[ { "id": "authors:h8b1v-76536", "collection": "authors", "collection_id": "h8b1v-76536", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20200727-111303655", "type": "publication_workingpaper", "title": "Price Formation in Multiple, Simultaneous Continuous Double Auctions, with Implications for Asset Pricing", "author": [ { "family_name": "Asparouhova", "given_name": "Elena", "clpid": "Asparouhova-E" }, { "family_name": "Bossaerts", "given_name": "Peter", "orcid": "0000-0003-2308-2603", "clpid": "Bossaerts-P" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "We propose a Marshallian model for price and allocation adjustments in parallel continuous double auctions. Agents quote prices that they expect will maximize local utility improvements. The process generates Pareto optimal allocations in the limit. In experiments designed to induce CAPM equilibrium, price and allocation dynamics are in line with the model's predictions. Walrasian aggregate excess demands do not provide additional predictive power. We identify, theoretically and empirically, a portfolio that is closer to mean-variance optimal throughout equilibration. This portfolio can serve as a benchmark for asset returns even if markets are not in equilibrium, unlike the market portfolio, which only works at equilibrium. The theory also has implications for momentum, volume and liquidity.", "doi": "10.7907/h8b1v-76536", "publisher": "California Institute of Technology", "publication_date": "2020-07-27" }, { "id": "authors:a6fvp-ke472", "collection": "authors", "collection_id": "a6fvp-ke472", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20191018-120435407", "type": "publication_workingpaper", "title": "Design of Tradable Permit Programs under Imprecise Measurement", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "If the measurement of production in a commons is accurate and precise, it is possible to design a tradable permit program such that, under a fairly general set of conditions, the market equilibrium is efficient for the given aggregate permit level and everyone is better off after the permit program than before. Often, however, implementation of a tradable permit system is postponed or never undertaken because an inexpensive technology able to provide accurate and precise measurements does not exist. However, there often is an inexpensive technology which accurate but not precise. I study the possibilities for the design of a tradable permit system when the measurement technology involves an imprecise, indirect measure of production that contains statistical uncertainty. To the best of my knowledge, this has not been studied before.\nAs one might expect, imprecise measurement can lead to inefficiency and prevent voluntary participation. But there are positive results. If measurement errors are proportional to use, it is possible to design so that aggregate output is efficiently allocated. Also, it is possible to calculate a set of individual firm lump-sum subsidies to attain voluntary participation.", "doi": "10.7907/a6fvp-ke472", "publisher": "California Institute of Technology", "publication_date": "2018-03-20" }, { "id": "authors:mte8a-n4r44", "collection": "authors", "collection_id": "mte8a-n4r44", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170707-110629443", "type": "publication_workingpaper", "title": "ACE: A Combinatorial Market Mechanism", "author": [ { "family_name": "Fine", "given_name": "Leslie", "clpid": "Fine-Leslie" }, { "family_name": "Goeree", "given_name": "Jacob K.", "orcid": "0000-0001-9876-3425", "clpid": "Goeree-J-K" }, { "family_name": "Ishikida", "given_name": "Tak", "clpid": "Ishikida-Takashi" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "In 1990 the South Coast Air Quality Management District created a tradable emissions program to more efficiently manage the ex- tremely bad emissions in the \nLos Angeles basin. The program created 136 different assets that an environmental engineer could use to cover emissions in place of installing expensive abatement equipment. Standard markets could not deal with this complexity and little trading occurred. A new combinatorial market was created in response and operated successfully for many years. That market design, called ACE (approximate competitive equilibrium), is described in detail and its successful performance in practice is analyzed.", "doi": "10.7907/mte8a-n4r44", "publisher": "California Institute of Technology", "publication_date": "2016-11-03" }, { "id": "authors:74cgh-0j750", "collection": "authors", "collection_id": "74cgh-0j750", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170727-150205866", "type": "publication_workingpaper", "title": "Market Design for Fishery IFQ Programs", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "I examine the impact of market design on the performance of a cap-and-trade program for Individual Fishing Quotas. In equilibrium, neither the term of the quota, the number of years for which it is valid, nor the method of initial allocation, granting or selling, has a differential effect on the protability of the shery or the quality of the environment. However, the term of the quota and the method of initialization can have a big impact on the price discovery process and whether equilibrium is attained. Because of this, both the fishery and the environment can be significantly better off with a