-P" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" }, { "family_name": "Rosenthal", "given_name": "Jean-Laurent", "clpid": "Rosenthal-J-L" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis presents and solves two dynamic problems. The first problem comes from online display advertising. In display advertising, a publisher displays an ad for an advertiser when a targeted user visits a webpage related to the advertiser's products or services. However, the publisher cannot control the supply of display opportunities, and hence the actual supply of ads that it can sell is stochastic. I consider the problem of optimal ad delivery, where the advertiser demands a certain number of impressions to be displayed over a certain time horizon. Time is divided into periods, and in the beginning of each period the publisher chooses a fraction of the still unrealized supply to allocate towards fulfilling the publisher's demand. The goal is to be able to fulfill the demand at the end of the horizon with minimal costs incurred from penalties associated with shortage or overdelivery of impressions. For a special case of this problem I describe an optimal policy that is very easy to implement. The general version of the problem is more computationally demanding, but I describe policies that are both implementable and arbitrarily close to the optimal solution.
\r\n\r\nIn the second part of the thesis, I develop a framework in which a principal can exploit myopic social learning in a population of agents in order to implement social or selfish outcomes that would not be possible under the traditional fully-rational agent model. Learning in this framework takes a simple form of imitation, or replicator dynamics, a class of learning dynamics that often leads the population to converge to a Nash equilibrium of the underlying game. To illustrate the approach, I give a wide class of games for which the principal can obtain strictly better outcomes than the corresponding Nash solution and show how such outcomes can be implemented. The framework is general enough to accommodate many scenarios, and powerful enough to generate predictions that agree with empirically-observed behavior. The last part of the thesis considers two more learning models, best response and fictitious play, and derives the principal's optimal policies theoretically and computationally for the same class of games considered in the social learning model.
\r\n", "doi": "10.7907/9PWJ-QM61", "publication_date": "2012", "thesis_type": "phd", "thesis_year": "2012" }, { "id": "thesis:5831", "collection": "thesis", "collection_id": "5831", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:05242010-150642550", "primary_object_url": { "basename": "dissertation.pdf", "content": "final", "filesize": 1302935, "license": "other", "mime_type": "application/pdf", "url": "/5831/1/dissertation.pdf", "version": "v4.0.0" }, "type": "thesis", "title": "Essays on Cooperation and Coordination", "author": [ { "family_name": "Romero", "given_name": "Julian Neukom", "clpid": "Romero-Julian-Neukom" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Goeree", "given_name": "Jacob K.", "clpid": "Goeree-J-K" }, { "family_name": "Rosenthal", "given_name": "Jean-Laurent", "clpid": "Rosenthal-J-L" }, { "family_name": "Yariv", "given_name": "Leeat", "clpid": "Yariv-L" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis examines questions related to game theory, and in particular cooperation and coordination among economic agents.
\r\n\r\nIn the first chapter (joint with Noah Myung) we propose a decision making process meant to mimic human behavior. This process is implemented with computational agents. We use these computational agents to run simulations of two coordination games, the minimum-effort coordination game and the Battle of the Sexes game. We find that the computational agents exhibit behavior similar to human subjects from previous experimental work. We then use the computational testbed to develop experimental hypotheses, which are then confirmed in the laboratory using human subjects. In particular, we show that higher cost may actually lead to higher average payoffs in the minimum-effort coordination game.
\r\n\r\nThe second chapter examines a model of infinitely repeated games in which agents are boundedly rational. I show that the number of equilibrium outcomes is smaller when agents are boundedly rational. Importantly, cooperative outcomes are still possible in equilibrium, even when players cannot use sophisticated strategies and are not able to perfectly monitor their opponents. The strategy that leads to cooperation is called \"Win-Stay, Lose-Shift\". Using this strategy, I show that cooperation is possible in equilibrium for a large class of 2x2 games. I also give necessary and sufficient conditions on equilibrium structure for Nx2 games. These conditions suggest that in equilibrium, players must be able to cooperate without getting caught in long periods of conflict.
\r\n\r\nThe final chapter focuses on a class of minimum-effort coordination games. I show that the symmetric quantal response equilibrium correspondence takes the shape of an s-shaped curve as long as players are sufficiently rational. Under certain assumptions, this s-shaped correspondence leads to hysteresis. Based on these theoretical results, I develop experiments with the minimum-effort coordination game, and test the hysteresis hypothesis in the laboratory. I find evidence that this hysteresis does occur when human subjects play the minimum-effort coordination game in the lab.
", "doi": "10.7907/210W-NF91", "publication_date": "2010", "thesis_type": "phd", "thesis_year": "2010" }, { "id": "thesis:5936", "collection": "thesis", "collection_id": "5936", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:06072010-231909128", "primary_object_url": { "basename": "thesisSeraLinardi.pdf", "content": "final", "filesize": 1563095, "license": "other", "mime_type": "application/pdf", "url": "/5936/1/thesisSeraLinardi.pdf", "version": "v4.0.0" }, "type": "thesis", "title": "Information and Motivation In Organizations", "author": [ { "family_name": "Linardi", "given_name": "Sera", "clpid": "Linardi-Sera" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Camerer", "given_name": "Colin F.", "clpid": "Camerer-C-F" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" }, { "family_name": "Rosenthal", "given_name": "Jean-Laurent", "clpid": "Rosenthal-J-L" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "My research focuses on incentive/information design for environments where contract enforcement is difficult and the information required for decision-making is dispersed. These environments are particularly challenging when the number of participants are small enough such that small perturbations have persistent influences. In these three chapters, I use theory, computation, and experiment to investigate the robustness of several basic economic mechanisms to stochastic noise.
\r\n\r\nThe first chapter analyzes the basic unit of information aggregation \u2013 the Geanakoplos and Polemarchakis (1982) posterior revision process. I find that if stochastic noise is present, then 1) the posterior revision process does not reliably give public statistics that approach the full information posterior, and 2) methods exist to rank information structures based upon the likelihood that they produce good public statistics through the posterior revision process.
\r\n\r\nThe last two chapters address the impact of stochastic noise on labor markets. The chapter coauthored with Margaret McConnell uncovers the image motivation behind prosociality by enforcing privately known stochastic stopping time in volunteering sessions. A unique cascade of quitting behavior suggests that volunteers are partially driven by stigma avoidance. The third chapter, coauthored with Colin Camerer, analyzes the robustness of\r\ncontracting relationships to exogenous disruptions caused by stochastic drops in demand. We find that stochastic noise slows the formation of relational contracts, but high-quality contracts remain unaffected.
