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Why do some incomplete information markets feature intermediaries while others do not? I study the allocation of two goods in an incomplete information setting with a single principal, multiple agents with unit demand, and interdependent valuations. I construct a novel dynamic mechanism implemented by a principal who faces a set of intermediaries, each of whom represents an ex ante identical set of agents. This mechanism has a unique (up to permutation) weak perfect Bayesian equilibrium. The dynamic mechanism is inefficient with positive probability. Nevertheless, under mild conditions the agents are ex ante better off under the dynamic mechanism relative to a Vickrey-like auction because the intermediaries are more able to exploit information asymmetries in the dynamic mechanism than agents are able to exploit information asymmetries in the Vickrey-like auction. Finally, I show that in large markets the dynamic mechanism and Vickrey-like auction have the same expected total surplus. The comparison between the two mechanisms gives a stylized intuition for the hierarchical structure of larger markets and institutions. [ABSTRACT FROM AUTHOR]

The article traces the development of "spot pricing" for electrical power, which has provided the technique for calculating electricity prices in wholesale markets in most of the United States, and is rapidly becoming the standard in many other countries. The model was first formalized by a group of engineers and economists associated with the engineering professor Fred Schweppe, at MIT. From his position as a leading control theorist, well known in the industry, Schweppe proposed an expansion of control theory that he argued would help break the deadlock in regulatory politics and benefit producers and consumers of power alike. He introduced the approach, which he called "homeostatic control," around 1978 in a seminar of the MIT Energy Lab. Derived by way of a biological metaphor, homeostatic control conceives of a self-correcting system that maintains its equilibrium state in the face of a changing environment. Schweppe's group envisioned bringing consumers of power into the control system by constantly feeding them signals in the form of prices. The MIT team discovered through the contact between economists and engineers that the calculation for determining efficient prices is identical to the calculation used by engineers for meeting system load while minimizing costs. The Lagrange multipliers, or lambdas, derived from the engineering optimization are the best estimates of the marginal cost, and therefore the efficient prices, at each node of the system. [ABSTRACT FROM AUTHOR]

Payments for Ecosystem Service (PES) schemes increasingly use auctions to target funds to low-cost providers, aiming to increase value-for-money. To date, PES auctions have most often employed "Pay-as-Bid" (PaB) pricing, in which successful participants are paid the amount stipulated in their bid(s). Alternative pricing rules exist, such as the "Uniform Price" (UP) rule, in which successful bids receive the same per unit payment determined by the marginal bid. Despite being successfully applied in other settings, the use of UP pricing in PES auctions has been limited. We explore the impact of UP pricing in the context of a scheme incentivising farmers to reduce nutrient run-off. Following our intervention, the auction through which contracts were allocated to farmers switched from PaB to UP. Our analysis provides the first real-world, causal evidence on the effect of alternative auction pricing rules in this context. We find that UP pricing reduced mean bids, by 40%. A priori the impact on payments made to the farmers is ambiguous, yet we find these to be reduced by a similar amount. Moreover, the UP format reduces the incidence of costly bidding behaviours, updating and sniping, by approximately 50% and 30% respectively. These significant and substantial changes suggest wider adoption of UP pricing in PES auctions is likely warranted. [ABSTRACT FROM AUTHOR]

The authors describe their implementation of a market-based approach to reallocating fishing shares in New South Wales, Australia. Their solution addressed several nonstandard requirements, including the possibility of all-or-nothing offers, fair prices, and an endogenously determined subsidy. Overfishing is a prime environmental concern. Catch-share systems are an effective way to combat overfishing, but they introduce economic inefficiencies when the allocation of shares does not align with industry needs. This paper describes the implementation of a market-based approach to reallocating fishing shares in New South Wales (NSW), Australia. The design of the market needed to address several nonstandard requirements, including the possibility of all-or-nothing offers, fair prices, and an endogenously determined subsidy. These features were crucial for the adoption of the reform, but also led to computationally challenging allocation and pricing problems. The market operated from May to July 2017 and successfully reallocated shares from inactive fishers to those who were impacted the most by the introduction of catch shares, with significant savings for the taxpayer. It provides a template for the reallocation of catch shares elsewhere and of resource rights in other applications (e.g., water rights, pollution rights, and environmental offsets). We provide a project description, practical examples, and implementation details of the implemented exchange. [ABSTRACT FROM AUTHOR]

