Sunday, Jan. 8, 2023 10:15 AM - 12:15 PM (CST)
- Chair: Ian Ball, Massachusetts Institute of Technology
Wage Dispersion, Minimum Wages, and Involuntary Unemployment: A Mechanism Design Perspective
AbstractAdopting 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
AbstractCan 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
AbstractQueuing 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.
- C7 - Game Theory and Bargaining Theory
- D4 - Market Structure, Pricing, and Design