", "doi": "10.7907/TJ7M-T295", "publication_date": "2010-06-11", "thesis_type": "phd", "thesis_year": "2010" }, { "id": "thesis:5876", "collection": "thesis", "collection_id": "5876", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:05282010-090118586", "primary_object_url": { "basename": "DissertationGuidoRevised.pdf", "content": "final", "filesize": 506635, "license": "other", "mime_type": "application/pdf", "url": "/5876/1/DissertationGuidoRevised.pdf", "version": "v5.0.0" }, "type": "thesis", "title": "Contracts and Markets", "author": [ { "family_name": "Maretto", "given_name": "Guido Tulio Andrea", "clpid": "Maretto-Guido-Tullio-Andrea" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Echenique", "given_name": "Federico", "orcid": "0000-0002-1567-6770", "clpid": "Echenique-F" }, { "family_name": "Cvitani\u0107", "given_name": "Jak\u0161a", "orcid": "0000-0001-6651-3552", "clpid": "Cvitani\u0107-J" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "I merge the standard Principal Agent model with a CAPM-type financial market, to study the interactions of contracts and financial markets. I prove existence of equilibrium in two models, a more general economy allowing for hidden type and action under generic mean variance preferences and a hidden action economy with Markowitz mean-variance preferences. I study economies for which markets have an insurance effect on compensation contracts. I show sufficient conditions for lower variance to obtain in large economies, even with asymmetric information. In this context I show the effect of markets' size on efficiency. I also study moral hazard economies, for which I prove existence of a unique pure strategy equilibrium, and I show that financial markets negatively affect the equilibrium returns of firms. In the final chapter I study the efficiency of securities issued under symmetric information. I find that small markets and low correlation of firms' returns generate inefficiency. I also show that the assumption of symmetry or independence is crucial to obtaining the insurance results in the previous Chapters.", "doi": "10.7907/FBS0-F288", "publication_date": "2010-06", "thesis_type": "phd", "thesis_year": "2010" }, { "id": "thesis:3106", "collection": "thesis", "collection_id": "3106", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-08122008-102414", "primary_object_url": { "basename": "David_Young_Thesis.pdf", "content": "final", "filesize": 990915, "license": "other", "mime_type": "application/pdf", "url": "/3106/1/David_Young_Thesis.pdf", "version": "v2.0.0" }, "type": "thesis", "title": "Firm Behaviour in Markets with Capacity Constraints", "author": [ { "family_name": "Young", "given_name": "David Thomas", "clpid": "Young-David-Thomas" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Echenique", "given_name": "Federico", "clpid": "Echenique-F" }, { "family_name": "Iaryczower", "given_name": "Matias", "clpid": "Iaryczower-M" }, { "family_name": "McAfee", "given_name": "R. Preston", "clpid": "McAfee-R-P" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "I study firms' behaviour in markets where firms' long-run capacity decisions, made in the presence of uncertain demand, constrains short-run competition. In Chapter 2, I analyse firms' investment and pricing incentives in a differentiated products framework with uncertain demand. Firms choose production capacities before observing demand and choose prices after demand is realised. Unlike previous models, when firms are identical, symmetric pure-strategy equilibria exist, even in the presence of very low capacity costs. Furthermore, industry capacity in these symmetric equilibria is strictly greater than the equivalent Cournot equilibrium industry capacity for low costs, and equal to the Cournot industry capacity for higher costs. Subsidies on capacity costs have a greater positive impact on equilibrium capacity than an equivalent subsidy on production costs. In Chapter 3, I use this model to analyse how the market changes when firms practice `withholding'. This is when firms withdraw capacity from the market in the short-run, after demand is realised, in the hope of making greater profits. I show that withholding is an optimal strategy for firms in these markets, and that compared to the no-withholding case, equilibrium output is lower in low demand states and higher in high demand states. Equilibrium capacity strictly increases. I discuss why it is hard to find real world examples of withholding in action, despite the increased profits. Chapter 4 looks at the specific case of the electricity industry. Electricity markets are a good example where capacity constraints and random demand affect competitive outcomes. However, trade in electricity is subject to additional constraints caused by the transmission of electricity through a network. Network constraints are well understood to cause considerable non-convexities in firms' optimisation problems; thus theoretical models have limited use in analysing the behaviour of electricity generating firms. An alternative approach, economic experiments, has become an important tool to study these markets, but questions remain on whether subjects can really imitate large firms in the presence of such complexity. This chapter provides evidence in the affirmative, specifically showing that experimental subjects can understand loop flows in the presence of Kirchoff's Laws, a key physical constraint, and how this affects firms' pricing decisions. The results suggest that electricity market experiments could be scaled up successfully to more realistic networks.\r\n", "doi": "10.7907/P1EX-FW81", "publication_date": "2009", "thesis_type": "phd", "thesis_year": "2009" }, { "id": "thesis:1484", "collection": "thesis", "collection_id": "1484", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-04232009-163542", "primary_object_url": { "basename": "Kucuksenel_Thesis.pdf", "content": "final", "filesize": 399101, "license": "other", "mime_type": "application/pdf", "url": "/1484/1/Kucuksenel_Thesis.pdf", "version": "v2.0.0" }, "type": "thesis", "title": "Incentives and Institutions: Essays in Mechanism Design and Game Theory with Applications", "author": [ { "family_name": "Kucuksenel", "given_name": "Serkan", "orcid": "0000-0002-6703-1157", "clpid": "Kucuksenel-Serkan" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Echenique", "given_name": "Federico", "clpid": "Echenique-F" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "In the first part of this dissertation we study the problem of designing desirable mechanisms for economic environments with different types of informational and consumption externalities. We first study the mechanism design problem for the class of Bayesian environments where preferences of individuals depend not only on their allocations but also on the welfare of other individuals. For these environments, we fully characterize interim efficient mechanisms and examine their properties. This set of mechanisms is compelling since interim efficient mechanisms are the best in the sense that there is no other mechanism which generates unanimous improvement. For public good environments, we show that these mechanisms produce the public good closer to the efficient level of production as the degree of altruism in the preferences increases. For private good environments, we show that altruistic agents trade more often than selfish agents.
\r\n\r\nWe next consider mechanism design problem for matching markets where externalities are present. We present mechanisms that implement the core correspondence of many-to-one matching markets, such as college admissions problems, where the students have preferences over the other students who would attend the same college. With an unrestricted domain of preferences the non-emptiness of the core is not guaranteed. We present a sequential mechanism implementing the core without any restrictions on the preferences. We also show that simple two-stage mechanisms cannot be used to implement the core correspondence in subgame perfect Nash equilibrium without strong assumptions on agents' preferences.
\r\n\r\nIn the final part of the dissertation we focus on another matching market, one-to-one assignment games with money. We present an alternative way to characterize the core as the fixed points of a certain mapping. We also introduce the first algorithm that finds all core outcomes in assignment games. The lattice property of the stable payoffs, as well as its non-emptiness, are proved using Tarski's fixed point theorem. We show that there is a polarization of interests in the core by using our formulation.
\r\n", "doi": "10.7907/EAZA-N950", "publication_date": "2009", "thesis_type": "phd", "thesis_year": "2009" }, { "id": "thesis:2249", "collection": "thesis", "collection_id": "2249", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-05292007-143256", "primary_object_url": { "basename": "meloso07th.pdf", "content": "final", "filesize": 1048275, "license": "other", "mime_type": "application/pdf", "url": "/2249/1/meloso07th.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "Prices, Holdings, and Learning in Financial Markets: Experiments and Methodology", "author": [ { "family_name": "Meloso", "given_name": "Debrah C. Z.", "clpid": "Meloso-Debrah-C-Z" } ], "thesis_advisor": [ { "family_name": "Bossaerts", "given_name": "Peter L.", "clpid": "Bossaerts-P-L" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Zame", "given_name": "William R.", "clpid": "Zame-W-R" } ], "thesis_committee": [ { "family_name": "Bossaerts", "given_name": "Peter L.", "clpid": "Bossaerts-P-L" }, { "family_name": "Zame", "given_name": "William R.", "clpid": "Zame-W-R" }, { "family_name": "Camerer", "given_name": "Colin F.", "clpid": "Camerer-C-F" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis is a compilation of three essays that bridge the theoretical and empirical study of financial markets. The subjects of study in the three main chapters are (i) equilibrium models of asset prices and asset holdings and trade; (ii) limited computational capacity and its interaction with asset prices and trades.
