Computational Explorations of Information and Mechanism Design in Markets

Markets or platforms assemble multiple selfishly-motivated and strategic agents. The outcomes of such agent interactions depend heavily on the rules, regulations, and norms of the platform, as well as the information available to agents. This thesis investigates the design and analysis of mechanisms and information structures through the ``computational lens\u27\u27 in both static and dynamic settings. It both addresses the outcome of single platforms and fills a gap in the study of the dynamics of multiple platform interactions. In static market settings, we are particularly interested in the role of information, because mechanisms are harder to change than the information available to participants. We approach information design through specific examples, i.e., matching markets and auction markets. First, in matching markets, we study the situation where the matching is preceded by a costly interviewing stage in which firms acquire information about the qualities of candidates. We focus on the impact of the signals of quality available prior to the interviewing stage. We show that more ``commonality\u27\u27 in the quality of information can be harmful, yielding fewer matches. Second, in auction markets, we design an information environment for revenue enhancement in a sealed-bid second price auction. Much of the previous literature has focused on signal design in settings where bidders are symmetrically informed, or on the design of optimal mechanisms under fixed information structures. Here, we provide new theoretical insights for complex situations like corporate mergers, where the sender of the signal has the opportunity to communicate in different ways to different receivers. Next, in dynamic markets, we focus on two dimensions: (1) the effects of different market-clearing rules on market outcomes and (2) the dynamics of multiple platform interactions. Considering both dimensions, we investigate two important real-world dynamic markets: kidney exchange and financial markets. Specifically, in kidney exchange, we analyze the performance of different market-clearing algorithms and design a competing-market model to quantify the social welfare loss caused by market competition and exchange fragmentation. Here, we present the first analysis of equilibrium behavior in these dynamic competing matching market systems, from the viewpoints of both agents and markets. To improve the performance of kidney exchange in terms of both social welfare and individual utility, we analyze the benefit of convincing directed donation pairs to participate in paired kidney exchange, measured in terms of long-term graft survival. We provide the first empirical evidence that including compatible pairs dramatically benefits both social welfare and individual outcomes. For financial markets, in the debate over high frequency trading, the frequent call (Call) mechanism has recently received considerable attention as a proposal for replacing the continuous double auction (CDA) mechanisms that currently run most financial markets. We examine agents\u27 profit under CDA and frequent call auctions in a dynamic environment. We design an agent-based model to study the competition between these two market policies and show that CALL markets can drive trade away from CDAs. The results help to inform this very important debate

Emotions and cognitive workload in economic decision processes - A NeuroIS Approach

The influence of cognitive and emotions on decision processes have been recently highlighted. Emotions interplay with the process of cognition, and determine decision processes. In this work, the role of external and internal influences on economic decision processes are studied. A NeuroIS method is applied for measuring emotions and cognitive workload. The lack of a suitable experimental platform for performing NeuroIS studies was recognized and the platform Brownie was developed and evaluated

Inter-organizational Interoperability through integration of Multiagent, Web Service, and Semantic Web Technologies

This paper presents a software architecture for inter-organizational multiagent systems. The architecture integrates Web service technology into multiagent systems to overcome the technical interoperability problem of current multiagent systems in the fast growing service-oriented environments. We integrate Semantic Web technology to make multiagent systems semantically interoperable. We address the problem of interoperability regarding interfaces, messaging protocols, data exchanged, and security whilst considering a dynamic e-business environment. The proposed architecture enables service virtualization, secure service access across organizational boundaries, service-to-agent communication, and OWL reasoning within agents