This paper introduces a decentralized market design, which allows a distribution system operator to manage local demand constraints by obtaining flexibility from competing aggregators, which must in-turn incentivize prosumers to provide this flexibility. The novel networked market structure accounts for distribution system operator-to-aggregator and aggregator-to-prosumer ICT infrastructure and contractual arrangements, which may limit which participants can negotiate transactions with one another. The proposed flexibility market is opt-in for prosumers, which continue to obtain energy within the existing retail electricity market. At the same time, it is underpinned by bilateral energy transactions, and could be integrated into future peer-to-peer electricity markets. Through the market, the distribution system operator, aggregators, and prosumers reach agreement on a stable outcome–a set of individually beneficial transactions no group wishes to mutually deviate from. Market outcomes also satisfy Pareto efficiency, meaning that it is not possible to make a participant better off, without making another worse off. [ABSTRACT FROM AUTHOR]

There is an ongoing debate on the introduction of capacity markets in most European countries while a few of them have already established capacity markets. Since the implementation of independent national capacity markets is not in line with the target of a pan-European internal electricity market we investigate the impacts of uncoordinated capacity markets compared with coordinated capacity markets. A probabilistic approach for the determination of capacity requirements is proposed and a European electricity market model (E2M2s) is applied for evaluation. The model simultaneously optimizes investments and dispatch of power plants. Besides the impact on generation investments, market prices and system costs we analyze effects on production and security of supply. While coordinated capacity markets reveal high potentials for cross-border synergies and cost savings, uncoordinated and unilateral implementations can lead to inefficiencies, in particular free riding effects and endanger security of supply due to adverse allocation of generation capacity. [ABSTRACT FROM AUTHOR]

We propose a criterion of approximate incentive compatibility, strategy-proofness in the large (SP-L), and argue that it is a useful second-best to exact strategy-proofness (SP) for market design. Conceptually, SP-L requires that an agent who regards a mechanism's "prices" as exogenous to her report—be they traditional prices as in an auction mechanism, or price-like statistics in an assignment or matching mechanism—has a dominant strategy to report truthfully. Mathematically, SP-L weakens SP in two ways: (1) truth-telling is required to be approximately optimal (within epsilon in a large enough market) rather than exactly optimal, and (2) incentive compatibility is evaluated ex interim, with respect to all full-support i.i.d. probability distributions of play, rather than ex post with respect to all possible realizations of play. This places SP-L in between the traditional notion of approximate SP, which evaluates incentives to manipulate ex post and as a result is too strong to obtain our main results in support of SP-L, and the traditional notion of approximate Bayes-Nash incentive compatibility, which, like SP-L, evaluates incentives to manipulate ex interim, but which imposes common knowledge and strategic sophistication assumptions that are often viewed as unrealistic. [ABSTRACT FROM AUTHOR]

Abstract Principal-agent relationships between the supervisory board and the management of firms are widespread in multi-object markets such as spectrum auctions. The management aims at winning the highest valued licenses whereas the board wants to maximize profit and limits exposure. If efficiency requires multiple firms to coordinate on winning smaller sets of objects, we demonstrate that principals would do so while agents would not and inflate demand to larger sets. We first show that even if the principal has complete information about the valuations she cannot generally incentive-align the agent with only budgets constraints in first-price sealed-bid package auctions. With hidden information the principal needs to determine contingent transfers, which can be impossible with strong value-maximizing motives of the agent. Contrary, in ascending package auctions this is straightforward. The second-price payment rule of the ascending auction enables the principal to overcome the agency problem and the dynamic mechanism further facilitates coordination. Highlights • A principal-agent model of bidding firms in high-stakes multi-object auctions is proposed. • Different objectives of principal and agent lead to an agency dilemma. • Sometimes the principals would coordinate in the efficient solution, but the agents would not. • It is not always possible to align agent incentives with budget constraints. [ABSTRACT FROM AUTHOR]

We apply standard evolutionary dynamics to study trader participation in three competing market formats —call market (CM), posted offer (PO) and decentralized market (DM). In our framework, heterogeneous buyers and sellers seek to transact a homogeneous good, which can be done by allocating their time among three different market formats. Our results show that (i) the final participation of traders in the CM is much higher, (ii) the PO can coexist with the CM, (iii) the DM unravels when competing against CM and (iv) the DM can coexist with the PO, depending on the initial participation conditions. Thus, we demonstrate that agent-based micro-simulations coupled with replication dynamics can reproduce most of the previously known theoretical results and have the potential to investigate other commonly used hybrid auction protocols. [ABSTRACT FROM AUTHOR]