\r\n\r\nIn chapter 1 (joint with Peter Bossaerts) we show that statistical improvements can be made on a traditional test of portfolio \"efficiency.\" Testing portfolio efficiency is used in the practice of investment decisions as well as to test theoretical models of asset prices (CAPM and multifactor models). We propose a parametric family of tests of the efficiency of a portfolio in a market with a risk-free asset. All tests in the family compare the mean-variance ratio of the tested portfolio (benchmark) with that of a different portfolio (reference). We show that the power of a test in our proposed family depends on the correlation between the benchmark and the reference portfolio. This provides a way to improve the power of efficiency tests for a given sample, by choosing the appropriate test in this family.
\r\n\r\nChapter 2 (joint with Peter Bossaerts and William Zame), is a test of the theory of dynamically complete markets. In this work we compare prices and portfolio choices in complete and incomplete experimental financial markets. The incomplete-markets treatment differs from the complete-markets one in that we close one market, and announce, halfway through trading, which of three states will not occur. We find prices and allocations to be analogous across the two treatments, as predicted by theory. In particular, subjects' additional trading in the incomplete-markets treatment is such that the final allocations become indistinguishable from the complete-markets treatment. The results show that participants form rational expectations about retrade prices, which is a very strong finding.
\r\n\r\nChapter 3 (joint work with Peter Bossaerts and Jernej Copic) moves away from existing theoretical paradigms. It explores the implications of analyzing intellectual discovery as the solution of a nonincremental problem, outside the reach of traditional models of learning with updating. The experiment sets up a situation that is non-incremental and where Bayesian updating is not a sensible model. In this framework we find that communication is possible, and that a primitive code is good enough to achieve intellectual discovery, not discourage it.
", "doi": "10.7907/F0Q4-E311", "publication_date": "2007", "thesis_type": "phd", "thesis_year": "2007" }, { "id": "thesis:1815", "collection": "thesis", "collection_id": "1815", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-05152005-021009", "primary_object_url": { "basename": "Healy-Dissertation_Full.pdf", "content": "final", "filesize": 1624387, "license": "other", "mime_type": "application/pdf", "url": "/1815/8/Healy-Dissertation_Full.pdf", "version": "v4.0.0" }, "type": "thesis", "title": "Institutions, Incentives and Behavior: Essays in Public Economics and Mechanism Design", "author": [ { "family_name": "Healy", "given_name": "Paul Jay", "clpid": "Healy-Paul-Jay" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Camerer", "given_name": "Colin F.", "clpid": "Camerer-C-F" }, { "family_name": "Echenique", "given_name": "Federico", "clpid": "Echenique-F" }, { "family_name": "McAfee", "given_name": "R. Preston", "clpid": "McAfee-R-P" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "The economic outcomes realized by a society are a function of the institutions put in place, the incentives they create, and the behavior of agents in the face of those incentives. Selecting the appropriate institutions for a given economy is particularly important in the domain of public economics, where individual incentives are often inconsistent with efficiency. Three major concerns in institutional design are addressed. First, do agents select the equilibrium strategies at which efficient allocations obtain? Second, does the repeated game nature of a long-lived institution impact behavior? Third, what degree of coercion is necessary for a planner to guarantee that the allocation selected by a mechanism can be enforced? Answering these questions helps to understand which institutions are most appropriate in various environments. In Chapter 2, five public goods mechanisms are experimentally tested in a repeated game environment. Behavior is well approximated by a model in which agents best respond to an avrage of recently observed data. This model provides various sufficient conditions a mechanism must satisfy for play to converge to an efficient equilibrium. In Chapter 3, it is assumed that the designer of a one-shot mechanism must allow agents a 'no trade' option in which they are free to contribute nothing but enjoy the public good produced by others' contributions. It is shown that a large set of economies exist in which there is some agent at every allocation who prefers this option. Even in economies where this is not true, it becomes true as the economy is replicated, making it impossible to implement any allocation except the endowment in large economies.
\r\n\r\nIn the final chapter, a model of group reputations is developed to explain why moral hazard problems are significant in some laboratory experiments and less significant in others. If firms believe that either all workers are selfish or all workers are reciprocal, then selfish workers may have an incentive to develop a 'group reputation' of being reciprocal for a fixed number of periods in order to extract higher wages. As predicted, only in those experiments in which this incentive is sufficiently large is the moral hazard problem mitigated.
", "doi": "10.7907/X53T-PZ38", "publication_date": "2005", "thesis_type": "phd", "thesis_year": "2005" }, { "id": "thesis:8160", "collection": "thesis", "collection_id": "8160", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:03242014-135929077", "type": "thesis", "title": "Cooperative and Market-Based Solutions to Pollution Abatement Problems", "author": [ { "family_name": "Fine", "given_name": "Leslie Rachel", "clpid": "Fine-Leslie-Rachel" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Jackson", "given_name": "Matthew O.", "clpid": "Jackson-M-O" }, { "family_name": "Kiewiet", "given_name": "D. Roderick", "clpid": "Kiewiet-D-R" }, { "family_name": "Wilkie", "given_name": "Simon J.", "clpid": "Wilkie-S-J" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This work concerns itself with the possibility of solutions, both cooperative and market based, to pollution abatement problems. In particular, we are interested in pollutant emissions in Southern California and possible solutions to the abatement problems enumerated in the\r\n1990 Clean Air Act. A tradable pollution permit program has been implemented to reduce emissions, creating property rights associated with various pollutants.
\r\n\r\nBefore we discuss the performance of market-based solutions to LA's pollution woes, we consider the existence of cooperative solutions. In Chapter 2, we examine pollutant emissions as a trans boundary public bad. We show that for a class of environments in which pollution\r\nmoves in a bi-directional, acyclic manner, there exists a sustainable coalition structure and associated levels of emissions. We do so via a new core concept, one more appropriate to modeling cooperative emissions agreements (and potential defection from them) than the\r\nstandard definitions.
\r\n\r\nHowever, this leaves the question of implementing pollution abatement programs unanswered. While the existence of a cost-effective permit market equilibrium has long been understood, the implementation of such programs has been difficult. The design of Los Angeles' REgional CLean Air Incentives Market (RECLAIM) alleviated some of the implementation problems, and in part exacerbated them. For example, it created two overlapping cycles of permits and two zones of permits for different geographic regions. While these design features create a market that allows some measure of regulatory control, they establish a very difficult trading environment with the potential for inefficiency arising from the transactions costs enumerated above and the illiquidity induced by the myriad assets and relatively few participants in this market.
\r\n\r\nIt was with these concerns in mind that the ACE market (Automated Credit Exchange) was designed. The ACE market utilizes an iterated combined-value call market (CV Market). Before discussing the performance of the RECLAIM program in general and the ACE mechanism in particular, we test experimentally whether a portfolio trading mechanism can overcome market illiquidity. Chapter 3 experimentally demonstrates the ability of a portfolio trading mechanism to overcome portfolio rebalancing problems, thereby inducing sufficient\r\nliquidity for markets to fully equilibrate.