Collaborative and adaptive supply chain planning

Dans le contexte industriel d'aujourd'hui, la compétitivité est fortement liée à la performance de la chaîne d'approvisionnement. En d'autres termes, il est essentiel que les unités d'affaires de la chaîne collaborent pour coordonner efficacement leurs activités de production, de façon a produire et livrer les produits à temps, à un coût raisonnable. Pour atteindre cet objectif, nous croyons qu'il est nécessaire que les entreprises adaptent leurs stratégies de planification, que nous appelons comportements, aux différentes situations auxquelles elles font face. En ayant une connaissance de l'impact de leurs comportements de planification sur la performance de la chaîne d'approvisionnement, les entreprises peuvent alors adapter leur comportement plutôt que d'utiliser toujours le même. Cette thèse de doctorat porte sur l'adaptation des comportements de planification des membres d'une même chaîne d'approvisionnement. Chaque membre pouvant choisir un comportement différent et toutes les combinaisons de ces comportements ayant potentiellement un impact sur la performance globale, il est difficile de connaître à l'avance l'ensemble des comportements à adopter pour améliorer cette performance. Il devient alors intéressant de simuler les différentes combinaisons de comportements dans différentes situations et d'évaluer les performances de chacun. Pour permettre l'utilisation de plusieurs comportements dans différentes situations, en utilisant la technologie à base d'agents, nous avons conçu un modèle d'agent à comportements multiples qui a la capacité d'adapter son comportement de planification selon la situation. Les agents planificateurs ont alors la possibilité de se coordonner de façon collaborative pour améliorer leur performance collective. En modélisant les unités d'affaires par des agents, nous avons simulé avec la plateforme de planification à base d'agents de FORAC des agents utilisant différents comportements de planification dits de réaction et de négociation. Cette plateforme, développée par le consortium de recherche FORAC de l'Université Laval, permet de simuler des décisions de planification et de planifier les opérations de la chaîne d'approvisionnement. Ces comportements de planification sont des métaheurisciques organisationnelles qui permettent aux agents de générer des plans de production différents. La simulation est basée sur un cas illustrant la chaîne d'approvisionnement de l'industrie du bois d'œuvre. Les résultats obtenus par l'utilisation de multiples comportements de réaction et de négociation montrent que les systèmes de planification avancée peuvent tirer avantage de disposer de plusieurs comportements de planification, en raIson du contexte dynamique des chaînes d'approvisionnement. La pertinence des résultats de cette thèse dépend de la prémisse que les entreprises qui adapteront leurs comportements de planification aux autres et à leur environnement auront un avantage concurrentiel important sur leurs adversaires

The Debilitating Effect of Exclusive Rights: Patents and Productive Inefficiency

Are we underestimating the costs of patent protection? Scholars have long recognized that patent law is a double-edged sword. While patents promote innovation, they also limit the number of people who can benefit from new inventions. In the past, policy makers striving to balance the costs and benefits of patents have analyzed patent law through the lens of traditional, neoclassical economics. This Article argue that this approach is fundamentally flawed because traditional economics rely on an inaccurate oversimplification: that individuals and firms always maximize profits. In actuality, so-called productive inefficiencies often prevent profit maximization. For example, cognitive biases, bounded rationality, habituation, and opportunism all contribute to productive inefficiencies that harm individuals, firms, and ultimately society. Moreover, a variety of theoretical analyses and empirical studies demonstrate that robust competition reduces productive inefficiencies. Consequently, patents that substantially limit competition exacerbate productive inefficiencies and an important effect of patent law therefore has been systematically overlooked. This Article begins to fill this void and demonstrates that consideration of productive inefficiencies sheds new light on numerous unresolved and contentious debates in patent law

The Debilitating Effect of Exclusive Rights: Patents and Productive Inefficiency

Are we underestimating the costs of patent protection? Scholars have long recognized that patent law is a double-edged sword. While patents promote innovation, they also limit the number of people who can benefit from new inventions. In the past, policy makers striving to balance the costs and benefits of patents have analyzed patent law through the lens of traditional, neoclassical economics. This Article argues that this approach is fundamentally flawed because traditional economics rely on an inaccurate oversimplification: that individuals and firms always maximize profits. In actuality, so-called productive inefficiencies often prevent profit maximization. For example, cognitive biases, bounded rationality, habituation, and opportunism all contribute to productive inefficiencies that harm individuals, firms, and ultimately society. Moreover, a variety of theoretical analyses and empirical studies demonstrate that robust competition reduces productive inefficiencies. Consequently, patents that substantially limit competition exacerbate productive inefficiencies and an important effect of patent law therefore has been systematically overlooked. This Article begins to fill this void and demonstrates that consideration of productive inefficiencies sheds new light on numerous unresolved and contentious debates in patent law

