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Federico Echenique

Publications and source records attributed to Federico Echenique.

52 records · Page 3Linked to original sources
arXiv2020

Top of the Batch: Interviews and the Match

Most doctors in the NRMP are matched to one of their most-preferred internship programs. Since various surveys indicate similarities across doctors' preferences, this suggests a puzzle. How can nearly everyone get a position in a highly-desirable program when positions in each program are scarce? We provide one possible explanation for this puzzle. We show that the patterns observed in the NRMP data may be an artifact of the interview process that precedes the match. Our analysis highlights the importance of interactions occurring outside of a matching clearinghouse for resulting outcomes, and casts doubts on analysis of clearinghouses that take reported preferences at face value.

econ.GN↗
arXiv2020

Constrained Pseudo-market Equilibrium

We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in course allocation; and other forms of constraints needed to model, for example, the market for roommates, and combinatorial assignment problems. Constraints give rise to pecuniary externalities, which are internalized via prices. Agents pay to the extent that their purchases affect the value of relevant constraints at equilibrium prices. The result is a constrained efficient market equilibrium outcome. The outcome is fair whenever the constraints do not single out individual agents. Our result can be extended to economies with endowments, and address participation constraints.

econ.TH↗
arXiv2020

Recovering Preferences from Finite Data

We study preferences estimated from finite choice experiments and provide sufficient conditions for convergence to a unique underlying "true" preference. Our conditions are weak, and therefore valid in a wide range of economic environments. We develop applications to expected utility theory, choice over consumption bundles, menu choice and intertemporal consumption. Our framework unifies the revealed preference tradition with models that allow for errors.

econ.TH↗
arXiv2020

Fairness and efficiency for probabilistic allocations with participation constraints

We propose a notion of fairness for allocation problems in which different agents may have different reservation utilities, stemming from different outside options, or property rights. Fairness is usually understood as the absence of envy, but this can be incompatible with reservation utilities. It is possible that Alice's envy of Bob's assignment cannot be remedied without violating Bob's participation constraint. Instead, we seek to rule out {\em justified envy}, defined as envy for which a remedy would not violate any agent's participation constraint. We show that fairness, meaning the absence of justified envy, can be achieved together with efficiency and individual rationality. We introduce a competitive equilibrium approach with price-dependent incomes obtaining the desired properties.

econ.TH↗
arXiv2020

Third-Party Data Providers Ruin Simple Mechanisms

Motivated by the growing prominence of third-party data providers in online marketplaces, this paper studies the impact of the presence of third-party data providers on mechanism design. When no data provider is present, it has been shown that simple mechanisms are "good enough" -- they can achieve a constant fraction of the revenue of optimal mechanisms. The results in this paper demonstrate that this is no longer true in the presence of a third-party data provider who can provide the bidder with a signal that is correlated with the item type. Specifically, even with a single seller, a single bidder, and a single item of uncertain type for sale, the strategies of pricing each item-type separately (the analog of item pricing for multi-item auctions) and bundling all item-types under a single price (the analog of grand bundling) can both simultaneously be a logarithmic factor worse than the optimal revenue. Further, in the presence of a data provider, item-type partitioning mechanisms---a more general class of mechanisms which divide item-types into disjoint groups and offer prices for each group---still cannot achieve within a $\log \log$ factor of the optimal revenue. Thus, our results highlight that the presence of a data-provider forces the use of more complicated mechanisms in order to achieve a constant fraction of the optimal revenue.

cs.GT↗
arXiv2020

Spherical Preferences

We introduce and study the property of orthogonal independence, a restricted additivity axiom applying when alternatives are orthogonal. The axiom requires that the preference for one marginal change over another should be maintained after each marginal change has been shifted in a direction that is orthogonal to both. We show that continuous preferences satisfy orthogonal independence if and only if they are spherical: their indifference curves are spheres with the same center, with preference being "monotone" either away or towards the center. Spherical preferences include linear preferences as a special (limiting) case. We discuss different applications to economic and political environments. Our result delivers Euclidean preferences in models of spatial voting, quadratic welfare aggregation in social choice, and expected utility in models of choice under uncertainty.

econ.TH↗
arXiv2019

New developments in revealed preference theory: decisions under risk, uncertainty, and intertemporal choice

This survey reviews recent developments in revealed preference theory. It discusses the testable implications of theories of choice that are germane to specific economic environments. The focus is on expected utility in risky environments; subjected expected utility and maxmin expected utility in the presence of uncertainty; and exponentially discounted utility for intertemporal choice. The testable implications of these theories for data on choice from classical linear budget sets are described, and shown to follow a common thread. The theories all imply an inverse relation between prices and quantities, with different qualifications depending on the functional forms in the theory under consideration.