\r\n\r\nWith experimental evidence in hand, we consider the CV Market's performance in the real world. We find that as the allocation of permits reduces to the level of historical emissions, prices are increasing. As of April of this year, prices are roughly equal to the cost of the Best Available Control Technology (BACT). This took longer than expected, due both to tendencies to mis-report emissions under the old regime, and abatement technology advances encouraged by the program. Vve also find that the ACE market provides liquidity where needed to encourage long-term planning on behalf of polluting facilities.
\r\n", "doi": "10.7907/hx59-2c08", "publication_date": "2001", "thesis_type": "phd", "thesis_year": "2001" }, { "id": "thesis:13825", "collection": "thesis", "collection_id": "13825", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:06292020-115132957", "primary_object_url": { "basename": "Thesis - A. Kwasnica 2000.pdf", "content": "final", "filesize": 6608979, "license": "other", "mime_type": "application/pdf", "url": "/13825/1/Thesis - A. Kwasnica 2000.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "Asymmetric Information and Cooperation", "author": [ { "family_name": "Kwasnica", "given_name": "Anthony Mark", "orcid": "0000-0001-6714-8147", "clpid": "Kwasnica-Anthony-Mark" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" }, { "family_name": "Ghirardato", "given_name": "Paolo", "clpid": "Ghirardato-P" }, { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis investigates the theory of cooperative behavior in the presence of asymmetric information.
\r\n\r\nTraditionally, the core has been a powerful and much used solution concept to describe cooperative outcomes. In settings where agents have some private information, it may be appropriate to include the opportunity for communication in the development of the core. I study the relationship of various core solution concepts with prevalent noncooperative solution concepts for environments with asymmetric information. The core definitions examined vary by the level of communication assumed. In Chapter 2, I investigate the welfare properties of market equilibria. I demonstrate that appropriate communication restrictions can be placed on the core (and efficiency) in order to obtain first and second welfare theorems. In Chapter 3, I discuss the Bayesian implementation of core solutions. If full communication is assumed, Palfrey and Srivastava (1987) have shown that the core is not Bayesian implementable: a game cannot be constructed that has only core allocations as its equilibria. I demonstrate that communication restrictions on the core are sufficient to obtain positive Bayesian implementation results in the environment studied by Palfrey and Srivastava. In other words, a game can be constructed that entices noncooperative players to choose strategies that are cooperative under limited communication.
\r\n\r\nIn Chapter 4, I examine cooperation between bidders in private value, sealed bid auctions. I assume that bidders can overcome their one period temptation to break any collusive agreement, and that they attempt to formulate a collusive mechanism. However, each bidder's valuations are still his own, private information. If he is not given the proper incentives, he may lie about his values in order to increase his profits. Therefore, any collusive mechanism must be incentive compatible and is likely to be, at a minimum, interim efficient. I demonstrate that the theory provides some predictions about the set of collusive mechanisms chosen by bidders and that, when moving to a setting where multiple objects are for sale, the set of feasible collusive mechanisms grows. When multiple objects are for sale, there exist incentive compatible mechanisms that are preferred by all bidders to the only incentive compatible mechanisms in the single object case. Laboratory experiments indicate that these predictions are often consistent with actual behavior. However, deviations by some bidders suggest some weaknesses in this approach.
", "doi": "10.7907/7xpp-6f16", "publication_date": "2000", "thesis_type": "phd", "thesis_year": "2000" }, { "id": "thesis:510", "collection": "thesis", "collection_id": "510", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-02052008-141952", "primary_object_url": { "basename": "Yu_j_1999.pdf", "content": "final", "filesize": 4786678, "license": "other", "mime_type": "application/pdf", "url": "/510/1/Yu_j_1999.pdf", "version": "v2.0.0" }, "type": "thesis", "title": "Discrete approximation of continuous allocation mechanisms", "author": [ { "family_name": "Yu", "given_name": "Jin", "clpid": "Yu-Jin" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This dissertation discusses two allocation mechanisms through which prices are set in markets.\r\n\r\nThe first chapter presents theories on discrete-bid auctions. In particular, we focus on four common auction institutions: the sealed-bid first-price auction, the sealed- bid second-price auction, the English auction and the Dutch auction, in a single-object, independent-private-value setting in which bids can only be multiples of some fixed increment. Two different models of English auction, the pay-your-bid and the penultimate-bid English auction are introduced. It is shown that when bids are discrete, second-price auctions and English auctions are no longer dominance solvable as bidding games. Bidding is more aggressive in the penultimate-bid English auction than that in the pay-your-bid English auction. Nevertheless, first-price auctions and Dutch auctions are still strategically equivalent. The equivalence of expected revenues in the continuous case breaks down when bids are discrete. As the number of bidders participating in the auction increases, auctions in which the winner pays the next highest bid (second-price auctions and penultimate-bid English auctions) are more likely to yield higher expected revenues than auctions in which the winner pays his own bid (first-price auctions and pay-your-bid English auctions). The probability of tie in discrete-bid auctions is strictly positive and hence resulting allocations can be Pareto inefficient.\r\n\r\nChapter 2 reports the laboratory observations of bidders' behavior in the pay your-bid and penultimate-bid English auctions. Results of six experiments show that theories developed in the first chapter in general perform very well in predicting the bidding behavior and the price range. However, observations of bidding that is significantly lower than what has been predicted by theory do exist in experiments with small increment. Two possible explanations are discussed.\r\n\r\nChapter 3 discusses a situation in which a monopolist seeks to sell a quality-differentiated spectrum of products of the same generic type to consumers of different characteristics that he cannot observe. The main difference between this framework and the previous literature is that there is a fixed set-up cost of each type of product. The presence of set-up cost makes it impossible for the monopolist to fully separate different types of consumers. The main purpose of this paper is to discuss the monopolist's profit maximization problem and characterize the optimal solution. It is shown that the lowest type in the consumer group consuming the highest quality level would be served efficiently in that the consumer's marginal rate of substitution between price and quality equals that of the monopolist. All other consumers will be served inefficiently and quality distortion takes the form of degradation. The monopolist's profit margin increases with the quality level and an upward shift of the distribution of consumer preference brings higher profit to the monopolist.\r\n", "doi": "10.7907/8SF1-5M95", "publication_date": "1999", "thesis_type": "phd", "thesis_year": "1999" }, { "id": "thesis:10345", "collection": "thesis", "collection_id": "10345", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:07102017-155916282", "primary_object_url": { "basename": "HANSON_RD_1998.pdf", "content": "final", "filesize": 48320619, "license": "other", "mime_type": "application/pdf", "url": "/10345/1/HANSON_RD_1998.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "Four Puzzles in Information and Politics : Product Bans, Informed Voters, Social Insurance, & Persistent Disagreement", "author": [ { "family_name": "Hanson", "given_name": "Robin Dale", "clpid": "Hanson-Robin-Dale" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" }, { "family_name": "Wilkie", "given_name": "Simon J.", "clpid": "Wilkie-S-J" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "In four puzzling areas of information in politics, simple intuition and simple theory seem to conflict, muddling policy choices. This thesis elaborates theory to help resolve these conflicts.
\r\n\r\nThe puzzle of product bans is why regulators don't instead offer the equivalent information, for example through a \"would have banned\" label. Regulators can want to lie with labels, however, either due to regulatory capture or to correct for market imperfections. Knowing this, consumers discount regulator warnings, and so regulators can prefer bans over the choices of skeptical consumers. But all sides can prefer regulators who are unable to ban products, since then regulator warnings will be taken more seriously.
