Essays on Economic Design: Theory and Estimation

Abstract

This thesis studies optimal economic design choices, both theoretically and empirically, in environments where some market participants themselves make welfare-relevant design choices. In the first two chapters, I study a platform's preferencing mechanism, or rule that assigns the placement of offers on a platform. I theoretically derive a platform's consumer-optimal preferencing rule in a setting in which firms choose prices in a locally envy-free profile, given the preferencing rule, which in special cases, correspond with equilibria in a Generalized Second Price auction. Additionally, I show that Reimers and Waldfogel (2023) empirical test to measure platform bias is valid even under prices endogenous to the preferencing rule in a locally envy-free profile. On Amazon, I measure the extent of platform bias using a large dataset from the platform during the years 2020-2022. I then extend this study to an environment in which firm prices are determined in a non-myopic, dynamic setting, which depends on the platform's preferencing rule. These dynamic pricing strategies result in pricing patterns that closely resemble Edgeworth cycles. I provide a method to estimate the primitives that govern these pricing cycles, which allows me to assess the counterfactual welfare implications associated with various preferencing rules, using a large dataset from the Amazon platform from 2018-2022. The welfare effects of policy proposals in this environment, in particular those that eliminate self-preferencing, significantly differ from those under the static price competition environment. The last chapter studies a class of complete information quantum games, where design choices in quantum versions of classical games, in particular the chosen basis and initial state, determine the set of feasible outcome distributions in a Nash equilibrium in quantum strategies. I derive necessary and sufficient conditions for a Nash equilibrium in quantum strategies to Pareto improve upon classical correlated equilibria in certain classes of quantum games.