Purpose Prediction markets are techniques to aggregate dispersed public opinions via market mechanisms to predict uncertain future events’ outcome. Many experiments have shown that prediction markets outperform other traditional forecasting methods in terms of accuracy. Logarithmic market scoring rules (LMSR) is one of the most simple and widely used market mechanisms; however, market makers have to confront crucial design decisions including the setting of the parameter “b” or the “liquidity parameter” in the price functions. As the liquidity parameter has significant effects on the market performance, this paper aims to provide a comprehensive basis for the setting of the parameter.Design/methodology/approach The analyses include the effects of the liquidity parameter on the forecast standard error and the amount of time for the market price to converge to the true value. These experiments use artificial prediction markets, the proposed simulation models that mimic real prediction markets.Findings The simulation results indicate that prediction market’s forecast standard error decreases as the value of the liquidity parameter increases. Moreover, for any given number of traders in the market, there exists an optimal liquidity parameter value that yields appropriate price adaptability and leads to the fastest price convergence.Originality/value Understanding these tradeoffs, the market makers can effectively determine the liquidity parameter value under various objectives on the standard error, the time to convergence and cost. [ABSTRACT FROM AUTHOR]

We consider an energy-only electricity market where some generation and/or load is uncertain, and where there are flexibility costs, i.e. some conventional power plants have to be scheduled well before real time in order to participate in the dispatch, while for others, additional cost incurs if generation plans have to be adjusted close to real time. In practice, electricity markets are often organized with sequential market clearing, and in this paper, we consider two sequential markets, for instance representing a day-ahead and a real-time market. We compare the outcomes of 1) a stochastic market clearing model, i.e. an integrated model that takes into account both markets and the uncertainty, to 2) a myopic market clearing model, where the first market is cleared based only on given bids, and not taking into account neither the uncertainty nor the bids to the second market. Compared to previous literature, our main contribution is that we compare the two different market models with respect to both efficiency and allocation of surplus, and thus the incentives they imply for the market participants. We discuss what information is needed in market agent bids and how that information can be manipulated. While the stochastic market clearing gives a solution with a higher expected social welfare, it poses several challenges for market design. The stochastic dispatch may lead to a dispatch where the day-ahead prices deviate from the bid curves to the first market. This can lead to incentives for self-scheduling, in that it may require market participants to accept prices that deviate from the marginal costs or benefits corresponding to the scheduled quantities. Our analysis shows that the intermittent producer has an incentive to deviate from the system optimal plan in both the myopic and stochastic model, and this incentive is particularly strong under the myopic model. We also discuss how the expected social welfare of the market outcome under stochastic market clearing depends on the quality of the information that the system operator will base the market clearing on. In particular, we show that an intermittent producer may have an incentive to misreport the probability distribution for its generation. [ABSTRACT FROM AUTHOR]

This paper presents a theoretical and experimental study of affirmative action policies in school choice problems focusing on the minority reserve mechanism, or DA-Reserve, proposed by Hafalir et al. (2013) and the majority quota mechanism, or DA-Quota, proposed by Abdulkadiroglu and Sönmez (2003) , Kojima (2012) and Matsubae (2011) . An evaluation of the performance of these mechanisms showed that, (1) while truth-telling is a dominant strategy in both mechanisms, the rate of its occurrence was less than 60%; (2) the average payoff was significantly higher with DA-Reserve than with DA-Quota, as theoretically predicted; (3) surprisingly, the proportion of students exhibiting justified envy was higher with DA-Reserve than with DA-Quota; and (4) a systematic pattern of deviation from the dominant strategy (referred to as skipping-down ) was observed, and it was theoretically proven that this constituted Nash equilibrium with DA-Quota in some environments but not with DA-Reserve. More generally, the set of stable matchings was found to be larger with DA-Quota than with DA-Reserve, which explains the matching instability observed with the latter. [ABSTRACT FROM AUTHOR]

