Aslan Fatma receives OTKA postdoctoral grant

Title of project: Complex Collective Decision Problems:

Summary:

Theories of allocations deal with the problem of allocating a set of goods (objects) between a set of individuals given the agents’ preferences over the possible outcomes. In most real-life allocation problems, a central planner implements a mechanism by collecting information about the agents’ preferences. Some practical examples are the reallocation of dorm rooms to students by the housing office of a university, the decision of which patients will receive kidneys by the health authorities, and the allocation of teachers to public schools by the ministry of education.

The problem is how to aggregate agents’ announced preferences to achieve a collective decision (i.e., a final allocation) that respects certain desired criteria. This project investigates allocation problems of purely indivisible goods with complex outcomes where complexity stems from some interdependencies in preferences.

Although the results are applicable to other settings with similar structures, a natural application this project considers is the (re)assignment problem of teachers to public schools. The interdependencies in individuals’ preferences come from the fact that there is a significant proportion of couples in the population of teachers; each partner cares not only about the “quality” of her new position but also about how far this position is from her partner’s.

In this project, we aim to (i) design new reallocation mechanisms for public school teachers whose objective is to comply with the couples’ concern about the proximity; (ii) empirically quantify the gains these mechanisms would bring in a real-life teacher assignment setting.

About the Grant:

The “OTKA” postdoctoral excellence program (PD_22) granted support to early-stage researchers with doctoral degrees to help them to stay in research and build a career by joining a research group and cooperating with experienced researchers in Hungary for a period of three years. This year, applicants submitted 301 project proposals with a total of HUF 8 billion in request, and 4 projects in Economics have been decided to support.

https://nkfih.gov.hu/palyazoknak/nkfi-alap/tamogatott-projektek-pd22

Robert Somogyi receives OTKA young researcher grant

Robert Somogyi’s OTKA young researcher (FK_22) project is titled ‘Pricing and regulation in the digital economy’. The main goal of this research project is the analysis of pricing practices in the digital world. The Internet is playing an ever more important role in our lives. In this research project, we investigate hidden fees on online price-comparison websites on the one hand, and the social welfare effects of the special market structure of some online platforms on the other hand. The importance of the first topic lies in the fact that many online platforms use hidden fees, which can reduce consumer welfare in the presence of naive consumers. In addition, we find in our preliminary results that the presence of online platforms makes shrouding incentives stronger. Therefore competition authorities worried about hidden fees should be especially worried about the presence of online intermediaries. The importance of the second topic was highlighted for example by the public debate about Facebook switching off news content by Australian news websites for a few days in February 2021. Through a series of research papers, we first aim to understand price-setting in digital markets, and second, we aim to compare different policy interventions to protect consumers when needed in these markets.

https://nkfih.gov.hu/palyazoknak/nkfi-alap/tamogatott-projektek-fk22

30 August: Dhandabani S (QSMS seminar)

The QSMS Research Group (BME) will be hosting two seminars this August 2022. One-to-one meetings with the speakers can be arranged; please contact the seminar organizers, Dr. Noémie Cabau (cabau.noemie@gtk.bme.hu) and Dr. Arseniy Samsonov (samsonov.arseniy@gtk.bme.hu).

Dhandabani S from the Indian Institute of Technology Madras (Decision Engineering Lab, Department of Management Studies) will be presenting his paper Modeling interactions between vertically cooperative and horizontally competitive newsvendor on the 30^th of August 2022 at 4PM, Room QA406.

Abstract: Consider a market served by both the supplier and the retailer, a typical example of a dual-channel supply chain. Supplier holds a fixed number of perishable inventories and shares them with the retailer for better reach. Also, because of the price matching guarantee, both the parties agree on a uniform retail price for customers, and it is set by the supplier along with the wholesale price. We assume that both the parties are profit-maximising newsvendors, i.e., retailer and supplier are quantity-setting and price-setting newsvendors, respectively. However, given the nature of the setting, their decisions are dependent on each other. As a result, none of them can control the environment solely and both set out to maximise their own profits, which calls for a game-theoretic perspective on the coopetitive (vertically cooperative and horizontally competitive) two-newsvendor setting. We model the interactions between the supplier and retailer as a Stackelberg game, with the supplier being the leader and the retailer being the follower. Given the price[1]sensitive nature of the demand, the retailer estimates her optimal quantity as a function of retail and wholesale prices as a function of the reaction curve. Exploiting the backward induction, the supplier leverages the retailer’s optimal quantity to base its pricing decisions. As the optimal solution becomes intractable for a generic demand uncertainty, focusing only on additive demand uncertainty, we derive sufficient optimality conditions for the supplier’s profit function to be concave with respect to both the retail and wholesale prices. Furthermore, we compute the best feasible set of quantity and price points that satisfy the already established restrictions and assumptions. Finally, extensive sensitivity analysis of the model parameters yields the following several managerial insights, out of which a few novel and counterintuitive are as follows: (i) supplier’s expected profit decreases with the capacity, (ii) the more the variation, supplier’s gain increases whereas retailer’s gain decreases, (iii) with a highly sensitive market, both the parties’ profits decrease, and (iv) retailer’s profit is concave with respect to the market potential.