\r\n\r\nThe puzzle of voter information is why voters are not even more poorly informed; press coverage of politics seems out of proportion to its entertainment value. Voters can, however, want to commit to becoming informed, either by learning about issues or by subscribing to sources, to convince candidates to take favorable positions. Voters can also prefer to be in large groups, and to be ignorant in certain ways. This complicates the evaluation of institutions, like voting pools, which reduce ignorance.
\r\n\r\nThe puzzle of group insurance as a cure for adverse selection is why this should be less a problem for groups than individuals. The usual argument about reduced variance of types for groups doesn't work in separating equilibria; what matters is the range, not variance, of types. Democratic group choice can, however, narrow the group type range by failing to represent part of the electorate. Furthermore, random juries can completely eliminate adverse selection losses.
\r\n\r\nThe puzzle of persistent political disagreement is that for ideal Bayesians with common priors, the mere fact of a factual disagreement is enough of a clue to induce agreement. But what about agents like humans with severe computational limitations? If such agents agree that they are savvy in being aware of these limitations, then any factual disagreement implies disagreement about their average biases. Yet average bias can in principle be computed without any private information. Thus disagreements seem to be fundamentally about priors or computation, rather than information.
\r\n", "doi": "10.7907/C98N-EV75", "publication_date": "1998", "thesis_type": "phd", "thesis_year": "1998" }, { "id": "thesis:17526", "collection": "thesis", "collection_id": "17526", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:07152025-005839090", "primary_object_url": { "basename": "Papai_S_1996.pdf", "content": "final", "filesize": 45125404, "license": "other", "mime_type": "application/pdf", "url": "/17526/1/Papai_S_1996.pdf", "version": "v2.0.0" }, "type": "thesis", "title": "Dominant Strategy Implementation on Private Goods Domains with Indivisibilities", "author": [ { "family_name": "P\u00e1pai", "given_name": "Szilvia", "orcid": "0000-0001-7895-8364", "clpid": "P\u00e1pai-Szilvia" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Davis", "given_name": "Lance E.", "clpid": "Davis-L-E" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Border", "given_name": "Kim C.", "orcid": "0000-0003-4437-0524", "clpid": "Border-K-C" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "orcid": "0000-0003-0769-8109", "clpid": "Palfrey-T-R" }, { "family_name": "Wilkie", "given_name": "Simon J.", "clpid": "Wilkie-S-J" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "We consider the allocation of indivisible goods to agents who may have private information about their preferences. Standard allocation rules such as Walrasian equilibria or administrative processes fail to perform satisfactorily in this setting. In particular, they are not compatible with individual incentives. Thus, the planner faces an implementation problem, a problem of designing an institution (or mechanism) that induces appropriate incentives for the agents. We examine allocation rules, called social choice functions, for which this implementation problem is solvable, using the dominant strategy solution concept, which requires the implementing mechanism to provide a best action for each agent which does not depend on the other agents' actions. Social choice functions that satisfy this requirement are called strategy proof. We investigate primarily two domains of preferences, the universal private goods domain (Chapter 3), which is only restricted by the assumption that the agents are selfish, and the strict private goods domain (Chapters 1 and 2) , which rules out, in addition, indifference between any two distinct allocations to any agent.
\r\nIn Chapter 1, we consider the allocation of a single indivisible object. Necessary and sufficient conditions for strategyproofness are established, and the relationship between strategyproofness, efficiency, and Pareto-optimality is examined. It is shown that if an indirect form of manipulation, bossiness, is also ruled out, then we obtain a Gibbard-Satterthwaite-type impossibility result. We also prove that all strategy-proof, non-bossy, and Pareto-optimal social choice functions are serial dictatorships.
\r\nWe investigate the allocation of heterogeneous and indivisible objects in Chapters 2 and 3. The objects are heterogeneous in the sense that they typically have different values to an agent. A most important characteristic of our model is that the valuation of the objects\r\ndepend on what other objects they are obtained with. In Chapter 2, we establish that all strategy-proof, strongly non-bossy, and Pareto-optimal social choice functions are serial dictatorships, where strong non-bossiness is a slightly stricter condition than bossiness. We also characterize the set of strategy-proof, non-bossy, and Pareto-optimal social choice functions. Namely, we show that they are dictatorial sequential choice functions, which indicates that the consequences of the Gibbard-Satterthwaite theorem can only be escaped on the strict private goods domain by choosing bossy social choice functions. We also explore two restricted domains, which express complementarity, and, respectively, substitutability of the objects. Finally, we briefly examine full implementation and social choice correspondences, allocation rules that may prescribe multiple outcomes to preference profiles.
\r\nIn Chapter 3, we explore the allocation of heterogeneous indivisible objects when monetary transfers can be used to induce the right incentives for the agents. When the utility functions are additively separable and linear in the currency in which the transfers are paid, a mechanism is strategy-proof and value maximizing if, and only if, it is a Groves mechanism. We impose further criteria, namely, envy-freeness and individual rationality, to choose among the Groves mechanisms. We show that none of the Groves mechanisms is envy-free on the universal private goods domain. However, we characterize the sets of envyfree, and the sets of both envyfree and individually rational Groves mechanisms on the two examined restricted domains. Some revenue related criteria are also examined.
", "doi": "10.7907/ted7-zm26", "publication_date": "1996", "thesis_type": "phd", "thesis_year": "1996" }, { "id": "thesis:3626", "collection": "thesis", "collection_id": "3626", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-09182007-084408", "primary_object_url": { "basename": "Duggan_j_1995.pdf", "content": "final", "filesize": 4154971, "license": "other", "mime_type": "application/pdf", "url": "/3626/1/Duggan_j_1995.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "Bayesian Implementation", "author": [ { "family_name": "Duggan", "given_name": "John R.", "clpid": "Duggan-John-R" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Davis", "given_name": "Lance E.", "clpid": "Davis-L-E" } ], "thesis_committee": [ { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "In Chapter 1, I briefly survey the literature on Bayesian implementation, discuss its shortcomings, and summarize the contribution of this thesis. In Chapter 2, I formally state the implementation problem, making no assumptions about the agents' sets of types, preferences, or beliefs, and I prove Jackson's (1991) necessity and sufficiency results for environments satisfying two weak conditions called \"invariance\" and \"independence.\" In short, incentive compatibility and Bayesian monotonicity are necessary for Bayesian implementability, and incentive compatibility and monotonicity-no-veto are sufficient. I prove Jackson's result that, for environments with conflict of interest, Bayesian monotonicity and monotonicity-no-veto are equivalent, but I show that conflict-of-interest places an unnatural restriction on agents' beliefs when the set of states is uncountable. I note that, when agents have uncountable sets of types, preferences over social choice functions derived from conditional expected utility calculations will generally be incomplete, and I show that this incompleteness sometimes leads to implausible Bayesian equilibrium predictions. I propose an extension of expected utility preferences that preserves the properties of invariance and independence.
\r\n\r\nIn Chapter 3, I consider environments satisfying invariance and a condition called \"interiority,\" and I show that incentive compatibility and an extension of Bayesian monotonicity are necessary and sufficient for Bayesian implementability. Using the extension of expected utility preferences proposed in Chapter 2 and assuming best-element-private values, I then show that interiority is satisfied in two important classes of environments: it holds in private and public good economies, and it holds in lottery environments, for which the set of outcomes is the set of probability measures over a measurable space of pure outcomes.