Communications Policy for 2006 and Beyond

In this Article, the Authors propose sweeping changes to the current telecommunications regulatory regime. With impending reform in telecommunications laws, the Authors argue that an important first step is the creation of a bipartisan, independent commission to examine and recommend implementation of more market-oriented communications policy. Through maximizing the operation of the markets, the authors argue that communications policy will better serve its goals of increasing business productivity and consumer welfare through the better services and lower prices. Important steps to achieve optimal market operation include deregulating retail prices where multifirm competition is available, minimizing the cost of public property inputs, overhauling universal service, assigning greater jurisdictional authority to federal regulators, and significantly reorganizing the FCC. The Authors argue that the timely implementation of these policies is crucial for achieving United States telecommunications policy goals

A Mechanism Design Approach to Bandwidth Allocation in Tactical Data Networks

The defense sector is undergoing a phase of rapid technological advancement, in the pursuit of its goal of information superiority. This goal depends on a large network of complex interconnected systems - sensors, weapons, soldiers - linked through a maze of heterogeneous networks. The sheer scale and size of these networks prompt behaviors that go beyond conglomerations of systems or `system-of-systems\u27. The lack of a central locus and disjointed, competing interests among large clusters of systems makes this characteristic of an Ultra Large Scale (ULS) system. These traits of ULS systems challenge and undermine the fundamental assumptions of today\u27s software and system engineering approaches. In the absence of a centralized controller it is likely that system users may behave opportunistically to meet their local mission requirements, rather than the objectives of the system as a whole. In these settings, methods and tools based on economics and game theory (like Mechanism Design) are likely to play an important role in achieving globally optimal behavior, when the participants behave selfishly. Against this background, this thesis explores the potential of using computational mechanisms to govern the behavior of ultra-large-scale systems and achieve an optimal allocation of constrained computational resources Our research focusses on improving the quality and accuracy of the common operating picture through the efficient allocation of bandwidth in tactical data networks among self-interested actors, who may resort to strategic behavior dictated by self-interest. This research problem presents the kind of challenges we anticipate when we have to deal with ULS systems and, by addressing this problem, we hope to develop a methodology which will be applicable for ULS system of the future. We build upon the previous works which investigate the application of auction-based mechanism design to dynamic, performance-critical and resource-constrained systems of interest to the defense community. In this thesis, we consider a scenario where a number of military platforms have been tasked with the goal of detecting and tracking targets. The sensors onboard a military platform have a partial and inaccurate view of the operating picture and need to make use of data transmitted from neighboring sensors in order to improve the accuracy of their own measurements. The communication takes place over tactical data networks with scarce bandwidth. The problem is compounded by the possibility that the local goals of military platforms might not be aligned with the global system goal. Such a scenario might occur in multi-flag, multi-platform military exercises, where the military commanders of each platform are more concerned with the well-being of their own platform over others. Therefore there is a need to design a mechanism that efficiently allocates the flow of data within the network to ensure that the resulting global performance maximizes the information gain of the entire system, despite the self-interested actions of the individual actors. We propose a two-stage mechanism based on modified strictly-proper scoring rules, with unknown costs, whereby multiple sensor platforms can provide estimates of limited precisions and the center does not have to rely on knowledge of the actual outcome when calculating payments. In particular, our work emphasizes the importance of applying robust optimization techniques to deal with the uncertainty in the operating environment. We apply our robust optimization - based scoring rules algorithm to an agent-based model framework of the combat tactical data network, and analyze the results obtained. Through the work we hope to demonstrate how mechanism design, perched at the intersection of game theory and microeconomics, is aptly suited to address one set of challenges of the ULS system paradigm - challenges not amenable to traditional system engineering approaches