23 August: Mikhail Freer (QSMS seminar)

Mikhail Freer from the University of Essex (Department of Economics) will be presenting his paper Constitutional Design (co-authored with César Martinelli) on the 23^rd of August 2022 at 4PM, Room QA406.

Abstract: Constitution is the cornerstone of any democracy: defining both the basic rights of citizens and the rules of the political process. However, most political economy literature frequently overlooks the constitution as a whole, focusing on bargaining between legislator and executive. This paper expands the scope and considers all three branches of power in the constitutional mechanism. First, we show that the constitutional mechanism (even with the accountability of the executive and legislator) cannot be credible without the presence of the “fourth power” (civic society). However, this fourth power is not directly governed by the constitution, and to restore the credibility of the constitution, the two key features are (1) society is affected by the outcomes of legislative bargaining, and (2) the judiciary is responsive to public opinion. However, these features are not enough to restore the “efficiency” of the constitution; to do so, we need to ensure that society does not stop pressuring the government with just the resignation of the corresponding official but gets a more direct involvement in the further legislative bargaining.

Koltai’s paper published in The Int. J. Manag. Educ.

The paper titled “Performance evaluation of teams in business simulation games with weight restricted data envelopment analysis models.” (joint with Tamás, A.) has been published in The International Journal of Management Education.

Business simulation games are widely used in higher education, management training, and executive management development programmes. The evaluation of the performance of participants is generally subjective and is based on the trainer’s perception of the importance of several evaluation criteria. In this paper, data envelopment analysis (DEA) is proposed for such evaluation. Input-oriented constant return-to-scale DEA models are used for evaluating the performance of teams participating in business simulation games (BSG). A car engine manufacturing game played by MBA master students is used to illustrate the proposed method. Weight restrictions are applied to obtain efficiency scores which can be used as an alternative to financial measures. The relationship between the efficiency measure and the financial measure is statistically analyzed. The main conclusion of the presented research is that if weight restriction parameters are properly set, DEA results can provide reliable and detailed information about participants’ performance, about the shortcomings of decisions made during the games, and about possible ways to improve performance.

The paper presents the first application of DEA in the area of performance evaluation in BSG, consequently it can be considered a significant extension of the DEA application domain.

_{Koltai, T. and Tamás, A. (2022). Performance evaluation of teams in business simulation games with weight restricted data envelopment analysis models. The International Journal of Management Education, Volume 20, Issue 3, p. 17.}

_{https://doi.org/10.1016/j.ijme.2022.100688}

Kóczy’s paper published in AnOR

Kóczy’s paper titled “Core-stability over networks with widespread externalities” has been published in the Annals of Operations Research.

The Covid-19 epidemic highlighted the significance of externalities: contacts with other people affect the chances of getting infected for our entire network. We study endogenous network formation where not only players or pairs but larger coalitions can, cooperatively change the network. We introduce a model for coalitional network stability for networks with widespread externalities. The network function form generalises the partition function form of cooperative games in allowing the network to be taken into account. The recursive core for network function form games generalises the recursive core for such environments. We present two simple examples to illustrate positive and negative externalities. The first is of a favour network and show that the core is nonempty when players must pay transfers to intermediaries; this simple setting also models economic situations such as airline networks. The second models social contacts during an epidemic and finds social bubbles as the solution.

_{Kóczy, L.Á. Core-stability over networks with widespread externalities. Ann Oper Res (2022). https://doi.org/10.1007/s10479-022-04669-5}

23 February: Maya Jalloul (QSMS seminar)

Presenting “Narrative adoption and strategic timing of disclosure?” at 16:00-17:30 online: Click here to join the meeting

On 23 February 2022, we have Maya Jalloul of Lebanese American University visiting us. She is going to give a seminar on “Narrative adoption and strategic timing of disclosure.” at 16:00 online Click here to join the meeting. Please help the organisers by registering in advance at egervari.zsuzsanna@gtk.bme.hu Registration is free. Event can only be attended with vaccination card.