\r\n\r\nIn Chapter 4, I consider lottery environments satisfying best-element-private values and a condition called \"strict separability,\" and I use the results of Chapter 3 to show that incentive compatibility is necessary and sufficient for virtual Bayesian implement ability. I then show that strict separability is satisfied for a suitably large class of environments. It holds when private values and value-distinguished types are satisfied and the set of pure outcomes is finite, and it holds when private values and value-distinguished types are satisfied and the set of pure outcomes is a finite set crossed with an open set of allocations of a transferable private good.
\r\n", "doi": "10.7907/7A6K-F810", "publication_date": "1995", "thesis_type": "phd", "thesis_year": "1995" }, { "id": "thesis:3505", "collection": "thesis", "collection_id": "3505", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-09122007-103429", "primary_object_url": { "basename": "Chen_y_1995.pdf", "content": "final", "filesize": 3057445, "license": "other", "mime_type": "application/pdf", "url": "/3505/1/Chen_y_1995.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "A theoretical study of political institutions and economic policies", "author": [ { "family_name": "Chen", "given_name": "Yan", "clpid": "Chen-Yan-Social-Science" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Ordeshook", "given_name": "Peter C.", "clpid": "Ordeshook-P-C" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" }, { "family_name": "Ordeshook", "given_name": "Peter C.", "clpid": "Ordeshook-P-C" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This dissertation consists of two relatively independent chapters that study the effects of political institutions on economic policies.
\r\n\r\nChapter I studies the privatization policies of maximizing politicians in a tightly managed transition economy under different political institutions. The majority of literature pertaining to privatization policies ignores the political constraints and the motivation of the politicians. In this dissertation, we consider two types of politicians, a Niskanen-style Bureaucrat who maximizes a surplus budget subject to the constraint of staying in office, and a Populist who maximizes consumer welfare subject to the constraint of a balanced budget. Other things being equal, the Bureaucrat will privatize the sector (firms) with the least market power and the largest subsidy first. The Populist will adopt the same policy, if the marginal costs of products in the private sectors are not too high with respect to the marginal utilities. We also show that controlled privatization is easier and faster in less democratic societies.
\r\n\r\nChapter 2 examines the effects that political processes, i.e., electoral systems and legislative processes, have on income taxation and public good allocation. We characterize the equilibrium income tax schedules under two types of political institutions. It is shown that, when there is a single district, for the two party plurality system the equilibrium income tax schedule is equivalent to an optimal tax schedule that puts equal weight over the whole population; when there are multiple districts, however, the simplest subgame perfect stationary equilibrium tax schedule of the stochastic legislative game is equivalent to an optimal tax schedule that puts more welfare weight on the subsets of the population whose legislators are in the winning coalition of the legislature. Thus, the social welfare functions in the optimal taxation literature can be endogenously determined by explicitly modelling the political processes that determines them.
", "doi": "10.7907/mzzc-zc64", "publication_date": "1995", "thesis_type": "phd", "thesis_year": "1995" }, { "id": "thesis:4185", "collection": "thesis", "collection_id": "4185", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-10192007-143628", "primary_object_url": { "basename": "Sherstyuk_k_1995.pdf", "content": "final", "filesize": 6706661, "license": "other", "mime_type": "application/pdf", "url": "/4185/1/Sherstyuk_k_1995.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "The formation of teams under incomplete information", "author": [ { "family_name": "Sherstyuk", "given_name": "Katerina", "clpid": "Sherstyuk-K" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Plott", "given_name": "Charles R.", "clpid": "Plott-C-R" }, { "family_name": "Grether", "given_name": "David M.", "clpid": "Grether-D-M" }, { "family_name": "Porter", "given_name": "David", "clpid": "Porter-D" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "NOTE: Text or symbols not renderable in plain ASCII are indicated by [...]. Abstract is included in .pdf document.\n\n\n\nOrganizational forms such as task-oriented teams have often been proposed as a method to enhance the efficiency of a firm. Under asymmetric information, however, the costs of acquiring the information needed to improve efficiency may outweigh the efficiency gain and lead to lower profits. This dissertation analyzes profitability-efficiency trade-offs faced by a profit-maximizing principal who wants to select teams from a given group of heterogeneous agents to work on a number of projects, given that the principal has incomplete information about the agents' abilities.\n\n\tThe dissertation consists of two main chapters. In chapter one, we take a theoretical mechanism design approach to analyze the problem of the formation of multiple teams under different information structures and behavioral assumptions. We study feasible incentive-compatible (truth-revealing) individually rational mechanisms under both the dominant strategy and Bayesian Nash behavioral assumptions. Some attention is also paid to Nash equilibrium mechanisms. The chapter covers derivation of optimal mechanisms, efficiency analysis, and analysis of the principal's expected profit as a function of different types of environment and information structures. We find that if the principal has little or no information about the agents' private characteristics and the agents follow dominant strategy behavior, the principal may often run into losses in an attempt to discover the hidden information. Paradoxically, the loss occurs when the efficiency gains from team production are high and the competition among the agents is low. If the hidden information about each agent can be summarized as a one-dimensional type parameter, and if a prior distribution function of the agents' types is common knowledge among the agents and the principal, an expected-profit maximizing Bayesian equilibrium mechanism exists and is of the optimal auction form (Myerson, 1981). Moreover, the mechanism can be equivalently implemented in dominant strategies with no expected profit loss for the principal. Yet, the principal's profit often decreases with an increase in the number of projects. The findings suggest that, in profit-maximizing firms with low competition among the employees, efficient organizational forms may often be foregone in favor of profits.\n\n\tIn chapter 2 we consider, theoretically and experimentally, one specific type of the team formation mechanisms, a wage-demand mechanism, first suggested by Bolle (1991). Under these mechanisms, potential team members submit their wage demands to the principal and the principal chooses a team which gives her the highest profit - defined as the output of the team net of wages demanded by the team-members, and then pays all the employed agents their demanded wages. Bolle found that the principal's ability to detect and choose efficient teams among the profit-maximizing teams is essential for the existence of pure strategy Nash equilibria of the wage-demand games. We consider wage-demand mechanisms in a framework when the principal might have incomplete information about the agents' characteristics. In this case, the pure strategy Nash equilibria of the wage-demand game do not exist. However, there are [...]-Nash equilibria, which are close in efficiency and profitability to the Nash equilibria of the complete information game.\n\n\tWe present the results of experimental tests of the Nash and [...]-Nash behavioral hypothesis for the team-selection wage-demand games corresponding to complete and incomplete information cases. If the agents do follow the Nash equilibrium behavior, then the principal's information should not significantly affect the outcomes of the games regarding team's profitabilities and efficiencies. In his experimental investigation of the wage-demand games, Bolle found that the subjects often do not follow the competitive Nash equilibrium behavior, but engage in \"tacit collusion.\" We test the robustness of Bolle's findings by introducing asymmetry into agent's productivity characteristics. We find that although some collusive tendencies are present in the subjects behavior, they are not sustainable; with repetition, the outcomes of the wage-demand games converge to the Nash equilibrium outcomes. However, we find that the two experimental treatments corresponding to the complete and incomplete information on the principal's part are not equivalent in the degrees of agents' competition and cooperation. In our experiments the agents were significantly more collusive when the principal had incomplete information, and the outcomes were less profitable for the principal. Thus, we once again confirm that information does matter for the profit-maximizing principal.\n", "doi": "10.7907/4cqc-pj45", "publication_date": "1995", "thesis_type": "phd", "thesis_year": "1995" }, { "id": "thesis:7641", "collection": "thesis", "collection_id": "7641", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:04292013-090327457", "primary_object_url": { "basename": "Chen 1994.pdf", "content": "final", "filesize": 12968189, "license": "other", "mime_type": "application/pdf", "url": "/7641/1/Chen 1994.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "The Strategic Behavior of Rational Novices", "author": [ { "family_name": "Chen", "given_name": "Kay-Yut", "clpid": "Chen-Kay-Yut" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Plott", "given_name": "Charles R.", "clpid": "Plott-C-R" } ], "thesis_committee": [ { "family_name": "Unknown", "given_name": "Unknown" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "There is a growing amount of experimental evidence that suggests people often\r\ndeviate from the predictions of game theory. Some scholars attempt to explain the\r\nobservations by introducing errors into behavioral models. However, most of these\r\nmodifications are situation dependent and do not generalize. A new theory, called the\r\nrational novice model, is introduced as an attempt to provide a general theory that takes\r\naccount of erroneous behavior. The rational novice model is based on two central\r\nprincipals. The first is that people systematically make inaccurate guesses when they are\r\nevaluating their options in a game-like situation. The second is that people treat their\r\ndecisions similar to a portfolio problem. As a result, non optimal actions in a game\r\ntheoretic sense may be included in the rational novice strategy profile with positive\r\nweights.