An investor has some funds invested through portfolio managers. By the end of the year, she reallocates the funds among these managers according to the managers' performance. While the investor tries to maximize her subjective utility (that depends on the total expected earnings), each portfolio manager tries to maximize the overall amount of funds bestowed in his hands to manage. A reward scheme is a rule that determines how funds should be allocated among the managers based on their performance. A reward scheme is optimal if it induces the (self-interested) managers to act in accordance with the interests of the investor. We show that an optimal reward scheme exists under quite general conditions. [ABSTRACT FROM AUTHOR]

Within the last decade, the use of living-donor kidney exchanges for transplants has emerged as a cross-disciplinary success for medical doctors and ethicists, market design economists, and computer scientists. This paper describes the fronts on which these efforts have been successful and what needs to be done further to increase their impact. This paradigm is also partially being applied to liver exchanges. There are other organs for which living donation is possible and gains from exchange can be much bigger than for kidneys. Recent academic work on single-graft liver and dual-donor organ exchanges for lobar lung, dual-graft liver, and simultaneous liver–kidney transplantation are also discussed. [ABSTRACT FROM AUTHOR]

This paper examines the relationship between ethics and market design. It argues that market design should not rely wholly on preference utilitarianism in order to make ethical judgements. It exposits an alternative normative framework—informed neutrality between reasonable ethical positions. [ABSTRACT FROM AUTHOR]

Electricity markets are designed to provide reliable electricity at least cost to consumers. This paper describes how the best designs satisfy the twin goals of short-run efficiency—making the best use of existing resources—and long-run efficiency—promoting efficient investment in new resources. The core elements are a day-ahead market for optimal scheduling of resources and a real-time market for security-constrained economic dispatch. Resources directly offer to produce per their underlying economics and then the system operator centrally optimizes all resources to maximize social welfare. Locational marginal prices, reflecting the marginal value of energy at each time and location, are used in settlement. This spot market provides the basis for forward contracting, which enables participants to manage risk and improves bidding incentives in the spot market. There are important differences in electricity markets around the world, reflecting different economic and political settings. Electricity markets are undergoing a transformation as the resource mix transitions from fossil fuels to renewables. The main renewables, wind and solar, are intermittent, have zero marginal cost, and lack inertia. These challenges can be met with battery storage and improved demand response. However, good governance is needed to assure the market rules adapt to meet new challenges. [ABSTRACT FROM AUTHOR]

We propose a new market design for a securities exchange that matches 'continuous scaled limit orders'. This new order type differs from standard limit orders in two ways. First, orders to buy and sell represent flows of shares over time rather than stocks of shares available for immediate purchase or sale. Second, orders are expressed as continuous piecewise linear functions relating price to quantity rather than step functions defined on a discrete grid of prices and quantities. Continuous scaled limit orders implement Fischer Black's vision of traders limiting temporary price impact by trading gradually over time. They dramatically lessen the rents high-frequency traders earn from the current market design. The proposal is compatible with frequent batch auctions and random time delays. [ABSTRACT FROM AUTHOR]

I present the institutions and incentives of online reviews, including attracting initial reviews, assuring truthful reviews of genuine experiences, and avoiding inflated or deceptive reviews. I also explore the competition and consumer protection concerns associated with reviews. [ABSTRACT FROM AUTHOR]

School choice refers to policies that allow parents' preferences to be an input to the decision of which school a student will attend. A rich body of research has developed over the past 10-15 years to study mechanisms that implement school choice. This literature has mostly taken the inputs of school choice—preferences, priorities, and capacities—as exogenous. More recently, researchers have sought to embed the school choice problem into its wider context, thereby broadening the scope of market design questions and enriching the analysis. This article discusses current school choice policy issues in light of this recent literature and outlines remaining open questions. [ABSTRACT FROM AUTHOR]

Market design seeks to translate economic theory and analysis into practical solutions to real-world problems. By redesigning both the rules that guide market transactions and the infrastructure that enables those transactions to take place, market designers can address a broad range of market failures. In this paper, we illustrate the process and power of market design through three examples: the design of medical residency matching programmes; a scrip system to allocate food donations to food banks; and the recent ‘Incentive Auction' that reallocated wireless spectrum from television broadcasters to telecoms. Our lead examples show how effective market design can encourage participation, reduce gaming, and aggregate information, in order to improve liquidity, efficiency, and equity in markets. We also discuss a number of fruitful applications of market design in other areas of economic and public policy. [ABSTRACT FROM AUTHOR]

