Research

2024

1. Optimal Membership Design

   Piotr Dworczak, Marco Reuter, Scott Duke Kominers, and Changhwa Lee

   Working Paper, 2024

   Abstract Download

   Membership design involves allocating an economic good whose value to any individual depends on who else receives it. We introduce a framework for optimal membership design by combining an otherwise standard mechanism-design model with allocative externalities that depend flexibly on agents’ observable and unobservable characteristics. Our main technical result characterizes how the optimal mechanism depends on the pattern of externalities. Specifically, we show how the number of distinct membership tiers – differing in prices and potentially involving rationing – is increasing in the complexity of the externalities. This insight may help explain a number of mechanisms used in practice to sell membership goods, including musical artists charging below-market-clearing prices for concert tickets, heterogeneous pricing tiers for access to digital communities, the use of vesting and free allocation in the distribution of network tokens, and certain admission procedures used by colleges concerned about the diversity of the student body.

2. Platform Precommitment via Decentralization

   Marco Reuter

   IMF Working Paper 2024/028, 2024

   Abstract Download

   I study an entrepreneur’s incentives to build a decentralized platform using a blockchain. The entrepreneur can either build the platform using a regular company and retain control of the platform, or build the platform using a blockchain and surrender control of the platform. In either case, the platform’s users experience a locked-in effect. I show that a decentralized implementation of the platform is both (i) more profitable for the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect exceeds some threshold. Further, progressive decentralization through airdrops can be optimal.

2022

1. Revenue Maximization with Partially Verifiable Information

   Marco Reuter

   Working Paper, Reject and Resubmit at Journal of Economic Theory, 2022

   Abstract Download

   I consider a seller selling a good to bidders with two-dimensional private information: their valuation for a good and their characteristic. While valuations are non-verifiable, characteristics are partially verifiable and convey information about the distribution of a bidder’s valuation. I derive the revenue-maximizing mechanism and show that it can be implemented by introducing a communication stage before an auction. I show that granting bidders a right to remain anonymous, i.e., to refuse participation in the communication stage, leaves the optimal mechanism unchanged and provides no benefits for the bidders.

2020

1. Mechanism Design for Unequal Societies

   Carl-Christian Groh, and Marco Reuter

   Working Paper, 2020

   Abstract Download

   We study optimal mechanisms for a utilitarian designer who seeks to assign a finite number of goods to a group of ex ante heterogeneous agents with unit demand. The agents have heterogeneous marginal utilities of money, which may naturally arise in environments where agents have different wealth levels or financing conditions. We show that the utilitarian optimal allocation rule deviates from the ex post efficient allocation rule in two ways, namely by (1) allocating the good to agents with lower willingnesses to pay in certain situations and (2) by potentially keeping some units of the good unallocated. We also highlight how our mechanism can be implemented as an auction with minimum bids and bidding subsidies.