Abstract: This paper investigates a model with two strategic politicians, a proponent and an opponent, and a group of non-strategic voters. The proponent, who is the first mover, has a narrative that she aims to convey to the voters; whereas the opponent’s objective is to divert the voters away from it. The strategic decision of the proponent is when to disclose her narrative with the objective to maximise the adoption of this narrative by a deadline, and that of the opponent is when to disclose the refutation. The voters opinions updating rule follows an average-based De Groot learning concept where a voter splits his attention between the two politicians, his own opinion and his neighbours. We show that once the proponent discloses her narrative, it is optimal for the opponent to disclose her refutation, and that the proponent faces a trade-off between early and late disclosure. We determine the optimal timing of disclosure for the cases of one voter and a group of voters and we examine connections among voters over a specific set of networks, while considering two types of voters, supporters and non-supporters. We also investigate the impact of homophily on timing of disclosure and we find that with higher homophily, the narrative adoption of the supporter is higher and that of the non-supporter is lower.

22 February: Christopher P. Stapenhurst (QSMS seminar)

Presenting “Can Media Pluralism Be Harmful to News Quality?” at 16:00-17:30 QA 406

On 22 February 2022, we have Chistopher P. Stapenhurst of University of Edinburgh visiting us. He is going to give a seminar on “Lemons by design: sowing secrets that curb corruption” (with Andrew Clausen) at 16:00 in room QA406. Please help the organisers by registering in advance at egervari.zsuzsanna@gtk.bme.hu Registration is free. Event can only be attended with vaccination card.

Abstract: We study a problem in which a polluting firm can bribe an inspector to conceal evidence of illegal behaviour. We find that the best way to deter bribes involves paying secret rewards and sending secret clues. The regulator promises to pay a secret reward to either the firm or the inspector when evidence is reported; it then gives them different clues about who will be rewarded. These clues are carefully constructed to engineer the worst possible lemons problem in the market for concealment: each player only wants to conceal evidence if they believe that the other player is more optimistic about being rewarded. But they cannot both be more optimistic in equilibrium, so no concealment takes place. As well as deterring bribes cheaply, this scheme demonstrates the full extent of contagious adverse selection in a bilateral trade environment.

Kóczy’s paper published in Games

Kóczy’s paper titled “Exits from the European Union and Their Effect on Power Distribution in the Council” (joint work with Dóra Gréta Petróczy and Mark Francis Rogers) has been published in Games.

Debates on an EU-leaving referendum arose in several member states after Brexit. This paper studies the effects of an additional exit on the power distribution in the Council of the European Union. Power indices of the member states are studied both with and without the country which might leave the union. Results show a pattern connected to a change in the number of states required to meet the 55% threshold. An exit that modifies this number benefits the countries with high population, while an exit that does not cause such a change benefits the small member states. According to the calculations, only the exit of Poland would be supported by the qualified majority of the Council.

_{Petróczy, D.G.; Rogers, M.F.; Kóczy, L.Á. Exits from the European Union and Their Effect on Power Distribution in the Council. Games 2022, 13, 18. https://doi.org/10.3390/g13010018}

9 February: Federico Innocenti (QSMS Seminar)

(QSMS Seminar)

Presenting “Can Media Pluralism Be Harmful to News Quality?” at 16:00-17:30 online Click here to join the meeting

On 9 February 2022, we have Federico Innocenti of University of Mannheim visiting us. He is going to give a seminar on “Can Media Pluralism Be Harmful to News Quality?” at 16:00 online Click here to join the meeting. Please help the organisers by registering in advance at egervari.zsuzsanna@gtk.bme.hu Registration is free. Event can only be attended with vaccination card.

Abstract: I study a Bayesian persuasion model that connects two stylized facts characterizing the Internet: a great diversity of news sources and the proliferation of disinformation. I show that competition between news sources with opposite biases reduces information quality when news consumers have limited attention because of the endogenous formation of echo chambers. According to the standard narrative, echo chambers arise because news consumers exhibit confirmation bias. I show that even unbiased and rational news consumers devote their limited attention to like-minded news sources in equilibrium. Confirmation bias thus arises endogenously because news sources have no incentive to provide valuable information.