Economics - Research Publications

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Type: Journal Article × Start date: 2005 × Author: Loertscher, Simon ×

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Now showing 1 - 10 of 17
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    When Walras meets Vickrey
    Delacrétaz, D ; Loertscher, S ; Mezzetti, C (The Econometric Society, 2022-11)
    We consider general asset market environments in which agents with quasilinear payoffs are endowed with objects and have demands for other agents' objects. We show that if all agents have a maximum demand of one object and are endowed with at most one object, the VCG transfer of each agent is equal to the largest net Walrasian price of this agent. Consequently, the VCG deficit is equal to the sum of the largest net Walrasian prices over all agents. Generally, whenever Walrasian prices exist, the sum of the largest net Walrasian prices is a nonnegative lower bound for the deficit, implying that no dominant‐strategy mechanism runs a budget surplus while respecting agents' ex post individual rationality constraints.
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    Bilateral Trade with Multiunit Demand and Supply
    Loertscher, S ; Marx, LM (INFORMS, 2023-02)
    We study a bilateral trade problem with multiunit demand and supply and one-dimensional private information. Each agent geometrically discounts additional units by a constant factor. We show that when goods are complements, the incentive problem—measured as the ratio of second-best to first-best social surplus—becomes less severe as the degree of complementarity increases. In contrast, if goods are substitutes and each agent’s distribution exhibits linear virtual types, then this ratio is a constant. If the bilateral trade setup arises from prior vertical integration between a buyer and a supplier, with the vertically integrated firm being a buyer facing an independent supplier, then the ratio of second-best to first-best social surplus is, in general, not monotone in the degree of complementarity when products are substitutes and is increasing when products are complements. Extensions to profit maximization by a market maker and a discrete public good problem show that the broad insight that complementarity of goods mitigates the incentive problem generalizes to these settings. This paper was accepted by Joshua Gans, business strategy. Funding: Financial support from the Samuel and June Hordern Endowment, the University of Melbourne Faculty of Business & Economics [Eminent Research Scholar Grant], and the Australian Research Council [Grant DP200103574] is acknowledged.
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    Double Markups, Information, and Vertical Mergers
    Loertscher, S ; Marx, LM (SAGE Publications, 2022-09-01)
    In vertical contracting models with complete information and linear prices, double markups that arise between independent firms provide an efficiency rationale for vertical mergers since these eliminate double markups (EDM). However, the double markups vanish even without vertical integration if the firms are allowed to use two-part tariffs. Hence, the efficiency rationale for vertical mergers in models of complete information requires restrictions on the contracts that firms can use. In a sense, with complete information, two-part tariffs are simply too powerful. If instead one allows incomplete information and removes the restriction on contract forms, then vertical mergers continue to have an effect that is analogous to EDM, but they also have the potential to affect the overall efficiency of the market to the detriment of society. Consequently, the social surplus effects of vertical integration depend on the underlying market structure, and vertical mergers are, in and of themselves, neither good nor bad. We illustrate through an example that with incomplete information, the private benefits from vertical integration tend to be excessive; that is, vertical mergers remain profitable even when they are socially harmful.
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    Monopoly Pricing, Optimal Randomization, and Resale
    Loertscher, S ; Muir, EV (UNIV CHICAGO PRESS, 2022-03-01)
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    Asymptotically optimal prior-free asset market mechanisms
    Loertscher, S ; Marx, LM (Elsevier BV, 2023-01-01)
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    To sell public or private goods
    Loertscher, S ; Marx, LM (SPRINGER HEIDELBERG, 2022-09)
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    A dominant strategy double clock auction with estimation-based tatonnement
    Loertscher, S ; Mezzetti, C (ECONOMETRIC SOCIETY, 2021-07)
    The price mechanism is fundamental to economics but difficult to reconcile with incentive compatibility and individual rationality. We introduce a double clock auction for a homogeneous good market with multidimensional private information and multiunit traders that is deficit‐free, ex post individually rational, constrained efficient, and makes sincere bidding a dominant strategy equilibrium. Under a weak dependence and an identifiability condition, our double clock auction is also asymptotically efficient. Asymptotic efficiency is achieved by estimating demand and supply using information from the bids of traders that have dropped out and following a tâtonnement process that adjusts the clock prices based on the estimates.
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    Road to recovery: Managing an epidemic
    Loertscher, S ; Muir, E (ELSEVIER SCIENCE SA, 2021-03)
    Without widespread immunization, the road to recovery from the current COVID-19 lockdowns will optimally follow a path that finds the difficult balance between the social and economic benefits of liberty and the toll from the disease. We provide an approach that combines epidemiology and economic models, taking as given that the maximum capacity of the healthcare system imposes a constraint that must not be exceeded. Treating the transmission rate as a decreasing function of the severity of the lockdown, we first determine the minimal lockdown that satisfies this constraint using an epidemiology model with a homogeneous population to predict future demand for healthcare. Allowing for a heterogeneous population, we then derive the optimal lockdown policy under the assumption of homogeneous mixing and show that it is characterized by a bang-bang solution. Possibilities such as the capacity of the healthcare system increasing or a vaccine arriving at some point in the future do not substantively impact the dynamically optimal policy until such an event actually occurs.
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    Two-sided allocation problems, decomposability, and the impossibility of efficient trade
    Delacrétaz, D ; Loertscher, S ; Marx, LM ; Wilkening, T (Elsevier, 2019-01-01)
    Previous literature has shown that private information is a transaction cost that prevents efficient reallocation in two-sided setups with bilateral trade or homogeneous goods. We derive conditions under which the impossibility of efficient trade extends to rich environments in which buyers and sellers have multi-dimensional private types, accommodating many-to-many trades and heterogeneous objects. If agents can be decomposed into unit constituents, the allocation problem can be represented as an assignment game and impossibility obtains through a generalization of Shapley's (1962) result that buyers and sellers are complements. We introduce a general family of payoff functions that ensures decomposability and thus impossibility.