redistribution through marketsvirtual-md-seminar.com/slides/kominersslides.pdf · today { preview...
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![Page 1: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/1.jpg)
Redistribution through Markets
Scott Duke Kominers
Harvard Business School and Department of Economics, Harvard University
(joint work with Piotr Dworczak R© Mohammad Akbarpour1)
Virtual Market Design SeminarBonn–Cologne–KIT–Paris II–ZEW–. . .
April 20, 2020
1Authors’ names are in (ce R©tified) random order.Dworczak R© Kominers R© Akbarpour April 20, 2020 1
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Redistribution through Markets
Today
How should we design marketplaces in the presence of systematicwealth inequality?
Dworczak R© Kominers R© Akbarpour April 20, 2020 2
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Redistribution through Markets
Today
How should we design marketplaces in the presence of systematicwealth inequality?
Framing assumption: designer regulates/controls one market.
Price controls and subsidies are abundant!
rent control in housing markets / public housingopposition to congestion pricing(Iranian) Kidney market
Are these sorts of policies a good idea?
Knee-jerk economics answer: NO!
Dworczak R© Kominers R© Akbarpour April 20, 2020 3
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Redistribution through Markets
Today
How should we design marketplaces in the presence of systematicwealth inequality?
Framing assumption: designer regulates/controls one market.
Price controls and subsidies are abundant!
rent control in housing markets / public housingopposition to congestion pricing(Iranian) Kidney market
Are these sorts of policies a good idea?
Knee-jerk economics answer: NO!
Dworczak R© Kominers R© Akbarpour April 20, 2020 3
![Page 5: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/5.jpg)
Redistribution through Markets
Today
How should we design marketplaces in the presence of systematicwealth inequality?
Framing assumption: designer regulates/controls one market.
Price controls and subsidies are abundant!
rent control in housing markets / public housingopposition to congestion pricing(Iranian) Kidney market
Are these sorts of policies a good idea?
Knee-jerk economics answer: NO!
Dworczak R© Kominers R© Akbarpour April 20, 2020 3
![Page 6: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/6.jpg)
Redistribution through Markets
Today
How should we design marketplaces in the presence of systematicwealth inequality?
Framing assumption: designer regulates/controls one market.
Price controls and subsidies are abundant!
rent control in housing markets / public housingopposition to congestion pricing(Iranian) Kidney market
Are these sorts of policies a good idea?
Knee-jerk economics answer: NO!
Dworczak R© Kominers R© Akbarpour April 20, 2020 3
![Page 7: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/7.jpg)
Redistribution through Markets
Standard Economic Intuition
Dworczak R© Kominers R© Akbarpour April 20, 2020 4
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Redistribution through Markets
Standard Economic Intuition
Dworczak R© Kominers R© Akbarpour April 20, 2020 4
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Redistribution through Markets
Buyer/Seller Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 5
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Redistribution through Markets
Standard Economic Intuition – revisited
Dworczak R© Kominers R© Akbarpour April 20, 2020 6
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Redistribution through Markets
Thought Experiment
Consider a frictionless buyer/seller market.
As sellers become (systematically) poorer than buyers, thecompetitive-equilibrium price decreases.
However, when sellers are poorer, the designer would like themto have more money on the margin, all else equal.
⇒ Past some point, competitive-equilibrium pricing will not besocially optimal(!).
Dworczak R© Kominers R© Akbarpour April 20, 2020 7
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Redistribution through Markets
Thought Experiment
Consider a frictionless buyer/seller market.
As sellers become (systematically) poorer than buyers, thecompetitive-equilibrium price decreases.
However, when sellers are poorer, the designer would like themto have more money on the margin, all else equal.
⇒ Past some point, competitive-equilibrium pricing will not besocially optimal(!).
Dworczak R© Kominers R© Akbarpour April 20, 2020 7
![Page 13: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/13.jpg)
Redistribution through Markets
Thought Experiment
Consider a frictionless buyer/seller market.
As sellers become (systematically) poorer than buyers, thecompetitive-equilibrium price decreases.
However, when sellers are poorer, the designer would like themto have more money on the margin, all else equal.
⇒ Past some point, competitive-equilibrium pricing will not besocially optimal(!).
Dworczak R© Kominers R© Akbarpour April 20, 2020 7
![Page 14: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/14.jpg)
Redistribution through Markets
Thought Experiment
Consider a frictionless buyer/seller market.
As sellers become (systematically) poorer than buyers, thecompetitive-equilibrium price decreases.
However, when sellers are poorer, the designer would like themto have more money on the margin, all else equal.
⇒ Past some point, competitive-equilibrium pricing will not besocially optimal(!).
Dworczak R© Kominers R© Akbarpour April 20, 2020 7
![Page 15: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/15.jpg)
Redistribution through Markets
Today – Preview
How should we design marketplaces in the presence of systematicwealth inequality?
? Model inequality as dispersion in marginal values for money.1,2
⇔ allowing for arbitrary Pareto weights in mechanism design.; We seek to maximize weighted surplus subject to resource,
budget balance, incentive, and individual rationality constraints.
? Optimal Mechanism uses two instruments:
cross-side inequality ⇒ price wedge∗
same-side inequality ⇒ rationing
1Following an approach from public finance.2Implicit assumption: this is a good approximation.
Dworczak R© Kominers R© Akbarpour April 20, 2020 8
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Redistribution through Markets
Today – Preview
How should we design marketplaces in the presence of systematicwealth inequality?
? Model inequality as dispersion in marginal values for money.1,2
⇔ allowing for arbitrary Pareto weights in mechanism design.; We seek to maximize weighted surplus subject to resource,
budget balance, incentive, and individual rationality constraints.
? Optimal Mechanism uses two instruments:
cross-side inequality ⇒ price wedge∗
same-side inequality ⇒ rationing
1Following an approach from public finance.2Implicit assumption: this is a good approximation.
