Essays on market and mechanism design

This dissertation consists of three essays on market and mechanism design. In each essay, I utilize tools and knowledge from game theory, equilibrium theory, and mechanism design to explain agents' behavior and assess the market equilibrium structure in different allocation mechanisms, both with and without monetary transactions. The first two chapters provide theoretical analyses of allocation mechanisms in environments where agents possess varying levels of information. The third chapter studies the allocation market for live kidney donations to patients in need of kidney transplants, examining the topic from both theoretical and empirical perspectives using data from the only regulated monetary market for kidneys in Iran. The first chapter, co-authored with Andrzej Skrzypacz, delves into allocation mechanisms for public school choice seats, catering to a population of students with different degrees of access to information regarding school quality. We demonstrate that this information disparity prompts less-informed students to rank schools based on the priority that schools assign them, hoping to evade the potential drawbacks of acceptance at each institution. Subsequently, we explore the welfare implications of such information disparities, emphasizing the impact of priority design in school and college assignment mechanisms in light of information inequality. In the second chapter, I collaborate with Ehsan Azarmsa to inspect the endogenous equilibrium structure emerging in Over the Counter (OTC) financial markets, featuring intermediaries capable of bolstering market liquidity. We elucidate the endogenous onset of fragmented markets wherein a solitary asset undergoes trading across multiple platforms, each displaying varying prices and liquidity levels. Our findings reveal that when the principal inventory cost for financial intermediaries is the information rent cost tied to trading with savvier traders, these intermediaries assume dual roles: those of market makers and match makers. This duality gives rise to two distinct market types: a fully liquid market characterized by a positive bid-ask spread, where the market maker furnishes inventory, and a less liquid market with a zero bid-ask spread, wherein traders' orders are fulfilled via matching. This streamlined model offers a framework to scrutinize alterations in market structure, liquidity, and prices in the OTC markets in response to post-crisis regulations imposed on banks and dealers. The dissertation's final chapter, jointly penned with Mohammad Akbarpour and Farshad Fatemi, evaluates the world's sole regulated system for paid donations, operational in Iran. We deliver empirical analyses of the market, indicating that the allowance for monetary compensation has significantly bolstered the supply of kidney donations, thereby curtailing waiting periods for patients. Addressing prevalent concerns surrounding the existence of such a market, our extensive data on donor and recipient demographics reveal that live kidney donors predominantly hail from impoverished backgrounds, while patients financially equipped to procure a live kidney in this system tend to be considerably affluent. Nonetheless, we delineate, within a theoretical framework, how the presence of such a market can be advantageous for both affluent and impoverished patients awaiting kidney transplants. This is achieved by diminishing waiting durations, not only for kidneys from live donors but also from deceased donors. We proceed to calibrate this model to project the hypothetical benefits of introducing a similar market in the U.S.

Keywords: Humanities and Sciences.
Economics.
Advisor: Jackson Matthew O.
Skrzypacz Andrzej
Akbarpour Mohammad