\r\n\r\nThe rational novice model can be divided into two parts: the behavioral model and\r\nthe equilibrium concept. In a theoretical chapter, the mathematics of the behavioral model\r\nand the equilibrium concept are introduced. The existence of the equilibrium is established.\r\nIn addition, the Nash equilibrium is shown to be a special case of the rational novice\r\nequilibrium. In another chapter, the rational novice model is applied to a voluntary\r\ncontribution game. Numerical methods were used to obtain the solution. The model is\r\nestimated with data obtained from the Palfrey and Prisbrey experimental study of the\r\nvoluntary contribution game. It is found that the rational novice model explains the data\r\nbetter than the Nash model. Although a formal statistical test was not used, pseudo R^2\r\nanalysis indicates that the rational novice model is better than a Probit model similar to the\r\none used in the Palfrey and Prisbrey study.
\r\n\r\nThe rational novice model is also applied to a first price sealed bid auction. Again,\r\ncomputing techniques were used to obtain a numerical solution. The data obtained from\r\nthe Chen and Plott study were used to estimate the model. The rational novice model\r\noutperforms the CRRAM, the primary Nash model studied in the Chen and Plott study.\r\nHowever, the rational novice model is not the best amongst all models. A sophisticated\r\nrule-of-thumb, called the SOPAM, offers the best explanation of the data.
\r\n", "doi": "10.7907/G9T6-8569", "publication_date": "1994", "thesis_type": "phd", "thesis_year": "1994" }, { "id": "thesis:7359", "collection": "thesis", "collection_id": "7359", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:01022013-113303956", "primary_object_url": { "basename": "Polk_cw_1993.pdf", "content": "final", "filesize": 19258118, "license": "other", "mime_type": "application/pdf", "url": "/7359/1/Polk_cw_1993.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "The Organization of Production: Moral Hazard and R&D", "author": [ { "family_name": "Polk", "given_name": "Charles William", "clpid": "Polk-Charles-William" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Unknown", "given_name": "Unknown" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "We model technical innovation of a final good at the subcomponent\r\nlevel. Research and Development efforts are undertaken on\r\nsubcomponents, incrementally enhancing the technological inputs to\r\nthe final good. Through observation of actual R and D procurements,\r\nwe identify the principal and agents appropriate for such innovation.\r\nTwo categories of agent, the conventional profit seeking agent and a\r\nperformance seeking agent, are identified. A principal who jointly\r\nvalues the capabilities of the subcomponent undergoing R and D and\r\nthe funds available for purchasing other subcomponents to the final\r\ngood is identified. The principal does not have a transferable utility\r\nfunction. We characterize optimal R and D production organization\r\nbetween such a principal and each type of agent. In addition to the\r\nimportance of the information environment between principal and\r\nagent, the motivational properties of the principal and agent\r\nsignificantly affect the form and existence of optimal R and D\r\nprocurement. We draw insights for both private and public sector\r\nindustrial organization.
", "doi": "10.7907/y956-qt38", "publication_date": "1993", "thesis_type": "phd", "thesis_year": "1993" }, { "id": "thesis:7370", "collection": "thesis", "collection_id": "7370", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:01042013-114124291", "primary_object_url": { "basename": "NOUSSAIR-CN-1993.pdf", "content": "final", "filesize": 19775283, "license": "other", "mime_type": "application/pdf", "url": "/7370/1/NOUSSAIR-CN-1993.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "A theoretical and experimental investigation of auctions in multi-unit demand environments", "author": [ { "family_name": "Noussair", "given_name": "Charles Nabih", "clpid": "Noussair-C-N" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Kiewiet", "given_name": "D. Roderick", "clpid": "Kiewiet-D-R" }, { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" }, { "family_name": "Plott", "given_name": "Charles R.", "clpid": "Plott-C-R" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "In many existing markets demanders wish to buy more than one unit from a group of identical units of a commodity. Often, the units are sold simultaneously by auction. The\r\nvast majority of literature pertaining to the economics of auctions, however, considers environments in which demanders buy at most one object. In this dissertation we present a collection of results concerning the generalization of theoretical and experimental results\r\nfrom environments in which buyers have single-unit demands to environments with two-unit demands. We derive necessary and sufficient conditions for a set of bidding strategies to be a symmetric monotone equilibrium to a uniform price sealed bid auction. We prove that equilibrium bidding strategies converge to truthful revelation as the number of bidders gets large. We also prove that the uniform price sealed bid auction and the English clock are not isomorphic in the two-unit demand environment. Either type of auction may generate higher efficiency and either may generate higher revenue. Finally, we report a set of experimental results which demonstrates that the revenue generating properties of the two auctions are different in two-unit demand environments. In the experimental environment, more revenue is generated by the uniform price sealed bid auction than the English clock, and more revenue is generated per market period if the market is run only once than if it is repeated with the same participants.
\r\n", "doi": "10.7907/vsj7-a337", "publication_date": "1993", "thesis_type": "phd", "thesis_year": "1993" }, { "id": "thesis:2971", "collection": "thesis", "collection_id": "2971", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-07232007-145323", "primary_object_url": { "basename": "Olson_ma_1991.pdf", "content": "final", "filesize": 9590224, "license": "other", "mime_type": "application/pdf", "url": "/2971/1/Olson_ma_1991.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "The Assignment Problem: Theory and Experiments", "author": [ { "family_name": "Olson", "given_name": "Mark Allen", "clpid": "Olson-Mark-Allen" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" }, { "family_name": "Grether", "given_name": "David M.", "clpid": "Grether-D-M" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "In this thesis I consider the problem of assigning a fixed and heterogeneous set of goods or services to a fixed set of individuals. I analyze this allocation problem with and without the use of monetary transfers to allocate good.
