Job Market Paper

Abstract: I study a repeated mechanism design problem where a revenue-maximizing monopolist sells a fixed number of service slots to randomly arriving buyers with private values and increasing exit rates. In addition to characterizing the fully optimal mechanism, I study the optimal mechanisms in two restricted classes. First, the pure calendar mechanism, where the seller allocates future service dates instead of general promises. The unique optimal pure calendar mechanism is characterized in terms of the opportunity costs of allocating additional service slots. Second, I analyze the waiting list mechanism, where promises of delayed service can depend on future arrivals, but the seller cannot discriminate among buyers who are offered the same position in the waiting list. Both the waiting list and the fully optimal mechanism are implemented by non-standard auctions with a scoring rule where the distance between buyers' bids affects the allocation. A novel property of these auctions is that for buyers it is better to win by a close margin and it is worse to lose by a close margin. Finally, I model partial commitment power as a penalty that the seller has to pay when forfeiting a promise. All the results are given for general partial commitment and therefore include full commitment and no commitment as special cases.

Work in Progress

Penny Auctions are Unpredictable [Show abstract]

Abstract: I study a new form of auctions called penny auctions. In these auctions every bid increases the price by a small amount, but it is costly to place a bid. The auction ends if more than some predetermined amount of time has passed since the last bid. There are many websites that implement this auction format and the outcomes are often surprising. Even selling cash can give the seller an order of magnitude higher or lower revenue than the nominal value. Sometimes the winner of the auction pays very little compared to many of the losers at the same auction. The unexpected outcomes have led to the accusations that the penny auction sites are either scams or gambling or both.

I propose a tractable model of penny auctions and show that the high variance of outcomes is a property of the auction format. Even absent of any randomizations, the equilibria in penny auctions are close to lotteries from the buyers' perspective.

Overbooking (with Jeff Ely and Dan Garrett) [Show abstract]

Abstract: We consider optimal pricing policies for airlines when passengers are uncertain at the time of ticketing of their eventual realized willingness to pay for air travel. Auctions at the time of departure efficiently allocate space and a profit maximizing airline can capitalize on these gains by overbooking flights and repurchasing excess tickets from those passengers whose realized value is low. Nevertheless profit maximization entails distortions away from the efficient allocation. In order to encourage early booking, passengers who purchase late are disadvantaged. In order to capture the information rents of passengers with high expected values, ticket repurchases at the time of departure are at a subsidized price, sometimes leading to unused capacity.

Strategic linking (with Marit Hinnosaar) [Show abstract]

Abstract: We present a model of directed network formation, where a fixed number of agents sell information to a continuum of customers. An agent considering adding a link to another agent faces a trade-off: additional links increase the value to each customer, but also drive some of the customers away to the linked agent. We characterize efficient networks and equilibrium networks. We show conditions under which there are efficient equilibria and argue that in general there is not enough linking in equilibria. We consider some specific applications of the model, including linking on websites, medical records sharing by hospitals and citations in research papers.

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