mixture of historically based grants and auctions with some form of limited term quotas. I also discuss some additional benefits from an initialization process that generates some revenue for the public. Section 5 contains a summary.", "doi": "10.7907/74cgh-0j750", "publisher": "California Institute of Technology", "publication_date": "2009-04-02" }, { "id": "authors:fwfvf-9g770", "collection": "authors", "collection_id": "fwfvf-9g770", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170731-152920042", "type": "publication_workingpaper", "title": "A General Characterization of Interim Efficient Mechanisms for Independent Linear Environments", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "orcid": "0000-0003-0769-8109", "clpid": "Palfrey-T-R" } ], "abstract": "We consider the class of Bayesian environments with independent types, and utility functions which are both quasi-linear in a private good and linear in a one-dimensional private-value type parameter. We call these independent linear environments. For these environments, we fully characterize interim efficient allocation rules which satisfy interim incentive compatibility and interim individual rationality constraints. We also prove that they correspond to decision rules based on virtual surplus maximization, together with the appropriate incentive taxes. We demonstrate how these techniques can be applied easily to the design of auctions, markets, bargaining rules, public good provision, and assignment problems.", "doi": "10.7907/fwfvf-9g770", "publisher": "California Institute of Technology", "publication_date": "2003-11-18" }, { "id": "authors:v811f-scj07", "collection": "authors", "collection_id": "v811f-scj07", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170808-142250579", "type": "publication_workingpaper", "title": "The Approximation of Efficient Public Good Mechanisms by Simple Voting Schemes", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "orcid": "0000-0003-0769-8109", "clpid": "Palfrey-T-R" } ], "abstract": "This paper compares the performance of simple voting rules, called referenda, to the performance of interim efficient mechanisms for the provision of a public good. In a referendum, voters simply vote for or against the provision of the public good, and production of the public good depends on whether or not the number of yes votes exceeds a prespecified threshold. Costs are shared equally. We show that in large populations for any interim efficient allocation rule, there exists a corresponding referendum that yields approximately the same total welfare when there are many individuals. Moreover, if there is a common value component to the voters' preferences, then there is a unique approximating referendum.", "doi": "10.7907/v811f-scj07", "publisher": "California Institute of Technology", "publication_date": "2000-10-12" }, { "id": "authors:yk4m6-yrv98", "collection": "authors", "collection_id": "yk4m6-yrv98", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170808-135334937", "type": "publication_workingpaper", "title": "Inducing Liquidity in Thin Financial Markets through Combined-Value Trading Mechanisms", "author": [ { "family_name": "Bossaerts", "given_name": "Peter", "orcid": "0000-0003-2308-2603", "clpid": "Bossaerts-P" }, { "family_name": "Fine", "given_name": "Leslie", "clpid": "Fine-Leslie" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "Previous experimental research has shown that thin financial markets fail to fully equilibrate, in contrast with thick markets. A specific type of market risk is conjectured to be the reason, namely, the risk of partial execution of desired portfolio rearrangements in a system of parallel, unconnected double auction markets. This market risk causes liquidity to dry up before equilibrium is reached. To verify the conjecture, we organized markets directly as a portfolio trading mechanism, allowing agents to better coordinate their orders across securities. The mechanism is an implementation of the combined-value trading (CVT) system. We present evidence that our portfolio trading mechanism facilitates equilibration to the same extent as thick markets do. Like in thick markets, the emergence of equilibrium pricing cannot be attributed to chance. Inspection of order submission and trade activity reveals that subjects manage to exploit the direct linkages between markets presented by the CVT system.", "doi": "10.7907/yk4m6-yrv98", "publisher": "California Institute of Technology", "publication_date": "2000-08" }, { "id": "authors:txk4w-c9032", "collection": "authors", "collection_id": "txk4w-c9032", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170808-140630427", "type": "publication_workingpaper", "title": "Experimental Testbedding of a Pollution Trading System: Southern California's RECLAIM Emissions Market", "author": [ { "family_name": "Ishikida", "given_name": "Takashi", "clpid": "Ishikida-Takashi" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Olson", "given_name": "Mark A.", "clpid": "Olson-M-A" }, { "family_name": "Porter", "given_name": "David", "clpid": "Porter-D-P" } ], "abstract": "[No abstract]", "doi": "10.7907/txk4w-c9032", "publisher": "California Institute of Technology", "publication_date": "2000-03" }, { "id": "authors:1xbgs-71j14", "collection": "authors", "collection_id": "1xbgs-71j14", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170808-141429666", "type": "publication_workingpaper", "title": "The