econ.TH↗
arXiv2019

Incentive Compatible Active Learning

We consider active learning under incentive compatibility constraints. The main application of our results is to economic experiments, in which a learner seeks to infer the parameters of a subject's preferences: for example their attitudes towards risk, or their beliefs over uncertain events. By cleverly adapting the experimental design, one can save on the time spent by subjects in the laboratory, or maximize the information obtained from each subject in a given laboratory session; but the resulting adaptive design raises complications due to incentive compatibility. A subject in the lab may answer questions strategically, and not truthfully, so as to steer subsequent questions in a profitable direction. We analyze two standard economic problems: inference of preferences over risk from multiple price lists, and belief elicitation in experiments on choice over uncertainty. In the first setting, we tune a simple and fast learning algorithm to retain certain incentive compatibility properties. In the second setting, we provide an incentive compatible learning algorithm based on scoring rules with query complexity that differs from obvious methods of achieving fast learning rates only by subpolynomial factors. Thus, for these areas of application, incentive compatibility may be achieved without paying a large sample complexity price.

cs.GT↗
arXiv2019

The Edgeworth Conjecture with Small Coalitions and Approximate Equilibria in Large Economies

We revisit the connection between bargaining and equilibrium in exchange economies, and study its algorithmic implications. We consider bargaining outcomes to be allocations that cannot be blocked (i.e., profitably re-traded) by coalitions of small size and show that these allocations must be approximate Walrasian equilibria. Our results imply that deciding whether an allocation is approximately Walrasian can be done in polynomial time, even in economies for which finding an equilibrium is known to be computationally hard.

cs.GT↗
arXiv2018

A characterization of "Phelpsian" statistical discrimination

We establish that statistical discrimination is possible if and only if it is impossible to uniquely identify the signal structure observed by an employer from a realized empirical distribution of skills. The impossibility of statistical discrimination is shown to be equivalent to the existence of a fair, skill-dependent, remuneration for workers. Finally, we connect the statistical discrimination literature to Bayesian persuasion, establishing that if discrimination is absent, then the optimal signaling problem results in a linear payoff function (as well as a kind of converse).

econ.TH↗
arXiv2018

Preference Identification

An experimenter seeks to learn a subject's preference relation. The experimenter produces pairs of alternatives. For each pair, the subject is asked to choose. We argue that, in general, large but finite data do not give close approximations of the subject's preference, even when the limiting (countably infinite) data are enough to infer the preference perfectly. We provide sufficient conditions on the set of alternatives, preferences, and sequences of pairs so that the observation of finitely many choices allows the experimenter to learn the subject's preference with arbitrary precision. While preferences can be identified under our sufficient conditions, we show that it is harder to identify utility functions. We illustrate our results with several examples, including consumer choice, expected utility, and preferences in the Anscombe-Aumann model.

econ.TH↗
arXiv2014

On the Existence of Low-Rank Explanations for Mixed Strategy Behavior

Nash equilibrium is used as a model to explain the observed behavior of players in strategic settings. For example, in many empirical applications we observe player behavior, and the problem is to determine if there exist payoffs for the players for which the equilibrium corresponds to observed player behavior. Computational complexity of Nash equilibria is an important consideration in this framework. If the instance of the model that explains observed player behavior requires players to have solved a computationally hard problem, then the explanation provided is questionable. In this paper we provide conditions under which Nash equilibrium is a reasonable explanation for strategic behavior, i.e., conditions under which observed behavior of players can be explained by games in which Nash equilibria are easy to compute. We identify three structural conditions and show that if the data set of observed behavior satisfies any of these conditions, then it is consistent with payoff matrices for which the observed Nash equilibria could have been computed efficiently. Our conditions admit large and structurally complex data sets of observed behavior, showing that even with complexity considerations, Nash equilibrium is often a reasonable model.

cs.GT↗
arXiv2014

Testing for separability is hard

This paper shows that it is computationally hard to decide (or test) if a consumption data set is consistent with separable preferences.

cs.GT↗
arXiv2014

The Empirical Implications of Privacy-Aware Choice

This paper initiates the study of the testable implications of choice data in settings where agents have privacy preferences. We adapt the standard conceptualization of consumer choice theory to a situation where the consumer is aware of, and has preferences over, the information revealed by her choices. The main message of the paper is that little can be inferred about consumers' preferences once we introduce the possibility that the consumer has concerns about privacy. This holds even when consumers' privacy preferences are assumed to be monotonic and separable. This motivates the consideration of stronger assumptions and, to that end, we introduce an additive model for privacy preferences that does have testable implications.

cs.GT↗
arXiv2013

The Empirical Implications of Rank in Bimatrix Games

We study the structural complexity of bimatrix games, formalized via rank, from an empirical perspective. We consider a setting where we have data on player behavior in diverse strategic situations, but where we do not observe the relevant payoff functions. We prove that high complexity (high rank) has empirical consequences when arbitrary data is considered. Additionally, we prove that, in more restrictive classes of data (termed laminar), any observation is rationalizable using a low-rank game: specifically a zero-sum game. Hence complexity as a structural property of a game is not always testable. Finally, we prove a general result connecting the structure of the feasible data sets with the highest rank that may be needed to rationalize a set of observations.

cs.GT↗