Abstract:

In the first chapter, we study efficient license auctions when a government allocates a second license to operate in a market where one firm is already active. Under the assumption that a demand function and firms' cost functions are linear, we obtain an extremely simple efficient mechanism that does not depend on the detailed information about the market. Namely, the 40% handicap auction, a modified English auction in which a newcomer that wins a license has to pay only 40% of the winning price, always achieves an efficient market structure. Our benchmark results are extended in general cases that introduce fixed costs, increase the number of incumbents, and incorporate general social welfare functions. We also show that efficiency losses caused by using the 40% handicap auction in non-linear situations are quite small.

In the second chapter, we analyze how financial constraints affect equilibrium payoffs and behaviors in repeated Cournot games. Modifying minmax and feasible payoffs, we derive the folk theorem under financial constraints. Our theorem illustrates that introducing financial constraints shrinks the set of equilibrium payoffs in favor of a firm that has a larger financial budget. We also show that financial constraints can substantially restrict possible equilibrium behaviors. For instance, collusion in which firms equally divide a monopoly profit in each period, which is often assumed in applications in industrial organization, may not be sustained in any equilibrium.

In the third chapter, we consider new student assignment algorithms in a public school choice. Truthful revelation of preferences has emerged as a desideratum in the design of school choice programs. The Gale-Shapely's deferred acceptance algorithm achieves this strategyproofness but limits students' abilities to communicate their preference intensities, which entails an ex ante inefficient allocation when schools are indifferent among students with the same ordinal preferences. We propose a new deferred acceptance procedure in which students are allowed, via signaling of their preferences, to influence how they are treated in a tie for a school. This new procedure preserves strategyproofness of ordinal preferences and yields a more desirable allocation.