First Use of a Combined Value Auction for Transportation Services", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Olson", "given_name": "Mark A.", "clpid": "Olson-M-A" }, { "family_name": "Porter", "given_name": "David", "clpid": "Porter-D-P" }, { "family_name": "Swanson", "given_name": "Joseph A.", "clpid": "Swanson-J-A" }, { "family_name": "Torma", "given_name": "David P.", "clpid": "Torma-D-P" } ], "abstract": "Sears, Roebuck and Co. is one of the largest procurers of trucking services in the world through its wholly-owned subsidiary, Sears Logistics Services (SLS). SLS controls supply chain elements that originate at the vendor (manufacturer) through distribution centers to retail stores, and from vendor to distribution centers to cross dock facilities. This case examines a major change in the method Sears used in contracting for truckload carrier services for this supply chain. It provides a pioneering example of complex business to business e-Commerce.", "doi": "10.7907/1xbgs-71j14", "publisher": "California Institute of Technology", "publication_date": "2000-03" }, { "id": "authors:wve8f-fxz97", "collection": "authors", "collection_id": "wve8f-fxz97", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170810-170308555", "type": "publication_workingpaper", "title": "A New and Improved Design for Multi-Object Iterative Auctions", "author": [ { "family_name": "DeMartini", "given_name": "Christine", "clpid": "DeMartini-C" }, { "family_name": "Kwasnica", "given_name": "Anthony M.", "clpid": "Kwasnica-A-M" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Porter", "given_name": "David", "clpid": "Porter-D-P" } ], "abstract": "In this paper we present a new improved design for multi-object auctions and report on the results of tests of that design. We merge the better features of two extant but very different auction processes, the Milgrom FCC design (see Milgrom (1995)) and the Adaptive User Selection Mechanism (AUSM) of Banks et al. (1989)). Then, by adding one crucial new feature, we are able to create a new design, the Resource Allocation Design (RAD) auction process, which performs better than both. We are able to demonstrate, in both simple and complex environments, that the RAD auction achieves higher efficiencies, lower bidder losses, and faster times to completion without increasing the complexity of a bidder's problem.", "doi": "10.7907/wve8f-fxz97", "publisher": "California Institute of Technology", "publication_date": "1999-09" }, { "id": "authors:r2944-rm514", "collection": "authors", "collection_id": "r2944-rm514", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170818-151840242", "type": "publication_workingpaper", "title": "Mutually Destructive Bidding: The FCC Auction Design Problem", "author": [ { "family_name": "Bykowsky", "given_name": "Mark. M", "clpid": "Bykowsky-M-M" }, { "family_name": "Cull", "given_name": "Robert J.", "clpid": "Cull-R-J" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "Dissatisfaction with previous assignment mechanisms and the desire to raise revenue induced Congress to grant the FCC authority to auction radio licenses. The debate over an appropriate auction design was wide ranging with many imaginative proposals. Many of the arguments and their scientific support are unfortunately not publicly available. Here, we present our side of this debate for the record.\nSynergies across license valuations complicate the auction design process. Theory suggests that a \"simple\" (i.e., non-combinatorial) auction will have difficulty in assigning licenses efficiently in such an environment. This difficulty increases with increases in \"fitting complexity.\" In some environments, bidding may become \"mutually destructive.\" Experiments indicate that a combinatorial auction is superior to a simple auction in terms of economic efficiency and revenue generation in bidding environments with a low amount of fitting complexity. Concerns that a combinatorial auction will cause a \"threshold\" problem are not borne out when bidders for small packages can communicate.", "doi": "10.7907/r2944-rm514", "publisher": "California Institute of Technology", "publication_date": "1998-06" }, { "id": "authors:b7sbx-5k980", "collection": "authors", "collection_id": "b7sbx-5k980", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170811-163520727", "type": "publication_workingpaper", "title": "Repeated Implementation", "author": [ { "family_name": "Kalai", "given_name": "Ehud", "clpid": "Kalai-E" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "In the traditional static implementation literature it is often impossible for implementors to enforce their optimal outcomes. And when restricting the choice to dominant-strategy implementation, only the dictatorial choices of one of the participants are implementable.