We study dynamic matching policies in a stochastic marketplace for barter, with agents arriving over time. Each agent is endowed with an item and is interested in an item possessed by another agent homogeneously with probability p, independently for all pairs of agents. Three settings are considered with respect to the types of allowed exchanges: (a) only two-way cycles, in which two agents swap items, (b) two-way or three-way cycles, (c) (unbounded) chains initiated by an agent who provides an item but expects nothing in return. We consider the average waiting time as a measure of efficiency and find that the cost outweighs the benefit from waiting to thicken the market. In particular, in each of the above settings, a policy that conducts exchanges in a greedy fashion is near optimal. Further, for small p, we find that allowing three-way cycles greatly reduces the waiting time over just two-way cycles, and conducting exchanges through a chain further reduces the waiting time significantly. Thus, a centralized planner can achieve the smallest waiting times by using a greedy policy, and by facilitating three-way cycles and chains, if possible. The online appendix is available at . [ABSTRACT FROM AUTHOR]

• We used EMIS-AS model to explore various market structures and clean energy targets. • Energy-only markets can achieve same clean energy goals as capacity markets. • ORDC scarcity pricing exhibits substitutional relationship with capacity markets. • Even one well-designed market mechanism can achieve desired clean energy targets. • Capacity/reserve eligibility rules for one technology or product can impact others. Competitive wholesale electricity markets can help facilitate energy system decarbonization by incentivizing investments in clean energy technologies that meet evolving system needs. We explore market structure impacts on generator operations and deployment by risk-averse, heterogeneous investor firms using the Electricity Markets and Investment Suite – Agent-based Simulation (EMIS-AS) model. We apply clean energy targets of 45%–100% by 2035 considering energy, ancillary services, capacity, and clean energy credit products and pricing and eligibility rules. Results highlight a complexity conundrum, whereby finding the "right" market design to achieve decarbonization goals and avoid unintended consequences can be a highly-nuanced, non-incremental challenge. Carefully designed energy-only markets can achieve the same clean energy targets as capacity market structures but with different revenue and profitability outcomes. Operating reserve demand curve-based scarcity pricing can substitute capacity markets for similar deployment outcomes. Carbon pricing alone is most effective at achieving decarbonization levels at low clean energy targets, and clean energy credit markets and carbon pricing are substitutionary at high clean energy targets. Restricting technology participation in capacity and operating reserve markets can impact deployment and operations, even for nonrestricted technologies. Adding an inertia product with fast frequency response yields insufficient provision at high clean energy targets, but work is needed to understand frequency requirements and capabilities. [ABSTRACT FROM AUTHOR]

The recent "incentive auction" of the US Federal Communications Commission was the first auction to reallocate radio frequencies between two different kinds of uses: from broadcast television to wireless Internet access. The design challenge was not just to choose market rules to govern a fixed set of potential trades but also, to determine the broadcasters' property rights, the goods to be exchanged, the quantities to be traded, the computational procedures, and even some of the performance objectives. An essential and unusual challenge was to make the auction simple enough for human participants while still ensuring that the computations would be tractable and capable of delivering nearly efficient outcomes. [ABSTRACT FROM AUTHOR]

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Energy storage is unique in that it can provide multiple services. This feature raises cost-recovery issues for storage, due to the combination of competitive markets and ratebased cost recovery used in many power systems today. This hybrid regulatory paradigm relies on classifying assets as providing competitively prices or unpriced services and handling cost recovery based on that classification. Some recent regulatory precedents suggest that storage developers must choose between classifying their assets as providing competitively priced or unpriced services. In the former case, storage costs must be recovered through the market. If an asset is classified as providing only unpriced services, costs can be recovered through the ratebase. This regulatory design can hamper cost recovery for storage and may lead to inefficient storage investment and use. We propose an alternate solution whereby storage-capacity rights are auctioned to third parties that use their rights for priced or unpriced services. Storage-capacity rights disentangle storage cost recovery from the regulatory treatment of its end use. We formulate the storage-capacity auction model and demonstrate how to efficiently price storage-capacity rights. We show that the revenues earned by the storage owner through the auction equals the imputed marginal value of storage capacity, as revealed by the market bids. [ABSTRACT FROM AUTHOR]

