Work in Progress
People in positions with formal authority are often expected to make better decisions
and fewer mistakes, and therefore their opinions and contributions are given higher
weight. This can be an equilibrium effect: people may be selected to the positions
with formal authority because of their knowledge or skills. But respect for authority
could also be a behavioral bias. These two explanations have very different implications.
Our goal is to measure the authority bias, which we define as the difference between
perceived and true quality of contributions by people with formal authority. Identifying
the authority bias is complicated by the fact that almost always the observable outcomes
include both explanations. We propose a method of identifying the authority bias that
allows us to separate it from the equilibrium effect. We estimate the authority bias
using a novel dataset from Wikipedia. In Wikipedia, editors in high-rank positions are
treated differently, and there is high regional variation. Our preliminary estimation
results indicate that the authority bias does not exist in Western Europe, but is large in
Eastern Europe. The authority bias more than doubles the time needed for the mistakes
made by high-rank editors in Eastern Europe to be corrected.
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.
We consider optimal pricing policies for airlines when passengers are
uncertain at the time of ticketing of their eventual 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. Under standard regularity conditions we show that the
optimal mechanism can be implemented by a modified double auction.
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.
I study an auction format 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. Outcomes of real penny auctions are 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 randomization, the equilibria in penny auctions are close to lotteries from the buyers' perspective.