\r\n\r\nThere are many applications in the literature associated with this problem. The usual approach to this problem has been to discuss the properties of individual mechanisms (variously called procedures, algorithms, or rules) to solve the problem, often ignoring the incentive properties. In this thesis I take a different approach, that is, to look at a large class of mechanisms and to determine the conditions necessary to induce mechanisms with desired optimality and incentive properties. This analytic technique is augmented by an experimental examination of some of the mechanisms that have been proposed to solve this problem. Mechanisms that use transfers and consider incentive properties exist in the literature, but mechanisms that do not use transfers do not. None of these mechanisms has been tested or compared. The thesis is divided into two chapters; in chapter I, I examine the class of nontransfer dominant and Nash strategy mechanisms, and in chapter II, I discuss the experimental tests of the known transfer mechanisms and of the nontransfer mechanisms discussed in chapter I.
\r\n\r\nIn the first chapter of this thesis, I characterize the conditions necessary for a nontransfer mechanism to be implementable in dominant and Nash strategies. This characterization is an extension of the Gibbard-Satterthwaite theorem. One of the conditions, ordinality, explains a distinction that is observed in the mechanisms described in the literature, that is, the use of cardinal information when transfers are used, and the use of ordinal information when transfers are not used. In addition, I apply a little-known concept for strategic behavior, nonbossiness, which is a necessary condition for implementability.
\r\n\r\nIn the second chapter of this thesis, I use experimental methods to explore some procedures that could be used to assign individuals to slots. I look at four mechanisms, two transfer mechanisms, a sealed-bid auction and a progressive auction, and two nontransfer mechanisms, a choice mechanism and a chit mechanism (which are also studied in part I of this thesis). The mechanisms were compared to their theoretical predictions and to each other. For the chit mechanism a genetic algorithm was used to compute the predicted outcome; since this is a new use for the technique, I discuss the methodology that I used.
\r\n\r\nThe experimental results for the transfer auctions are similar to the results found for single and multiple unit auctions; that is, progressive auctions tend to be more efficient and extract higher revenue from the bidders. While the transfer mechanisms studied had the properties that they are efficient and extract surplus (in terms of revenue) from the bidders, nontransfer mechanisms retain most of the surplus for bidders but tend to be less efficient. The difference between the two classes of mechanisms was most apparent in a high-contention environment where the use of nontransfer mechanisms resulted in a much larger surplus to the individual bidders, and the transfer mechanisms resulted in slightly higher efficiencies (the differences in efficiencies were small in comparison to the differences in consumer surplus). In a low-contention environment the use of either a transfer or a nontransfer mechanism had little effect on either the efficiencies or the consumer surplus.
\r\n\r\nThe results of this study are a first step to understanding the assignment problem and to understanding more difficult allocation problems with heterogeneous goods. Two simple results are evident from our results. In the low-contention environment the planner can choose among the mechanisms discussed and not be concerned about their relative merits, since there is little difference in the outcomes of these mechanisms; in the high-contention environment the planner must determine whether efficiency or consumer surplus is more important; if efficiency or revenue is most important then, the progressive auction is clearly superior, if consumer welfare is most important then the chit mechanism is superior.
", "doi": "10.7907/8ZCK-E373", "publication_date": "1991", "thesis_type": "phd", "thesis_year": "1991" }, { "id": "thesis:8620", "collection": "thesis", "collection_id": "8620", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:07292014-111212753", "primary_object_url": { "basename": "Tan-g-1990.pdf", "content": "final", "filesize": 19946004, "license": "other", "mime_type": "application/pdf", "url": "/8620/1/Tan-g-1990.pdf", "version": "v3.0.0" }, "type": "thesis", "title": "Optimal procurement and contracting with research and development", "author": [ { "family_name": "Tan", "given_name": "Guofu", "clpid": "Tan-Guofu" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "thesis_committee": [ { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "clpid": "Palfrey-T-R" }, { "family_name": "Border", "given_name": "Kim C.", "clpid": "Border-K-C" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "Government procurement of a new good or service is a process that usually includes basic research, development, and production. Empirical evidences indicate that investments in research and development (R and D) before production are significant in many defense procurements. Thus, optimal procurement policy should not be only to select the most efficient producer, but also to induce the contractors to design the best product and to develop the best technology. It is difficult to apply the current economic theory of optimal procurement and contracting, which has emphasized production, but ignored R and D, to many cases of procurement.
\r\n\r\nIn this thesis, I provide basic models of both R and D and production in the procurement process where a number of firms invest in private R and D and compete for a government contract. R and D is modeled as a stochastic cost-reduction process. The government is considered both as a profit-maximizer and a procurement cost minimizer. In comparison to the literature, the following results derived from my models are significant. First, R and D matters in procurement contracting. When offering the optimal contract the government will be better off if it correctly takes into account costly private R and D investment. Second, competition matters. The optimal contract and the total equilibrium R and D expenditures vary with the number of firms. The government usually does not prefer infinite competition among firms. Instead, it prefers free entry of firms. Third, under a R and D technology with the constant marginal returns-to-scale, it is socially optimal to have only one firm to conduct all of the R and D and production. Fourth, in an independent private values environment with risk-neutral firms, an informed government should select one of four standard auction procedures with an appropriate announced reserve price, acting as if it does not have any private information.
\r\n", "doi": "10.7907/ccg7-br11", "publication_date": "1990", "thesis_type": "phd", "thesis_year": "1990" }, { "id": "thesis:1950", "collection": "thesis", "collection_id": "1950", "cite_using_url": "https://resolver.caltech.edu/CaltechETD:etd-05222007-095847", "type": "thesis", "title": "Efficiency and Stability in Partnerships", "author": [ { "family_name": "Legros", "given_name": "Patrick", "clpid": "Legros-Patrick" } ], "thesis_advisor": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Kiewiet", "given_name": "D. Roderick", "clpid": "Kiewiet-D-R" } ], "thesis_committee": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Kiewiet", "given_name": "D. Roderick", "clpid": "Kiewiet-D-R" }, { "family_name": "Border", "given_name": "Kim C.", "orcid": "0000-0003-4437-0524", "clpid": "Border-K-C" }, { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "orcid": "0000-0003-0769-8109", "clpid": "Palfrey-T-R" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "A partnership is an organization in which the owners of the firm provide inputs into the production process and in which they have, collectively, the power to make decisions. An institution defines how the output of the partnership is shared among the partners and also the collective decision process that will be used. An institution should have two desirable properties: efficiency and stability. Efficiency means that the partners have an incentive to provide efficient levels of inputs (the moral hazard problem) and that the decision process selects an efficient decision. Stability means that the partners do not want to modify the institution (renegotiation proofness).
\r\n\r\nWhen the inputs that the partners provide are not verifiable, there is a well established belief in the literature that efficiency cannot be sustained in partnerships. The first part of the dissertation establishes, contrary to this common belief, that the moral hazard problem can be almost eliminated in partnerships: there exists an allocation of the final output which induces each partner to almost always take an efficient action. It is in fact sometimes possible for the partners to attain full efficiency: necessary and sufficient conditions are established.
\r\n\r\nThe second part of the thesis considers a situation in which renegotiation takes place through a mediator. It is shown that, under some sufficient conditions on the environment, there exist collective decision making processes which are (interim) efficient and which are renegotiation proof, i.e., stable.
", "doi": "10.7907/twmw-b767", "publication_date": "1989", "thesis_type": "phd", "thesis_year": "1989" } ]