\n\nRepeated implementation problems are drastically different. This paper provides a strong implementation \"folk theorem\": for patient implementors, every outcome function they care about is dominant-strategy implementable.", "doi": "10.7907/b7sbx-5k980", "publisher": "California Institute of Technology", "publication_date": "1998-03" }, { "id": "authors:y319s-0vv88", "collection": "authors", "collection_id": "y319s-0vv88", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170816-164222869", "type": "publication_workingpaper", "title": "Interim Efficiency in a Public Goods Problem", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "orcid": "0000-0003-0769-8109", "clpid": "Palfrey-T-R" } ], "abstract": "We consider a Bayesian public goods environment with independent private valuations, where a public good can be produced at constant returns to scale, up to some capacity. We fully characterize the interim efficient allocation rules and prove that they correspond to decision rules based on a virtual cost-benefit criterion, together with the appropriate incentive taxes. Compared to the classical Lindahl-Samuelson solution there are generally distortions that depend on the welfare weights because the efficient way to reduce the tax burden on low-valuation (resp: high-valuation) types is to reduce (resp: increase) the level of provision of the public good. Second, we explore the implementation of efficient allocations by means of simple, dominant strategy voting rules, called referenda. In a referendum, individuals vote for or against production of the public good. If a sufficiently large fraction vote in favor, the good is provided at maximum capacity and costs are distributed equally across the population. Otherwise the good is not produced. We prove that for each interim efficient allocation rule there exists a referendum that approximates that achieves the same total surplus in large populations. Furthermore, if there is common value uncertainty in addition to the private valuations uncertainty, then the approximately optimal referendum is unique.", "doi": "10.7907/y319s-0vv88", "publisher": "California Institute of Technology", "publication_date": "1997-06" }, { "id": "authors:6ehr5-jww49", "collection": "authors", "collection_id": "6ehr5-jww49", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170815-163214049", "type": "publication_workingpaper", "title": "The Results of Some Tests of Mechanism Designs for the Allocation and Pricing of Collections of Heterogeneous Items", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Porter", "given_name": "David", "clpid": "Porter-D-P" }, { "family_name": "Rangel", "given_name": "Antonio", "clpid": "Rangel-A" } ], "abstract": "During the discussion and evaluation of proposals for the design of the Federal Communications Commission (FCC) mechanism to sell the spectrum, over 130 auctions were run under controlled conditions at Caltech for the National Telecommunications and Information Administration (NTIA), the FCC and others. In this paper we look at these data and try to extract some useful findings for those who may be involved in creating future designs of similar auctions. For those whose experience with experimental economics methodology is limited, we begin with a section on the general framework within which experimental work underlying applied mechanism design is conducted. Next we cover, in section 2, the various technical pieces needed to understand the data: performance measures, economic environments, mechanisms tested, and the major issues considered. The experimental data are presented and our observations are summarized in section 3. We end, in section 4, with some thoughts for future work and with the observation that there is a huge gap between, theory, scientific evidence, and practice in the design of complex auctions. Much needed research remains to be done.", "doi": "10.7907/6ehr5-jww49", "publisher": "California Institute of Technology", "publication_date": "1996-03" }, { "id": "authors:rgkfq-awr86", "collection": "authors", "collection_id": "rgkfq-awr86", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170822-135920548", "type": "publication_workingpaper", "title": "First Best Bayesian Privatization Mechanisms", "author": [ { "family_name": "Dudek", "given_name": "R.", "clpid": "Dudek-R" }, { "family_name": "Kim", "given_name": "Taesung", "clpid": "Kim-Taesung" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "A planner is interested in designing an ex-post efficient, individually rational, Bayesian mechanism for allocating a single indivisible object to one of the agents who knows his own valuation and only the distribution of other agents' valuations of the object. In this paper, we show that it is impossible to design such a mechanism without any transfers among agents and the planner. However, we discover and describe an ex-post efficient, ex-post individually rational, Bayesian mechanism which balances transfers among agents without any payment to (or from) the planner.\nOur result that an ex-post efficient, ex-post individually rational, transfer balanced, Bayesian mechanism exists, is in stark contrast to two well-known impossibility results in the literature; the nonexistence of a Bayesian public good mechanism satisfying expost efficiency, individual rationality and budget balance (Laffont and Maskin (1979)) and the impossibility of an ex-post efficient, individually rational, Bayesian bilateral trading mechanism between a seller and a buyer without an outside subsidy (Myerson and Satterthwaite (1983)).", "doi": "10.7907/rgkfq-awr86", "publisher": "California Institute of Technology", "publication_date": "1995-04" }, { "id": "authors:sb8p2-77f71", "collection": "authors", "collection_id": "sb8p2-77f71", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170818-150309360", "type": "publication_workingpaper", "title": "The