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Mechanism Design for Social Good: Carbon Auctions and Health Insurance Market Entry

By Kira Goldner
Location Bloomfield 527
Academic Program: Please choose
Monday 16 December 2019, 13:00 - 14:00
In this talk, we'll discuss how to use ideas from algorithmic mechanism design, such as price of anarchy bounds for auctions and virtual welfare, to improve social good.
First, we study carbon cap-and-trade schemes: a policy tool used to distribute licenses and control the social cost of pollution. A license grants its holder the right to pollute a unit of carbon. We focus on the allocation mechanism most commonly deployed in practice: the uniform price auction with a price floor and/or ceiling. This mechanism is not truthful; we quantify the strategic vulnerabilities of this mechanism, and use as a benchmark the welfare of the best uniform price auction with a price floor and ceiling under truth-telling behavior.  We then define a subclass of "safe-price auctions", and show how to choose a number of licenses and a high enough price floor such that, at any Bayes-Nash equilibrium, the better of a "safe-price" auction and a single-bidder contract gives a constant-factor approximation to our benchmark.
Second, we'll discuss a scenario in which an employer contracts with health insurance plans and aims to optimize its employees' utility.  When can the employer use its regulatory power to benefit the employees (patients), as opposed to just running a free market being best?  We characterize market equilibrium conditions, reducing the problem to one in revenue maximization.
Joint work with (1) Nicole Immorlica and Brendan Lucier and (2) Meryem Essaidi and Matt Weinberg.