Dworczak R© Kominers R© Akbarpour April 20, 2020 8
![Page 17: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/17.jpg)
Redistribution through Markets
Today – Preview
How should we design marketplaces in the presence of systematicwealth inequality?
? Model inequality as dispersion in marginal values for money.1,2
⇔ allowing for arbitrary Pareto weights in mechanism design.; We seek to maximize weighted surplus subject to resource,
budget balance, incentive, and individual rationality constraints.
? Optimal Mechanism uses two instruments:
cross-side inequality ⇒ price wedge∗
same-side inequality ⇒ rationing
1Following an approach from public finance.2Implicit assumption: this is a good approximation.
Dworczak R© Kominers R© Akbarpour April 20, 2020 8
![Page 18: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/18.jpg)
Redistribution through Markets
Today – Preview
Technical ContributionWe characterize an optimal mechanism for an arbitrarydistribution of values for money, and show that it has asimple form.
Market Design under Wealth InequalityWe show how the form of the optimal mechanism depends onthe type of inequality: cross-side vs. same-side.
Conceptual ContributionCompetitive equilibrium is not necessarily “optimal” in thepresence of wealth inequality.
Dworczak R© Kominers R© Akbarpour April 20, 2020 9
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Redistribution through Markets
Today – Preview
Technical ContributionWe characterize an optimal mechanism for an arbitrarydistribution of values for money, and show that it has asimple form.
Market Design under Wealth InequalityWe show how the form of the optimal mechanism depends onthe type of inequality: cross-side vs. same-side.
Conceptual ContributionCompetitive equilibrium is not necessarily “optimal” in thepresence of wealth inequality.
Dworczak R© Kominers R© Akbarpour April 20, 2020 9
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Redistribution through Markets
Today – Preview
Technical ContributionWe characterize an optimal mechanism for an arbitrarydistribution of values for money, and show that it has asimple form.
Market Design under Wealth InequalityWe show how the form of the optimal mechanism depends onthe type of inequality: cross-side vs. same-side.
Conceptual ContributionCompetitive equilibrium is not necessarily “optimal” in thepresence of wealth inequality.
Dworczak R© Kominers R© Akbarpour April 20, 2020 9
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Redistribution through Markets
Related Literature (not exhaustive!)
Rationing vs. Market Mechanism: Weitzman (1977); Condorelli (2013);Huesmann (2017)
Auctions with Budget-Constrained Bidders: Che–Gale (1998);Fernandez–Gali (1999); Che–Gale–Kim (2012); Pai–Vohra(2014); Kotowski (2017)
Optimal Tax: Diamond–Mirrlees (1971); Atkinson–Stiglitz (1976);Piketty–Saez (2013); Scheuer (2014), Saez–Stantcheva(2016, 2017); Scheuer–Werning (2017)
Minimum Wage: Allen (1987); Guesnerie–Roberts (1987); Boadway–Cuff(2001); Lee–Saez (2012); Cahuc–Laroque (2014)
Fair Marketplace Design: Hylland–Zeckhauser (1979);Bogomolnaia–Moulin (2001); Budish (2011)
Dworczak R© Kominers R© Akbarpour April 20, 2020 10
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Redistribution through Markets
Standard Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + xM .
; How to maximize welfare? Set price pCE.
Dworczak R© Kominers R© Akbarpour April 20, 2020 11
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Redistribution through Markets
Standard Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + xM .
; How to maximize welfare? Set price pCE.
Dworczak R© Kominers R© Akbarpour April 20, 2020 11
![Page 24: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/24.jpg)
Redistribution through Markets
Standard Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + xM .
; How to maximize welfare? Set price pCE.
Dworczak R© Kominers R© Akbarpour April 20, 2020 11
![Page 25: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/25.jpg)
Redistribution through Markets
Standard Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + xM .
; How to maximize welfare? Set price pCE.
Dworczak R© Kominers R© Akbarpour April 20, 2020 11
![Page 26: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/26.jpg)
Redistribution through Markets
Standard Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + xM .
; How to maximize welfare? Set price pCE.
Dworczak R© Kominers R© Akbarpour April 20, 2020 11
![Page 27: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/27.jpg)
Redistribution through Markets
But wealth influences preferences!
Dworczak R© Kominers R© Akbarpour April 20, 2020 12
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Redistribution through Markets
But wealth influences preferences!
Dworczak R© Kominers R© Akbarpour April 20, 2020 12
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Redistribution through Markets
But wealth influences preferences!
Dworczak R© Kominers R© Akbarpour April 20, 2020 12
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Redistribution through Markets
But wealth influences preferences!
Dworczak R© Kominers R© Akbarpour April 20, 2020 12
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Redistribution through Markets
Our Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
Each agent has a valuation vM for M .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + xM .
; Rates of substitution vK
vM =: r ∼ Gj(r) (∼ Unif[0, 1] for now).
Dworczak R© Kominers R© Akbarpour April 20, 2020 13
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Redistribution through Markets
Our Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
Each agent has a valuation vM for M .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + vM · xM .
; Rates of substitution vK
vM =: r ∼ Gj(r) (∼ Unif[0, 1] for now).
Dworczak R© Kominers R© Akbarpour April 20, 2020 13
![Page 33: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/33.jpg)
Redistribution through Markets
Our Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
Each agent has a valuation vM for M .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + vM · xM .
; Rates of substitution vK
vM =: r ∼ Gj(r) (∼ Unif[0, 1] for now).
Dworczak R© Kominers R© Akbarpour April 20, 2020 13
![Page 34: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/34.jpg)
Redistribution through Markets
Our Model
good K (indivisible) and money M (divisible).
Unit mass of sellers (own good K ).
