Research

2022

1. The Value of Decentralization Using the Blockchain

   Marco Reuter

   Working Paper, 2022

   Abstract Download

   The popularity of blockchain technology and cryptocurrencies has grown in recent years, but there is still disagreement about their value in economic interactions. In this paper, I examine the value of a blockchain for an entrepreneur who creates a network. The entrepreneur can decide to retain control of the network with a centralized implementation through a regular company, or surrender control over the network with a decentralized implementation through the blockchain. The network’s users experience a locked-in effect. I show that a decentralized implementation of the network is both (i) preferred by the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect is sufficiently large.

2. Revenue Maximization with Partially Verifiable Information

   Marco Reuter

   Working Paper, 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.