Marco Reuter

Marco Reuter

PhD Candidate in Economics

Working Papers

The Value of Decentralization Using the Blockchain (Job Market Paper)

Although blockchain technology and cryptocurrencies have grown in popularity over the past years, there does not seem to be a consensus if they bring any value to economic interactions. In this paper, I argue that a fundamental value the blockchain provides is commitment. I develop a model of an entrepreneur, who can create a network for her users. She can decide to retain control of the network with centralized implementation through a regular company, or surrender control over the network with a decentralized implementation through the blockchain. Users that join the network are subject to a locked-in effect. I show that a decentralized implementation of the network is (i) preferred by the entrepreneur and (ii) a Pareto improvement, if and only if the size of the locked-in effect is sufficiently large.

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Mechanism Design for Unequal Societies (with Carl-Christian Groh)

We study optimal mechanisms for a utilitarian designer who seeks to assign multiple units of an indivisible good to a group of agents. The agents have heterogeneous marginal utilities of money, which may naturally arise in environments where agents have different wealth levels or financing conditions. The designer faces constraints on ex ante transfers. We show that the ex post efficient allocation rule is not utilitarian optimal in our setting. In certain situations, it is utilitarian optimal to deterministically assign the good to an agent with a lower willingness to pay. This is because a high willingness to pay may stem from a low marginal utility of money. Moreover, the transfer rule does not only facilitate implementation of the desired social choice function in our setting, but also directly affects social welfare. Finally, we highlight how our mechanism can be implemented as an auction with minimum bids and bidding subsidies.

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Revenue Maximization with Partially Verifiable Information

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.

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