Mass µ of buyers (don’t yet own good K ).
Each agent has a valuation vK for K .
Each agent has a valuation vM for M .
If (xK , xM) denotes the holdings of K and M , then utility ∝
vK · xK + vM · xM .
; Rates of substitution vK
vM =: r ∼ Gj(r) (∼ Unif[0, 1] for now).
Dworczak R© Kominers R© Akbarpour April 20, 2020 13
![Page 35: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/35.jpg)
Redistribution through Markets
Simple Mechanisms under Uniform Distribution
First, we solve one-sided problems given Q and R .
Then, we link our characterizations of seller- and buyer-sidesolutions through the optimal choice of Q and R .
Our general results have the same structure/intuition(!).
Key Observation
Agents’ behavior depends only on r = vK
vM , but r is informative about
welfare weight λ(r) := E[vM | vK
vM = r ].
⇒ Identifying “poorer” agents through market behavior.
Dworczak R© Kominers R© Akbarpour April 20, 2020 14
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Redistribution through Markets
Simple Mechanisms under Uniform Distribution
First, we solve one-sided problems given Q and R .
Then, we link our characterizations of seller- and buyer-sidesolutions through the optimal choice of Q and R .
Our general results have the same structure/intuition(!).
Key Observation
Agents’ behavior depends only on r = vK
vM , but r is informative about
welfare weight λ(r) := E[vM | vK
vM = r ].
⇒ Identifying “poorer” agents through market behavior.
Dworczak R© Kominers R© Akbarpour April 20, 2020 14
![Page 37: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/37.jpg)
Redistribution through Markets
Simple Mechanisms under Uniform Distribution
First, we solve one-sided problems given Q and R .
Then, we link our characterizations of seller- and buyer-sidesolutions through the optimal choice of Q and R .
Our general results have the same structure/intuition(!).
Key Observation
Agents’ behavior depends only on r = vK
vM , but r is informative about
welfare weight λ(r) := E[vM | vK
vM = r ].
⇒ Identifying “poorer” agents through market behavior.
Dworczak R© Kominers R© Akbarpour April 20, 2020 14
![Page 38: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/38.jpg)
Redistribution through Markets
Measures of Inequality
Λj := Ej [vM ]
cross-side inequality if ΛS 6= ΛB
same-side inequality on side j ∈ {B , S} if λj 6≡ Λj
low if λj(r j) ≤ 2Λj ; high otherwise
Dworczak R© Kominers R© Akbarpour April 20, 2020 15
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Redistribution through Markets
Measures of Inequality
Λj := Ej [vM ]
cross-side inequality if ΛS 6= ΛB
same-side inequality on side j ∈ {B , S} if λj 6≡ Λj
low if λj(r j) ≤ 2Λj ; high otherwise
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Redistribution through Markets
Measures of Inequality
Λj := Ej [vM ]
cross-side inequality if ΛS 6= ΛB
same-side inequality on side j ∈ {B , S} if λj 6≡ Λj
low if λj(r j) ≤ 2Λj ; high otherwise
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Redistribution through Markets
The Optimal Seller Price pS
Goal: Acquire Q objects while spending at most R .
maxpS≥G−1
S (Q)
{Q
GS(pS)
∫ pS
rS
λS(r)(pS − r)dGS(r) + ΛS(R − pSQ)
}.
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Redistribution through Markets
The Optimal Seller Price pS
Goal: Acquire Q objects while spending at most R .
maxpS≥G−1
S (Q)
{Q
GS(pS)
∫ pS
rS
λS(r)(pS − r)dGS(r) + ΛS(R − pSQ)
}.
Three effects of pushing pS above pCS :
1 allocative efficiency ↓;2 lump sum transfer R − pSQ ↓;3 money to sellers who trade ↑.
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Redistribution through Markets
The Optimal Seller Price pS
Goal: Acquire Q objects while spending at most R .
maxpS≥G−1
S (Q)
{Q
GS(pS)
∫ pS
rS
λS(r)(pS − r)dGS(r) + ΛS(R − pSQ)
}.
Proposition
When seller same-side inequality is low, pS = pCS is optimal. When
seller same-side inequality is high and Q is low enough, rationing at aprice pS > pC
S is optimal.
Decision to trade always identifies sellers with low rates ofsubstitution (⇒ equity ↑)!
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Redistribution through Markets
The Optimal Seller Price pS
Goal: Acquire Q objects while spending at most R .
maxpS≥G−1
S (Q)
{Q
GS(pS)
∫ pS
rS
λS(r)(pS − r)dGS(r) + ΛS(R − pSQ)
}.
Proposition
When seller same-side inequality is low, pS = pCS is optimal. When
seller same-side inequality is high and Q is low enough, rationing at aprice pS > pC
S is optimal.
Decision to trade always identifies sellers with low rates ofsubstitution (⇒ equity ↑)!
Dworczak R© Kominers R© Akbarpour April 20, 2020 16
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Redistribution through Markets
The Optimal Buyer Price pB
Goal: Allocate Q objects with revenue at least R .
maxpB≤G−1
B (1−Q)
{Q
1− GB(pB)
∫ rB
pB
λB(r)(r − pB)dGB(r) + ΛB(pBQ − R)
}.
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Redistribution through Markets
The Optimal Buyer Price pB
Goal: Allocate Q objects with revenue at least R .
maxpB≤G−1
B (1−Q)
{Q
1− GB(pB)
∫ rB
pB
λB(r)(r − pB)dGB(r) + ΛB(pBQ − R)
}.
Three effects of pushing pB below pCB :
1 allocative efficiency ↓;2 lump sum transfer pBQ − R ↓;3 “money to” buyers who buy ↑.