Allocation of a Shared Resource Within an Organization", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Noussair", "given_name": "Charles N.", "clpid": "Noussair-C-N" }, { "family_name": "Porter", "given_name": "David P.", "clpid": "Porter-D-P" } ], "abstract": "Many resources such as supercomputers, legal advisors, and university classrooms are shared by many members of an organization. When the supply of shared resources is limited, conflict usually results between contending demanders. If these conflicts can be adequately resolved, then value is created for the organization. In this paper we use the methodology of applied mechanism design to examine alternative processes for the resolution of such conflicts for a particular class of scheduling problems. We construct a laboratory environment, within which we evaluate the outcomes of various allocation mechanisms. In particular, we are able to measure efficiency, the value attained by the resulting allocations as a percentage of the maximum possible value. Our choice of environment and parameters is guided by a specific application, the allocation of time on NASA's Deep Space Network, but the results also provide insights relevant to other scheduling and allocation applications. We find (1) experienced user committees using decision support algorithms produce reasonably efficient allocations in lower conflict situations but perform badly when there is a high level of conflict between demanders, (2) there is a mechanism, called the Adaptive User Selection Mechanism (AUSM) which charges users for time, which yields high efficiencies in high conflict situations but because of the prices paid, the net surplus available to the users is less than that resulting from the inefficient user committee (a reason why users may not appreciate \"market solutions\" to organization problems) and (3) there is a modification of AUSM in which tokens, or internal money, replaces real money, which results in highly efficient allocations without extracting any of the users' surplus. Although the distribution of surplus is still an issue, the significant increase in efficiency provides users with a strong incentive to replace inefficient user committees with the more efficient AUSM.", "doi": "10.7907/sb8p2-77f71", "publisher": "California Institute of Technology", "publication_date": "1995-01" }, { "id": "authors:f3s6c-3pw50", "collection": "authors", "collection_id": "f3s6c-3pw50", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170823-160736011", "type": "publication_workingpaper", "title": "Public Goods: A Survey of Experimental Research", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "Environments with public goods are a wonderful playground for those interested in delicate experimental problems, serious theoretical challenges, and difficult mechanism design issues. A review is made of various public goods experiments. It is found that the public goods environment is a very sensitive one with much that can affect outcomes but are difficult to control. The many factors interact with each other in unknown ways. Nothing is known for sure. Environments with public goods present a serious challenge even to skilled experimentalists and many opportunities for imaginative work.", "doi": "10.7907/f3s6c-3pw50", "publisher": "California Institute of Technology", "publication_date": "1994-02" }, { "id": "authors:x8d9n-q6988", "collection": "authors", "collection_id": "x8d9n-q6988", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20160328-160830650", "type": "publication_workingpaper", "title": "Voting and Lottery Drafts as Efficient Public Goods Mechanisms", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Palfrey", "given_name": "Thomas R.", "orcid": "0000-0003-0769-8109", "clpid": "Palfrey-T-R" } ], "abstract": "This paper characterizes interim efficient mechanisms for public good production and\ncost allocation in a two-type environment with risk neutral, quasi-linear preferences and\nfixed size projects, where the distribution of the private good, as well as the public\ngoods decision, affects social welfare. An efficient public good decision can always be\naccomplished by a majority voting scheme, where the number of \"YES\" votes required\ndepends on the welfare weights in a simple way. The results are shown to have a natural\ngeometry and an intuitive interpretation. We also extend these results to allow for\nrestrictions on feasible transfer rules, ranging from the traditional unlimited transfers to\nthe extreme case of no transfers.\n\nFor a range of welfare weights, an optimal scheme is a two-stage procedure which\ncombines a voting stage with a second stage where an even-chance lottery is used to\ndetermine who pays. We call this the \"lottery draft mechanism\". Since such a costsharing\nscheme does not require transfers, it follows that in many cases transfers are\nnot necessary to achieve the optimal allocation. For other ranges of welfare weights\nthe second stage is more complicated, but the voting stage remains the same. If transfers\nare completely infeasible, randomized voting rules may be optimal. The paper also\nprovides a geometric characterization of the effects of voluntary participation constraints.", "doi": "10.7907/x8d9n-q6988", "publisher": "California Institute of