This paper provides answers to questions raised by Hirth and Ziegenhagen [1] regarding the “German paradox” in the balancing power markets. We show that in spite of the increasing energy production from variable renewable energy sources, there is no need for a higher demand of balancing power in Germany because adaptations in the energy market design were undertaken and Grid Control Cooperations led to immense efficiency savings. Additionally, we investigate the price developments in the German Secondary balancing power market. We find evidence that the suppliers coordinate on a price level which is (far) above the competitive level and that they orientate their power bids towards previous auction prices. [ABSTRACT FROM AUTHOR]

We characterize solutions for two-sided matching, both in the transferable- and in the nontransferable-utility frameworks, using a cardinal formulation. Our approach makes the comparison of the matching models with and without transfers particularly transparent. We introduce the concept of a no-trade stable matching to study the role of transfers in matching. A no-trade stable matching is one in which the availability of transfers does not affect the outcome. [ABSTRACT FROM AUTHOR]

In the unbundled national electricity markets in Europe, the balancing market is the institutional arrangement that deals with the balancing of electricity demand and supply. This paper presents a framework for policy makers that identifies the relevant design variables and performance criteria that play a role in the design and analysis of European balancing markets. We outline the full extent of the design challenge through a discussion of trade-offs among performance criteria, uncertain effects of design variables, and the many inter-linkages between the balancing market and the electricity market at large. Policy makers can address the balancing market design challenge by adopting a structured approach in which design variables, performance criteria, market conditions, system developments, and resultant market incentives are explicitly considered. [ABSTRACT FROM AUTHOR]

This paper addresses the private parking slot sharing problem during regular working hours in a big city. Our results extend the existing market design theory so that money flow is allowed in the matching mechanisms. We consider two cases of money flow: (i) one agent who fails to exchange his parking slot can join the leasing mechanism as a lessor; and (ii) one agent who fails in parking slot exchange can always “transfer” (rent) his parking slots to the platform. Each agent is self-interested. We propose the (price-compatible) top trading cycles and deals (TTCD) mechanism for case (i) and the price-compatible top trading cycles and chains (PC-TTCC) mechanism for case (ii). Both mechanisms are effective in terms of the compatibility with money flow, agents’ welfare, and strategy-proofness. Our experimental results further show that the proposed mechanisms would result in remarkable social welfare, and (ex post) budget balance for the platform in a big city with large population. In some realistic settings, our proposed mechanisms can almost realize cost saving of 60% and make more than 50% of agents strictly better off. There is no private parking slot sharing in the benchmark case. Overall, this paper opens the door to the solutions of a host of price-compatible matching problems. [ABSTRACT FROM AUTHOR]

While much of the school choice literature advocates strategyproofness, recent research has aimed to improve efficiency using mechanisms that rely on non-truthtelling equilibria. We address two issues that arise from this approach. We first show that even in simple environments with ample feedback and repetition, agents fail to reach non-truthtelling equilibria. We offer another way forward: implementing truth-telling as an ordinal Bayes–Nash equilibrium rather than as a dominant strategy equilibrium. We show that this weaker solution concept can allow for more efficient mechanisms in theory and provide experimental evidence that this is also the case in practice. In fact, truth-telling rates are basically the same whether truthtelling is implemented as an ordinal Bayes–Nash equilibrium or a dominant strategy equilibrium. This provides a proof-of-concept that ordinal Bayes–Nash design might provide a middle path, achieving efficiency gains over strategy-proof mechanisms without relying on real-life agents playing a non-truth-telling equilibrium. [ABSTRACT FROM AUTHOR]

We provide a new perspective on how to operate matching markets when there are many types of markets. Our finding is that the market-wise adaptation of strategy-proof and non-wasteful rules yields a strategy-proof rule with the following efficiency property: no strategy-proof rule Pareto-dominates the rule. Such rules are abundant as they include the market-wise use of the well-known priority-based rules of the top trading cycles and the deferred acceptance. This result gives theoretical support to the independent operation of markets observed in real-life markets as well as our practice in Market Design that separately treats each market for its design. [ABSTRACT FROM AUTHOR]

Public support for renewables has led to an unexpected investment momentum in Germany. A consequence is reduced wholesale electricity prices, the so-called merit order effect of renewables. We estimate this reduction using an econometric approach and give a quantitative overview of the financial situation of conventional generators. Our results indicate that investments in new conventional capacities are economically unviable. With the current market design, this situation is going to impact supply security at least in the long run. A popular approach to address this issue is the introduction of additional public support for conventional power plants. However, we believe that subsidizing renewable and conventional capacities contradicts the idea of a liberal market. We present two alternatives: State control of investments in renewables through auctions (as proposed by the European Commission), and a premium paid to representatives of the demand side (such as retailers) independence of their shares of renewables. [ABSTRACT FROM AUTHOR]