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Redistribution through Markets
The Optimal Buyer Price pB
Goal: Allocate Q objects with revenue at least R .
maxpB≤G−1
B (1−Q)
{Q
1− GB(pB)
∫ rB
pB
λB(r)(r − pB)dGB(r) + ΛB(pBQ − R)
}.
Proposition
Setting pB = pCB is optimal (“fullstop”).
Decision to trade always identifies buyers with higher rates ofsubstitution (⇒ equity ↓)!
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Redistribution through Markets
The Optimal Buyer Price pB
Goal: Allocate Q objects with revenue at least R .
maxpB≤G−1
B (1−Q)
{Q
1− GB(pB)
∫ rB
pB
λB(r)(r − pB)dGB(r) + ΛB(pBQ − R)
}.
Proposition
Setting pB = pCB is optimal (“fullstop”).
Decision to trade always identifies buyers with higher rates ofsubstitution (⇒ equity ↓)!
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Redistribution through Markets
Multiple Prices?
Single price pS is optimal for seller-side.
Not so for buyers!
Using two prices can improve screening: buy at pHB withprobability 1 or at pLB with probability δ < 1
; “wealthier” buyers choose pHB .
Proposition
When buyer same-side inequality is low, pHB = pCB is optimal. When
buyer same-side inequality is high and Q is large enough, rationing atpLB is optimal.
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Redistribution through Markets
Multiple Prices?
Single price pS is optimal for seller-side.
Not so for buyers!
Using two prices can improve screening: buy at pHB withprobability 1 or at pLB with probability δ < 1
; “wealthier” buyers choose pHB .
Proposition
When buyer same-side inequality is low, pHB = pCB is optimal. When
buyer same-side inequality is high and Q is large enough, rationing atpLB is optimal.
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Redistribution through Markets
Multiple Prices?
Single price pS is optimal for seller-side.
Not so for buyers!
Using two prices can improve screening: buy at pHB withprobability 1 or at pLB with probability δ < 1
; “wealthier” buyers choose pHB .
Proposition
When buyer same-side inequality is low, pHB = pCB is optimal. When
buyer same-side inequality is high and Q is large enough, rationing atpLB is optimal.
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Redistribution through Markets
Multiple Prices?
Single price pS is optimal for seller-side.
Not so for buyers!
Using two prices can improve screening: buy at pHB withprobability 1 or at pLB with probability δ < 1
; “wealthier” buyers choose pHB .
Proposition
When buyer same-side inequality is low, pHB = pCB is optimal. When
buyer same-side inequality is high and Q is large enough, rationing atpLB is optimal.
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Redistribution through Markets
Multiple Prices?
Single price pS is (globally) optimal for seller-side.
Not so for buyers!
Using two prices can improve screening: buy at pHB withprobability 1 or at pLB with probability δ < 1
; “wealthier” buyers choose pHB .
Proposition
When buyer same-side inequality is low, pHB = pCB is (globally)
optimal. When buyer same-side inequality is high and Q is largeenough, rationing at pLB is (globally) optimal.
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Redistribution through Markets
Linking the Two Sides (I)
Proposition
When seller same-side inequality is low, pS = pCS is optimal. When
seller same-side inequality is high and Q is low enough, rationing at aprice pS > pC
S is optimal.
Proposition
When buyer same-side inequality is low, pHB = pCB is optimal. When
buyer same-side inequality is high and Q is large enough, rationing atpLB is optimal.
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Redistribution through Markets
Linking the Two Sides (II) – price wedges
PropositionWhen same-side inequality is low on both sides, it is optimal to setprices such that the market clears, GS(pS) = µ(1− GB(pB)); weredistribute any revenue as a lump-sum payment to the side withhigher average value for money Λj .
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Redistribution through Markets
Linking the Two Sides (III) – rationing
Proposition
If seller same-side inequality is high and ΛS ≥ ΛB , then (if µ is lowenough) it is optimal to ration the sellers by setting a single priceabove the market-clearing level.
PropositionIf buyer same-side inequality is high and buyers’ willingness to pay issufficiently high [relative to the seller’s rates of substitution], then itis optimal to ration the buyers for µ ∈ (1, 1 + ε).
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Redistribution through Markets
Linking the Two Sides (III) – rationing
Proposition
If seller same-side inequality is high and ΛS ≥ ΛB , then (if µ is lowenough) it is optimal to ration the sellers by setting a single priceabove the market-clearing level.
PropositionIf buyer same-side inequality is high and buyers’ willingness to pay issufficiently high [relative to the seller’s rates of substitution], then itis optimal to ration the buyers for µ ∈ (1, 1 + ε).
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Redistribution through Markets
Today – (P)review
How should we design marketplaces in the presence of systematicwealth inequality?
? Model inequality as dispersion in marginal values for money.1,2
⇔ allowing for arbitrary Pareto weights in mechanism design.; We seek to maximize weighted surplus subject to resource,
budget balance, incentive, and individual rationality constraints.
? Optimal Mechanism uses two instruments:
cross-side inequality ⇒ price wedge∗
same-side inequality ⇒ rationing
1Following an approach from public finance.2Implicit assumption: this is a good approximation.
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Redistribution through Markets
Main Result
For the full model ((vK , vM) ∼ f{B,S}), we seek to maximize welfaresubject to incentive compatibility, individual rationality, market-clearing, and budget balance constraints.
TheoremThere exists an optimal mechanism that uses some combination of aprice wedge (with lump-sum transfer) and rationing.
Total number of prices involved is small (4 at most; 3 if nonzerolump-sum transfer).
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Redistribution through Markets
Main Result
For the full model ((vK , vM) ∼ f{B,S}), we seek to maximize welfaresubject to incentive compatibility, individual rationality, market-clearing, and budget balance constraints.
TheoremThere exists an optimal mechanism that uses some combination of aprice wedge (with lump-sum transfer) and rationing.