Technology", "publication_date": "1993-09" }, { "id": "authors:zvw0j-4sc93", "collection": "authors", "collection_id": "zvw0j-4sc93", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170825-143301240", "type": "publication_workingpaper", "title": "Designing Organizations for Trading Pollution Rights", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Szakaly", "given_name": "Kristin E.", "clpid": "Szakaly-K-E" } ], "abstract": "Regulators and academicians have recently become interested in using a marketable permits program as a new way to control aggregate pollution emissions. Our research focuses on choosing a permit trading mechanism that is both economically efficient and politically viable. We consider an organized trading process and a revenue neutral auction, both of which involve an initial allocation of permits based on past history. Each is tested in a competitive and in a non-competitive environment to determine which mechanism performs best. The results of our research suggest that, overall, the organized trading process outperforms the revenue neutral auction.", "doi": "10.7907/zvw0j-4sc93", "publisher": "California Institute of Technology", "publication_date": "1993-07" }, { "id": "authors:y75p1-g1790", "collection": "authors", "collection_id": "y75p1-g1790", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170825-145611518", "type": "publication_workingpaper", "title": "The Design of Coordination Mechanisms and Organizational Computing", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "We provide an introduction to a theory of coordination mechanism design and show how to apply it to an assignment problem. The purpose is to introduce those familiar with organizational computing, but unfamiliar with game theory and economics, to the subject. We also describe briefly how we can test new mechanisms before taking them into the field. Finally, we raise some unresolved research questions.", "doi": "10.7907/y75p1-g1790", "publisher": "California Institute of Technology", "publication_date": "1993-02" }, { "id": "authors:dja9h-egh71", "collection": "authors", "collection_id": "dja9h-egh71", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170830-135904085", "type": "publication_workingpaper", "title": "Political Competition in a Model of Economic Growth; Some Theoretical Results", "author": [ { "family_name": "Boylan", "given_name": "Richard T.", "clpid": "Boylan-R-T" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "McKelvey", "given_name": "Richard D.", "clpid": "McKelvey-R-D" } ], "abstract": "We study a one-sector model of economic growth in which decisions about capital accumulation and consumption are made through a political process of two candidate competition. Each voter's utility for a consumption stream is the discounted value of that voter's utility of consumption in each period. We consider the case when voters' one period utility functions for consumption are identical but discount factors are different. We are particularly interested in the conditions under which neoclassical optimal growth paths occur, and conditions in which political business cycles occur.\nThe answer depends on the ability or inability of the candidates to commit to multi-period investment strategies. If candidates can commit indefinitely into the future, then a political (majority rule) equilibrium path will not exist if all discount factors are different. For any feasible consumption path, there is a perturbation which is majority preferred to it. For any neoclassical optimal path there exists a perturbated path that is preferred to it either unanimously or by all but one voter. These results are true even if the perturbations can differ at no more than three consecutive periods from the original path.\nIf candidates are unable to commit to multi-period plans, we show there is a unique subgame perfect, stationary, symmetric equilibrium to the infinite horizon two candidate competition game; namely the optimal consumption path for the median voter. The equilibrium is unique in the following sense: It is the unique limit of subgame perfect equilibria to the finite horizon electoral game.\nIn the case when candidates can commit for a finite time into the future, we show that a stationary minmax path (a path which minimizes the maximum vote that can be obtained against it) yields a political business cycle.", "doi": "10.7907/dja9h-egh71", "publisher": "California Institute of Technology", "publication_date": "1992-10" }, { "id": "authors:96gx6-bw273", "collection": "authors", "collection_id": "96gx6-bw273", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170905-153759955", "type": "publication_workingpaper", "title": "Information Aggregation in Two-Candidate Elections", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "Many interesting political institutions, such as campaigning, polls, and sequences of elections cannot be understood in the context of standard spatial competition models of elections with fully informed candidates and voters. To fill this void, we introduce a model of elections in which candidates are privately and asymmetrically informed about the electorate. This model differs from other incomplete information models, such as the rational expectations model, in that a full range of sequential strategic behavior is considered. We begin with a model in which candidates can constantly revise their positions before the election. In this case, one might expect each to \"invert\" the other's strategies and infer the other's private information, as is done in equilibrium with rational expectations. However, we find that each candidate, knowing the other will try to make such inferences, will follow a strategy which is not invertible. No information will leak from one candidate to the other. The outcome will be identical to a single-move election with incomplete information and no information aggregation will occur.