In an experiment with 739 subjects, we study whether and how different interventions might have an influence on the degree of moral behavior when subjects make decisions that can generate negative externalities on uninvolved parties. Particularly, subjects can either take money for themselves or donate it to UNICEF for measles vaccines. By considering two fairly different institutional regimes-one with individual decision making, one with a double-auction market-we expose the different interventions to a kind of robustness check. We find that the threat of monetary punishment promotes moral behavior in both regimes. Getting subjects more involved with the traded good has no effect, though, in both regimes. Only the removal of anonymity, thus making subjects identifiable, has different effects across regimes, which we explain by different perceptions of responsibility. This paper was accepted by Uri Gneezy, behavioral economics. [ABSTRACT FROM AUTHOR]

Shortage is common in many markets, such as those for human organs or blood, but the problem is often difficult to solve through price adjustment, given safety and ethical concerns. In this paper, we study two non-price methods that are often used to alleviate shortage for human blood. The first method is informing existing donors of a current shortage via a mobile message and encouraging them to donate voluntarily. The second method is asking the patient's family or friends to donate in a family replacement (FR) program at the time of shortage. Using 447,357 individual donation records across 8 years from a large Chinese blood bank, we show that both methods are effective in addressing blood shortage in the short run but have different implications for total blood supply in the long run. We compare the efficacy of these methods and discuss their applications under different scenarios to alleviate shortage. [ABSTRACT FROM AUTHOR]

Demand response is a cornerstone problem in electricity markets under climate change constraints. Most liberalized electricity markets have a poor track record at encouraging the deployment of smart meters and the development of demand response. In Europe, different models are considered for demand response, from a development under a regulated regime to a development under competitive perspectives. In this paper focusing on demand response and smart metering for mid-size and small consumers, we investigate which types of market signals should be sent to demand managers to see demand response emerge as a competitive activity. Using data from the French power system over nine years, we compare the possible market design options which would enable the development of demand response. Our simulations demonstrate that under the current market rules demand response is not a profitable activity in the French electricity industry. Introducing a capacity market could bring additional revenues to demand response providers and improve incentives to put in place demand response programs in a market environment. [ABSTRACT FROM AUTHOR]

Does the type of posterior feedback affect how people decide in one-shot environments? We revisit this question in first-price auction markets. We consider three feedback types: minimal (only knowing whether winning or not), loser (also knowing the winning bid) and winner (knowing the second highest bid if winning). Filiz-Ozbay and Ozbay (2007) find that loser as opposed to minimal or winner feedback increases bids. We use three novel protocols and additionally replicate theirs. Using a sample of 624 subjects, we find that bidders’ ex ante knowledge of posterior feedback type has no systematic effect on the average bid/value ratios. [ABSTRACT FROM AUTHOR]

We introduce an auction design framework for large markets with hundreds of items and complex bidder preferences. Such markets typically lead to computationally hard allocation problems. Our new framework consists of compact bid languages for sealed-bid auctions and methods to compute second-price rules such as the Vickrey-Clarke-Groves or bidder-optimal, core-selecting payment rules when the optimality of the allocation problem cannot be guaranteed. To demonstrate the efficacy of the approach for a specific, complex market, we introduce a compact bidding language for TV advertising markets and investigate the resulting winner-determination problem and the computation of core payments. For realistic instances of the respective winner-determination problems, very good solutions with a small integrality gap can be found quickly, although closing the integrality gap to find marginally better solutions or prove optimality can take a prohibitively large amount of time. Our subsequent adaptation of a constraint-generation technique for the computation of bidder-optimal core payments to this environment is a practically viable paradigm by which core-selecting auction designs can be applied to large markets with potentially hundreds of items. Such auction designs allow bidders to express their preferences with a low number of parameters, while at the same time providing incentives for truthful bidding. We complement our computational experiments in the context of TV advertising markets with additional results for volume discount auctions in procurement to illustrate the applicability of the approach in different types of large markets. [ABSTRACT FROM AUTHOR]