Total number of prices involved is small (4 at most; 3 if nonzerolump-sum transfer).
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Redistribution through Markets
Main Result
For the full model ((vK , vM) ∼ f{B,S}), we seek to maximize welfaresubject to incentive compatibility, individual rationality, market-clearing, and budget balance constraints.
TheoremThere exists an optimal mechanism that uses some combination of aprice wedge (with lump-sum transfer) and rationing.
Total number of prices involved is small (4 at most; 3 if nonzerolump-sum transfer).
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Redistribution through Markets
Sketch of Proof
1 We transform the problem into maximization over allocationrules alone.
2 We represent a feasible allocation rule as a lottery overquantities ⇒ deterministic outcome in aggregate.
3 Market-clearing ⇔ expected quantity sold to buyers equals theexpected quantity bought from sellers – essentially, aBayes-plausibility constraint.
4 The solution is characterized as a concave closure of theobjective function, subject to a linear constraint.
5 By Caratheodory’s Theorem, the solution is supported on atmost three points ; three-price characterization for each side.(And two constraints are common across the market!)
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Redistribution through Markets
Sketch of Proof
1 We transform the problem into maximization over allocationrules alone.
2 We represent a feasible allocation rule as a lottery overquantities ⇒ deterministic outcome in aggregate.
3 Market-clearing ⇔ expected quantity sold to buyers equals theexpected quantity bought from sellers – essentially, aBayes-plausibility constraint.
4 The solution is characterized as a concave closure of theobjective function, subject to a linear constraint.
5 By Caratheodory’s Theorem, the solution is supported on atmost three points ; three-price characterization for each side.(And two constraints are common across the market!)
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Redistribution through Markets
Sketch of Proof
1 We transform the problem into maximization over allocationrules alone.
2 We represent a feasible allocation rule as a lottery overquantities ⇒ deterministic outcome in aggregate.
3 Market-clearing ⇔ expected quantity sold to buyers equals theexpected quantity bought from sellers – essentially, aBayes-plausibility constraint.
4 The solution is characterized as a concave closure of theobjective function, subject to a linear constraint.
5 By Caratheodory’s Theorem, the solution is supported on atmost three points ; three-price characterization for each side.(And two constraints are common across the market!)
Dworczak R© Kominers R© Akbarpour April 20, 2020 24
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Redistribution through Markets
Sketch of Proof
1 We transform the problem into maximization over allocationrules alone.
2 We represent a feasible allocation rule as a lottery overquantities ⇒ deterministic outcome in aggregate.
3 Market-clearing ⇔ expected quantity sold to buyers equals theexpected quantity bought from sellers – essentially, aBayes-plausibility constraint.
4 The solution is characterized as a concave closure of theobjective function, subject to a linear constraint.
5 By Caratheodory’s Theorem, the solution is supported on atmost three points ; three-price characterization for each side.(And two constraints are common across the market!)
Dworczak R© Kominers R© Akbarpour April 20, 2020 24
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Redistribution through Markets
Sketch of Proof
1 We transform the problem into maximization over allocationrules alone.
2 We represent a feasible allocation rule as a lottery overquantities ⇒ deterministic outcome in aggregate.
3 Market-clearing ⇔ expected quantity sold to buyers equals theexpected quantity bought from sellers – essentially, aBayes-plausibility constraint.
4 The solution is characterized as a concave closure of theobjective function, subject to a linear constraint.
5 By Caratheodory’s Theorem, the solution is supported on atmost three points ; three-price characterization for each side.(And two constraints are common across the market!)
Dworczak R© Kominers R© Akbarpour April 20, 2020 24
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Redistribution through Markets
When to use each instrument? (modulo reg. conditions)
Cross-side inequality (ΛB 6= ΛS) ; price wedge.
; moves money to the poorer side of the market.N.B. Drawback: Each seller receives the same lump-sum transfer
regardless of how much she contributes to social welfare.
High seller-side inequality ; rationing.
; shifts more money to the sellers who are most eager to trade –identifies the “poorest.”
High buyer-side inequality + large amount of trade ; rationingwith multiple prices.
N.B. The “poorest” buyers are those that are least able to trade!; Rationing at a single price helps richer buyers more than poorer.
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Redistribution through Markets
When to use each instrument? (modulo reg. conditions)
Cross-side inequality (ΛB 6= ΛS) ; price wedge.
; moves money to the poorer side of the market.N.B. Drawback: Each seller receives the same lump-sum transfer
regardless of how much she contributes to social welfare.
High seller-side inequality ; rationing.
; shifts more money to the sellers who are most eager to trade –identifies the “poorest.”
High buyer-side inequality + large amount of trade ; rationingwith multiple prices.
N.B. The “poorest” buyers are those that are least able to trade!; Rationing at a single price helps richer buyers more than poorer.
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Redistribution through Markets
When to use each instrument? (modulo reg. conditions)
Cross-side inequality (ΛB 6= ΛS) ; price wedge.
; moves money to the poorer side of the market.N.B. Drawback: Each seller receives the same lump-sum transfer
regardless of how much she contributes to social welfare.
High seller-side inequality ; rationing.
; shifts more money to the sellers who are most eager to trade –identifies the “poorest.”
High buyer-side inequality + large amount of trade ; rationingwith multiple prices.
N.B. The “poorest” buyers are those that are least able to trade!; Rationing at a single price helps richer buyers more than poorer.
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 28
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 29
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 30
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 31
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 32
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 33
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 34
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 35
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Redistribution through Markets
Optimal Market Design under Wealth Inequality
Dworczak R© Kominers R© Akbarpour April 20, 2020 36
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Redistribution through Markets
Coming Soon: New Paper!
Dworczak R© Kominers R© Akbarpour April 20, 2020 37
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Redistribution through Markets
Coming Soon: New Paper!
