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Mechanism Design

Paper Session

Sunday, Jan. 8, 2023 10:15 AM - 12:15 PM (CST)

Hilton Riverside, Norwich
Hosted By: Econometric Society
  • Chair: Ian Ball, Massachusetts Institute of Technology

Purchase History and Product Personalization

Laura Doval
Columbia University
Vasiliki Skreta
University of Texas-Austin and University College London


Product personalization opens the door to price discrimination. A rich product line allows for higher consumer satisfaction, but the mere choice of a product carries valuable information about the consumer that the firm can leverage for price discrimination. Controlling the degree of product personalization provides the firm with an additional tool to curb ratcheting forces arising from consumers’ awareness of being price discriminated. Indeed, a firm’s inability to not engage in price discrimination introduces a novel distortion: The firm offers a subset of the products that it would offer if, instead, the firm could commit to not price discriminate. Doing so gives commitment power to the firm: By ‘pooling’ consumers with different tastes to the same variety, the firm commits not to learn their tastes.

Wage Dispersion, Minimum Wages, and Involuntary Unemployment: A Mechanism Design Perspective

Simon Loertscher
University of Melbourne
Ellen Muir
Stanford University


Adopting a mechanism design approach, we show that wage dispersion and involuntary unemployment are optimal for a monopsony whenever the cost of procurement under market-clearing wages is not convex at the optimal level of employment. A minimum wage between the lowest equilibrium wage and the market-clearing wage decreases involuntary unemployment and increases employment. Whenever a minimum wage induces wage dispersion and involuntary unemployment, a small increase in that wage increases employment and decreases involuntary unemployment. Absent involuntary unemployment, a small increase in the minimum wage still generically increases employment. Extensions analyze quantity competition, horizontal differentiation, migration and unemployment insurance.

The Limits of Linking Decisions

Ian Ball
Massachusetts Institute of Technology
Deniz Kattwinkel
London's Global University


Can linking decisions serve as a substitute for transfers? It is known that with a common prior, linking decisions and transferable utility can implement the same class of social choice rules. The linking mechanisms, however, are very sensitive to the prior – the designer must know the exact distribution of the agents’ types. If ex post implementation is demanded, then linking multiple decisions has no bite. We study what linking mechanisms can (approximately) implement if the designer knows only that agents’ types are exchangeable.

Pricing, Rationing, and Queuing

Piotr Dworczak
Northwestern University


Queuing is a method of allocating scarce resources that is commonly used in practice, especially in contexts in which the designer is concerned about the welfare of relatively poor agents. Using a mechanism-design approach, we investigate whether queuing---or, more generally, utility burning---can be part of an optimal mechanism even when monetary transfers are feasible. We show that queuing may indeed be used by a designer with redistributive concerns, as long as the privately observed disutility from queuing is sufficiently strongly negatively correlated with the welfare weights. Our analysis casts light on the relationship between three classical allocation methods: pricing, rationing, and queuing.
JEL Classifications
  • C7 - Game Theory and Bargaining Theory
  • D4 - Market Structure, Pricing, and Design