This paper examines crowdfunding of a risky, constant-returns project. The crowdfunder chooses a threshold and interest rate. These jointly determine profit and welfare outcomes by influencing investors’ decisions to acquire information and to bid and by aggregating the information their bids reveal into a project funding decision. A higher threshold funds fewer projects but, fixing investor strategies, raises the ratio of good to bad quality among those that get funded by a factor we call the “crowdblessing.” At the same time, raising the threshold, or the interest rate, reduces incentives to acquire and use private information. Optimal design trades off crowdblessing against investment scale. Surprisingly, profit-maximizers sometimes induce excessive information acquisition to limit investor rent. In our comparative statics, information acquisition falls with the cost of information and with prior optimism but precision has an ambiguous impact. Costly information reduces welfare but may raise profits by facilitating rent-extraction.
Auctioning access rights to private providers through competitive tendering has become a central instrument for governments to regulate markets and public services. While efficient in allocating licenses, such auctions may generate monopolistic market structures with adverse effects on consumer welfare. We experimentally evaluate two policy interventions to mitigate these outcomes: introducing post-tender competition and imposing minimum production obligations on winning firms. Our results show that performance obligations substantially improve welfare by raising output and consumer surplus, albeit at the cost of reduced auction revenue. Extending the design with additional treatments, we demonstrate that genuine competition yields even stronger welfare gains. These findings highlight a trade-off between government revenue and consumer welfare in auction design. We conclude that while obligations are an effective tool to counter monopoly distortions, sustaining competition remains essential to maximise total surplus at the market level.
This paper introduces the experience-based pairwise comparison dynamics—a deterministic evolutionary process in which each agent, upon having the opportunity to revise her strategy, compares her realized payoff with that of another agent. The key departure from standard dynamics is that agents compare realized payoffs from actual matches rather than expected payoffs of strategies. Thus, agents need not know the population distribution of strategies and compute expected payoffs. In a uniformly random pairwise matching environment, this dynamic process is markedly more sensitive to the cardinality of the underlying game’s payoff structure than standard dynamics based on comparing the expected payoffs of different strategies. This heightened sensitivity yields equilibrium selection results in coordination games without the long waiting times typical of stochastic stability models. We further show that the strictly dominated strategy in the prisoner’s dilemma can survive.
We define and study obvious strategy-proofness with respect to a partition of the set of agents. This novel concept encompasses strategy-proofness as a special case when the partition is the coarsest one, and obvious strategy-proofness when the partition is the finest one. For any intermediate partition, the concept falls between these two extremes. We establish two general properties of this new concept and apply it to the two-sided matching model with one strategic side.
We investigate the impact of rising inequality on social instability through a novel multi-period laboratory experiment. In each period, members of two groups are randomly matched to play a battle of the sexes game, in which payoffs are either zero for both or positive but unequal. At the beginning of the game, the implied payoff inequality is low but, under some treatments, it increases over time. While under low initial inequality, unequal conventions – where one group is systematically better off – tend to emerge, increasing inequality causes destabilization. This is initiated by the group disadvantaged by the unequal convention and is particularly pronounced when not only the relative, but also the absolute position of the disadvantaged group is worsening. These findings are consistent with a simple model incorporating disadvantageous inequality aversion. Finally, we show that history matters; responses to current inequality depend on past experiences of inequality and stability.