We introduce quality q; rate of substitution r now characterizestrade-off between q and money.
Agents also have a label representing observable characteristics(linked to r and/or Pareto weights).
We can again identify an optimal mechanism (even with apartial revenue objective).
Assortative matching on r × q under revenue maximization, orwhen lump-sum transfer especially valuable.Random matching when poorer agents also value quality.More generally, regions of assortative and random matching.
Surprising(?) insight: Degree of assortativeness may benon-monotone in welfare weight on “poorer” agents.
Why? Past some point, revenue is a better way to redistribute!
Dworczak R© Kominers R© Akbarpour April 20, 2020 38
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Redistribution through Markets
Coming Soon: New Paper!
We introduce quality q; rate of substitution r now characterizestrade-off between q and money.
Agents also have a label representing observable characteristics(linked to r and/or Pareto weights).
We can again identify an optimal mechanism (even with apartial revenue objective).
Assortative matching on r × q under revenue maximization, orwhen lump-sum transfer especially valuable.Random matching when poorer agents also value quality.More generally, regions of assortative and random matching.
Surprising(?) insight: Degree of assortativeness may benon-monotone in welfare weight on “poorer” agents.
Why? Past some point, revenue is a better way to redistribute!
Dworczak R© Kominers R© Akbarpour April 20, 2020 38
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Redistribution through Markets
Coming Soon: New Paper!
We introduce quality q; rate of substitution r now characterizestrade-off between q and money.
Agents also have a label representing observable characteristics(linked to r and/or Pareto weights).
We can again identify an optimal mechanism (even with apartial revenue objective).
Assortative matching on r × q under revenue maximization, orwhen lump-sum transfer especially valuable.Random matching when poorer agents also value quality.
More generally, regions of assortative and random matching.
Surprising(?) insight: Degree of assortativeness may benon-monotone in welfare weight on “poorer” agents.
Why? Past some point, revenue is a better way to redistribute!
Dworczak R© Kominers R© Akbarpour April 20, 2020 38
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Redistribution through Markets
Coming Soon: New Paper!
We introduce quality q; rate of substitution r now characterizestrade-off between q and money.
Agents also have a label representing observable characteristics(linked to r and/or Pareto weights).
We can again identify an optimal mechanism (even with apartial revenue objective).
Assortative matching on r × q under revenue maximization, orwhen lump-sum transfer especially valuable.Random matching when poorer agents also value quality.More generally, regions of assortative and random matching.
Surprising(?) insight: Degree of assortativeness may benon-monotone in welfare weight on “poorer” agents.
Why? Past some point, revenue is a better way to redistribute!
Dworczak R© Kominers R© Akbarpour April 20, 2020 38
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Redistribution through Markets
Coming Soon: New Paper!
We introduce quality q; rate of substitution r now characterizestrade-off between q and money.
Agents also have a label representing observable characteristics(linked to r and/or Pareto weights).
We can again identify an optimal mechanism (even with apartial revenue objective).
Assortative matching on r × q under revenue maximization, orwhen lump-sum transfer especially valuable.Random matching when poorer agents also value quality.More generally, regions of assortative and random matching.
Surprising(?) insight: Degree of assortativeness may benon-monotone in welfare weight on “poorer” agents.
Why? Past some point, revenue is a better way to redistribute!
Dworczak R© Kominers R© Akbarpour April 20, 2020 38
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Redistribution through Markets
Coming Soon: New Paper!
We introduce quality q; rate of substitution r now characterizestrade-off between q and money.
Agents also have a label representing observable characteristics(linked to r and/or Pareto weights).
We can again identify an optimal mechanism (even with apartial revenue objective).
Assortative matching on r × q under revenue maximization, orwhen lump-sum transfer especially valuable.Random matching when poorer agents also value quality.More generally, regions of assortative and random matching.
Surprising(?) insight: Degree of assortativeness may benon-monotone in welfare weight on “poorer” agents.
Why? Past some point, revenue is a better way to redistribute!
Dworczak R© Kominers R© Akbarpour April 20, 2020 38
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Redistribution through Markets
Policy
Dworczak R© Kominers R© Akbarpour April 20, 2020 39
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Redistribution through Markets
Policy
Dworczak R© Kominers R© Akbarpour April 20, 2020 39
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Redistribution through Markets
Wrap
Micro “market design” approach to redistribution.
If you regulate/control an individual market, it may be worthdistorting allocative efficiency to improve equity.
Rent control, price controls in kidney markets, and similar mightbe optimal responses to underlying inequality.
(Complements macro approaches from PF!)
cross-side ineq. ⇒ price wedge + lump-sum redistributionsame-side ineq. ⇒ rationing
; Real opportunity for this type of design with the rise of newmarketplace businesses.
Framework for “Inequality-Aware” Marketplace Design
(vK , vM) ; “Macro-Founded” Micro
Dworczak R© Kominers R© Akbarpour April 20, 2020 40
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Redistribution through Markets
Wrap
Micro “market design” approach to redistribution.If you regulate/control an individual market, it may be worthdistorting allocative efficiency to improve equity.
Rent control, price controls in kidney markets, and similar mightbe optimal responses to underlying inequality.
(Complements macro approaches from PF!)
cross-side ineq. ⇒ price wedge + lump-sum redistributionsame-side ineq. ⇒ rationing
; Real opportunity for this type of design with the rise of newmarketplace businesses.
Framework for “Inequality-Aware” Marketplace Design
(vK , vM) ; “Macro-Founded” Micro
Dworczak R© Kominers R© Akbarpour April 20, 2020 40
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Redistribution through Markets
Wrap
Micro “market design” approach to redistribution.If you regulate/control an individual market, it may be worthdistorting allocative efficiency to improve equity.
Rent control, price controls in kidney markets, and similar mightbe optimal responses to underlying inequality.