\nThe introduction of a public poll changes the results in an interesting way. Candidates still use pooling strategies (strategies that are constant on their private information) to avoid leaking anything to the opponent but, contrary to the case without the poll, candidates learn about the electorate before the election. In equilibrium, candidates use mixed strategies (pure strategy equilibria do not exist) and the better informed player cannot prevent the lesser informed from learning from the poll. No private information is leaked but information aggregation occurs. We conclude with an examination of the effect on information aggregation of a sequence of elections. In the previous results, candidates moves were \"free\" in the sense that revisions were costless as in a \"cheap talk\" model. Now moves are not free and hiding information today in order to improve one's chances of winning tomorrow may lower one's chances today. We show that information aggregation may occur both through the results of the election (as with the poll) and through the leakage of private information. We also provide an example in which the strategic choices of the candidates are skewed away from the rational expectations equilibrium. Because of the asymmetric information and the strategic issues surrounding information leakage, behavior is different than would be observed in simple one-shot elections.", "doi": "10.7907/96gx6-bw273", "publisher": "California Institute of Technology", "publication_date": "1988-11" }, { "id": "authors:mhs8g-89z20", "collection": "authors", "collection_id": "mhs8g-89z20", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170906-135234942", "type": "publication_workingpaper", "title": "Allocating Uncertain and Unresponsive Resources", "author": [ { "family_name": "Banks", "given_name": "Jeffrey S.", "clpid": "Banks-J-S" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" }, { "family_name": "Porter", "given_name": "David", "clpid": "Porter-D-P" } ], "abstract": "We identify an important class of economic problems that arise naturally in several applications: the allocation of multiple resources when there are uncertainties in demand or supply, unresponsive supplies (no inventories and fixed capacities), and significant demand indivisibilities (rigidities). Examples of such problems include scheduling job shops, airports or super-computers, zero-inventory planning, and the allocation and pricing of NASA's planned Space Station. We show that the two most common organizations used to deal with this problem, markets and administrative procedures, can perform at very low efficiencies (60-65percent efficiency in a seemingly robust example). Thus, there is a need to design new mechanisms that more efficiently allocate resources in these environments. We develop and analyze two that arise naturally from auctions used in the allocation of single dimensional goods. These new mechanisms involve computer assisted coordination made possible by the existence of networked computers. Both mechanisms significantly improve on the performance of both administrative and market procedures.", "doi": "10.7907/mhs8g-89z20", "publisher": "California Institute of Technology", "publication_date": "1988-09" }, { "id": "authors:k0pn8-m1r25", "collection": "authors", "collection_id": "k0pn8-m1r25", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170906-145751798", "type": "publication_workingpaper", "title": "Incentive Compatibility", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "Incentive compatibility is described and discussed. A summary of the current state of understanding is provided. Key words are: incentive compatibility, game theory, implementation, mechanism, Bayes, Nash, and revelation.", "doi": "10.7907/k0pn8-m1r25", "publisher": "California Institute of Technology", "publication_date": "1987-01" }, { "id": "authors:rjxey-cy967", "collection": "authors", "collection_id": "rjxey-cy967", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170912-134741993", "type": "publication_workingpaper", "title": "Market Failure", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "Market failure is described and discussed. A summary of the current state of understanding is provided. Key words are: market failure, public good, externalities, rational expectations, information, monopoly, and competitive equilibrium.", "doi": "10.7907/rjxey-cy967", "publisher": "California Institute of Technology", "publication_date": "1987-01" }, { "id": "authors:nz1n2-wkn56", "collection": "authors", "collection_id": "nz1n2-wkn56", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20170919-145551174", "type": "publication_workingpaper", "title": "The Scope of the Hypothesis of Bayesian Equilibrium", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "What behavior can be explained as the Bayes equilibrium of some game? The main finding is almost anything. Given any Bayesian (coordination) game with positive priors and given any vector of nondominated strategies, there is an increasing transformation of each utility function such that the given vector of strategies is a Bayes (Nash) equilibrium of the transformed game. Any nondominated behavior can be rationalized as Bayes equilibrium behavior. Some comments on the implications of these results for game theory are included.", "doi": "10.7907/nz1n2-wkn56", "publisher": "California Institute of Technology", "publication_date": "1985-12" }, { "id": "authors:ck8tg-pc937", "collection": "authors", "collection_id": "ck8tg-pc937", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20171019-155736804", "type": "publication_workingpaper", "title": "The Paradox of Voting and Candidate Competition: A General Equilibrium Analysis", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "Conventional analysis of the decision of expected utility maximizing agents to vote has concluded that it is irrational to vote unless voters have a distorted view of their individual impact or place a direct value on the act of voting. On the other hand, mathematical analyses of the electoral process (see, e.g., Davis, Hinich, Ordeshook (1970)), have usually assumed that all voters vote. Each theory is incorrect in the sense that in actual elections turnout is neither zero nor 100%. In this paper we will argue that previous analyses of expected utility maximizing voters s topped too soon because of the partial equilibrium approach and that if each voter considers the simultaneous reactions of all voters in a \"rational\" manner, then depending on the location of the candidates' platforms, turnout will usually be positive but less than 100%. In particular we will derive a (probabilistic) vote supply function, given a distribution of voters and the choice of platforms of candidates, which has the property that, even with costs of voting, unless the candidates have identical platforms, the expected turnout is positive. The model and these results are presented in sections 1a and 1b.", "doi": "10.7907/ck8tg-pc937", "publisher": "California Institute of Technology", "publication_date": "1978-07" }, { "id": "authors:8q2dx-kpv75", "collection": "authors", "collection_id": "8q2dx-kpv75", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20171020-165624169", "type": "publication_workingpaper", "title": "The Existence of Efficient and Incentive Compatible Equilibria with Public Goods", "author": [ { "family_name": "Groves", "given_name": "Theodore", "clpid": "Groves-T" }, { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "In our previous paper, \"Optimal Allocation of Public Goods...,\" (1977) we presented a mechanism for determining efficient public goods allocations when preferences are unknown and consumers are free to misrepresent their demands for public goods. We proved the basic welfare theorem for this model: If consumers are competitive in markets for private goods and follow Nash behavior in their choice of demands to report to the mechanism, then equilibria will be Pareto optimal. In this paper we show this result is not vacuous by proving that an equilibria will be Pareto optimal. In this paper we show this result is not vacuous by proving that an equilibrium will exist for a wide class of economies. Our conditions are slightly stronger than those required to prove the existence of a Lindahl equilibrium. In order to rule out the possibility of bankruptcy, we assume additionally that at all Pareto optimal allocations, private goods consumption is bounded away from zero.", "doi": "10.7907/8q2dx-kpv75", "publisher": "California Institute of Technology", "publication_date": "1978-03" }, { "id": "authors:qk8yn-ng985", "collection": "authors", "collection_id": "qk8yn-ng985", "cite_using_url": "https://resolver.caltech.edu/CaltechAUTHORS:20171023-122234187", "type": "publication_workingpaper", "title": "Incentive Compatibility and Incomplete Information", "author": [ { "family_name": "Ledyard", "given_name": "John O.", "clpid": "Ledyard-J-O" } ], "abstract": "It is by now reasonably well known that when informationally decentralized processes are used to make collective choice decisions or to allocate resources, individuals may find it in their interest to distort the information they provide and that these distortions may lead to non-optimal group decisions. In the social choice context, this has been formalized in the Gibbard-Satterthwaite Theorem, which states that all non-dictatorial rules will have this property. In a different context, Hurwicz has shown that there is a private goods neo-classical exchange economy such that any decentralized mechanism which selects Pareto-optimal allocations and which has a no-trade option will have this property. Roberts has provided a similar example in the public goods context. Other work (e.g., Green-Laffont, Groves-Loeb, Hurwicz, and Walker) indicates that, for mechanisms designed to select efficient outcomes, in most environments some agent will have an incentive to misrepresent his information and thus to manipulate the mechanism. All these results lead one to the conjecture that it is almost impossible to design any mechanism for group decisions which is compatible with individual incentives and efficiency.", "doi": "10.7907/qk8yn-ng985", "publisher": "California Institute of Technology", "publication_date": "1977" } ]