(Complements macro approaches from PF!)
cross-side ineq. ⇒ price wedge + lump-sum redistributionsame-side ineq. ⇒ rationing
; Real opportunity for this type of design with the rise of newmarketplace businesses.
Framework for “Inequality-Aware” Marketplace Design
(vK , vM) ; “Macro-Founded” Micro
Dworczak R© Kominers R© Akbarpour April 20, 2020 40
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Redistribution through Markets
Wrap
Micro “market design” approach to redistribution.If you regulate/control an individual market, it may be worthdistorting allocative efficiency to improve equity.
Rent control, price controls in kidney markets, and similar mightbe optimal responses to underlying inequality.
(Complements macro approaches from PF!)
cross-side ineq. ⇒ price wedge + lump-sum redistributionsame-side ineq. ⇒ rationing
; Real opportunity for this type of design with the rise of newmarketplace businesses.
Framework for “Inequality-Aware” Marketplace Design
(vK , vM) ; “Macro-Founded” Micro
Dworczak R© Kominers R© Akbarpour April 20, 2020 40
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Redistribution through Markets
Wrap
Micro “market design” approach to redistribution.If you regulate/control an individual market, it may be worthdistorting allocative efficiency to improve equity.
Rent control, price controls in kidney markets, and similar mightbe optimal responses to underlying inequality.
(Complements macro approaches from PF!)
cross-side ineq. ⇒ price wedge + lump-sum redistributionsame-side ineq. ⇒ rationing
; Real opportunity for this type of design with the rise of newmarketplace businesses.
Framework for “Inequality-Aware” Marketplace Design
(vK , vM) ; “Macro-Founded” Micro
Dworczak R© Kominers R© Akbarpour April 20, 2020 40
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Redistribution through Markets
Wrap
Micro “market design” approach to redistribution.If you regulate/control an individual market, it may be worthdistorting allocative efficiency to improve equity.
Rent control, price controls in kidney markets, and similar mightbe optimal responses to underlying inequality.
(Complements macro approaches from PF!)
cross-side ineq. ⇒ price wedge + lump-sum redistributionsame-side ineq. ⇒ rationing
; Real opportunity for this type of design with the rise of newmarketplace businesses.
Framework for “Inequality-Aware” Marketplace Design
(vK , vM) ; “Macro-Founded” Micro
Dworczak R© Kominers R© Akbarpour April 20, 2020 40
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Redistribution through Markets
Wrap
Micro “market design” approach to redistribution.If you regulate/control an individual market, it may be worthdistorting allocative efficiency to improve equity.
Rent control, price controls in kidney markets, and similar mightbe optimal responses to underlying inequality.
(Complements macro approaches from PF!)
cross-side ineq. ⇒ price wedge + lump-sum redistributionsame-side ineq. ⇒ rationing
; Real opportunity for this type of design with the rise of newmarketplace businesses.
Framework for “Inequality-Aware” Marketplace Design
(vK , vM) ; “Macro-Founded” Micro
\end{talk}Dworczak R© Kominers R© Akbarpour April 20, 2020 40
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Redistribution Extra Slides
Main Argument (I)
; Maximize over HS , HB ∈ ∆([0, 1]), UB , US ≥ 0
µ
∫ 1
0
φαB(q)dHB(q) +
∫ 1
0
φαS(q)dHS(q)
subject to
µ
∫ 1
0
qdHB(q) =
∫ 1
0
qdHS(q).
Dworczak R© Kominers R© Akbarpour April 20, 2020 41
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Redistribution Extra Slides
Main Argument (II)
; Maximize over HS , HB ∈ ∆([0, 1]), UB , US ≥ 0
µ
∫ 1
0
φαB(q)dHB(q)
+
∫ 1
0
[∫ G−1S (q)
0
(ΠΛS(r)− αJS(r))gS(r)dr + (ΛS − α)US
]dHS(q)
,
where Λj =∫λj(r)dGj(r) is the average weight of j and
ΠΛB(r) :=
∫ 1
rλB(r)dGB(r)
gB(r), ΠΛ
S(r) :=
∫ r
0λS(r)dGS(r)
gS(r).
Dworczak R© Kominers R© Akbarpour April 20, 2020 42
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Redistribution Extra Slides
Main Argument (II)
; Maximize over HS , HB ∈ ∆([0, 1]), UB , US ≥ 0
µ
∫ 1
0
φαB(q)dHB(q)
+
∫ 1
0
[∫ G−1S (q)
0
(ΠΛS(r)− αJS(r))gS(r)dr + (ΛS − α)US
]dHS(q),
where Λj =∫λj(r)dGj(r) is the average weight of j and
ΠΛB(r) :=
∫ 1
rλB(r)dGB(r)
gB(r), ΠΛ
S(r) :=
∫ r
0λS(r)dGS(r)
gS(r).
Dworczak R© Kominers R© Akbarpour April 20, 2020 42
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Redistribution Extra Slides
Main Argument (II)
; Maximize over HS , HB ∈ ∆([0, 1]), UB , US ≥ 0
µ
∫ 1
0
φαB(q)dHB(q)
+
∫ 1
0
[∫ G−1S (q)
0
(ΠΛS(r)− αJS(r))gS(r)dr + (ΛS − α)US
]dHS(q),
where Λj =∫λj(r)dGj(r) is the average weight of j and
ΠΛB(r) :=
∫ 1
r1dGB(r)
gB(r), ΠΛ
S(r) :=
∫ r
01dGS(r)
gS(r).
Dworczak R© Kominers R© Akbarpour April 20, 2020 42
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Redistribution Extra Slides
Main Argument (II)
; Maximize over HS , HB ∈ ∆([0, 1]), UB , US ≥ 0
µ
∫ 1
0
φαB(q)dHB(q)
+
∫ 1
0
[∫ G−1S (q)
0
(ΠΛS(r)− αJS(r))gS(r)dr + (ΛS − α)US
]dHS(q),
where Λj =∫λj(r)dGj(r) is the average weight of j and
ΠΛB(r) :=
1− GB(r)
gB(r), ΠΛ
S(r) :=GS(r)
gS(r).
Dworczak R© Kominers R© Akbarpour April 20, 2020 42
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Redistribution Extra Slides
Main Argument (III)
; Maximize over HS , HB ∈ ∆([0, 1]), UB , US ≥ 0
µ
∫ 1
0
φαB(q)dHB(q) +
∫ 1
0
φαS(q)dHS(q)
subject to
µ
∫ 1
0
qdHB(q) =
∫ 1
0
qdHS(q).
Dworczak R© Kominers R© Akbarpour April 20, 2020 43
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Redistribution Extra Slides
Main Argument (III)
; Maximize over HS , HB ∈ ∆([0, 1]), UB , US ≥ 0
µ
∫ 1
0
φαB(q)dHB(q) +
∫ 1
0
φαS(q)dHS(q)
subject to
Q =
∫ 1
0
qdHS(q).
Dworczak R© Kominers R© Akbarpour April 20, 2020 44
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Redistribution Extra Slides
Main Argument (IV)
Find a probability distribution over q ∈ [0, 1] with mean Q thatmaximizes the expectation of φαS(q)
Dworczak R© Kominers R© Akbarpour April 20, 2020 45
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Redistribution Extra Slides
Main Argument (IV)
Find a probability distribution over q ∈ [0, 1] with mean Q thatmaximizes the expectation of φαS(q)
Dworczak R© Kominers R© Akbarpour April 20, 2020 45
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Redistribution Extra Slides
Main Argument (IV)
Find a probability distribution over q ∈ [0, 1] with mean Q thatmaximizes the expectation of φαS(q)
Dworczak R© Kominers R© Akbarpour April 20, 2020 45
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Redistribution Extra Slides
Main Argument (IV)
Find a probability distribution over q ∈ [0, 1] with mean Q thatmaximizes the expectation of φαS(q)
Dworczak R© Kominers R© Akbarpour April 20, 2020 45
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Redistribution Extra Slides
Main Argument (V)
; Maximize over Q?, UB , US ≥ 0
µ co(φαB)(Q?/µ) + co(φαS)(Q?).
Last Step: Caratheodory’s Theorem
Bonus Step: Linear Algebra eliminates some constraints
; four-price characterization
Dworczak R© Kominers R© Akbarpour April 20, 2020 46
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Redistribution Extra Slides
Main Argument (V)
; Maximize over Q?, UB , US ≥ 0
µ co(φαB)(Q?/µ) + co(φαS)(Q?).
Last Step: Caratheodory’s Theorem
Bonus Step: Linear Algebra eliminates some constraints
; four-price characterization
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Redistribution Extra Slides
Main Argument (V)
; Maximize over Q?, UB , US ≥ 0
µ co(φαB)(Q?/µ) + co(φαS)(Q?).
Last Step: Caratheodory’s Theorem
Bonus Step: Linear Algebra eliminates some constraints
; four-price characterization
Dworczak R© Kominers R© Akbarpour April 20, 2020 46
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Redistribution Extra Slides
What if direct redistribution is not feasible?
Lump-sum transfers give agents a constant amount of money even ifthey do not trade.
If we consider a model with entry to the market, this mightundermine budget balance.
It might also be problematic if the designer cannot distinguishbuyers from sellers.
Assumption (“No Free Lunch”)
The participation constraints of the lowest-utility type of buyersrB = 0, and of the lowest-utility type sellers rS = 1 both bind.
; rules out price wedges
; Rationing can emerge even if there is no same-side inequality(provided that cross-side inequality is sufficiently large).
Dworczak R© Kominers R© Akbarpour April 20, 2020 47
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Redistribution Extra Slides
What if direct redistribution is not feasible?
Lump-sum transfers give agents a constant amount of money even ifthey do not trade.
If we consider a model with entry to the market, this mightundermine budget balance.
It might also be problematic if the designer cannot distinguishbuyers from sellers.
Assumption (“No Free Lunch”)
The participation constraints of the lowest-utility type of buyersrB = 0, and of the lowest-utility type sellers rS = 1 both bind.
; rules out price wedges
; Rationing can emerge even if there is no same-side inequality(provided that cross-side inequality is sufficiently large).
Dworczak R© Kominers R© Akbarpour April 20, 2020 47
![Page 113: Redistribution through Marketsvirtual-md-seminar.com/slides/KominersSlides.pdf · Today { Preview How should we design marketplaces in the presence of systematic wealth inequality??](https://reader035.vdocuments.mx/reader035/viewer/2022070922/5fba893992128d01d1186c52/html5/thumbnails/113.jpg)
Redistribution Extra Slides
What if direct redistribution is not feasible?
Lump-sum transfers give agents a constant amount of money even ifthey do not trade.
If we consider a model with entry to the market, this mightundermine budget balance.
It might also be problematic if the designer cannot distinguishbuyers from sellers.
Assumption (“No Free Lunch”)
The participation constraints of the lowest-utility type of buyersrB = 0, and of the lowest-utility type sellers rS = 1 both bind.
; rules out price wedges
; Rationing can emerge even if there is no same-side inequality(provided that cross-side inequality is sufficiently large).
Dworczak R© Kominers R© Akbarpour April 20, 2020 47
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Redistribution Extra Slides
Model – Welfare
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Redistribution Extra Slides
Index
Preview
Intuition?
Model (Pareto)
Simple Mechanisms
Optimal Mechanism
Proof Sketch
Designing Under Inequality
New Paper
NFL
Policy
Wrap (wrapped)
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