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- Всего слайдов:37 слайдов
- Для класса:1,2,3,4,5,6,7,8,9,10,11
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Слайды и текст к этой презентации:
№2 слайд
![Recap Players may have the](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img1.jpg)
Содержание слайда: Recap
Players may have the possibility to “communicate” to alter the outcome of the game.
They may announce the intended action (cheap talk) in order to facilitate coordination.
In games with incomplete information, players may consider taking actions that signal their type (signaling), or find out the type of the other player (screening).
e.g. provide warranties to signal the quality of your products.
e.g. go to university to signal your skills.
№4 слайд
![Mechanism design examples](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img3.jpg)
Содержание слайда: Mechanism design examples
Price discrimination
Seller/buyer.
Source of incomplete information: buyers’ willingness to pay is unknown to the seller.
Mechanism design: price system that makes buyers with high willingness-to-pay buy higher quality products at a higher price.
Incentives for effort
Manager/employee.
Source of incomplete information: the manager cannot observe how hard employees work.
Mechanism design: align the incentives of employees to the incentives of the manager, and induce employees to exert high effort.
№6 слайд
![Example Price discrimination](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img5.jpg)
Содержание слайда: Example 1: Price discrimination
Different consumers have different valuations for the same product.
Bob willing to pay $20; Bill willing to pay $10.
Is it optimal to charge the same price ($10) to both consumers?
To maximize profit, the seller will try to sell the good for $20 to Bob; and for $10 to Bill.
Price discrimination
№8 слайд
![Price discrimination](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img7.jpg)
Содержание слайда: Price discrimination: limitations and solution
Price discrimination is often not feasible: sellers may not observe individual consumers’ willingness to pay.
Then what? Seller may design a price system to implement some sort of price discrimination:
Price system that will separate buyers into different groups and allow the seller to increase profit.
№11 слайд
![Price discrimination may not](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img10.jpg)
Содержание слайда: Price discrimination may not be simple to implement...
The airline initially does not have enough information on types of customers, and cannot ask different prices to different travellers.
Demographics (age; gender etc.) may provide information on the type...but it may be illegal/unethical to use this information.
If the airline asks 300 for a first-class seat, business travellers will rather buy an economy class ticket.
If the economy ticket is at 140, business travellers would prefer pay 140 for an economy seat, rather than pay 300 for a first-class seat.
If the economy ticket is at 140, business travellers have consumer surplus of 225 -140 = 85 in economy class ticket.
№12 слайд
![Solution? Design a price](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img11.jpg)
Содержание слайда: Solution?
Design a price mechanism such that business travellers choose to buy first-class tickets, and tourists choose to buy economy class tickets.
Suppose the airline charges X for economy, and Y for first-class.
X and Y should be such that tourists choose economy, and business travellers choose first-class.
Two constraints.
Constraint #1: Participation constraint
Charge maximum 140 for economy class, otherwise tourists drop off. (X<140)
Charge maximum 300 for first-class. (Y<300)
№15 слайд
![Outcome... Since X maximum](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img14.jpg)
Содержание слайда: Outcome...
Since X=140 (maximum price), then Y=215 at maximum (140+75).
By pricing first-class seats at 215 and economy seats at 140, the airline can separate the two types.
Note that business travellers have a surplus of 85=300-215
First-class seats are sold at rebate price (215 vs. 300).
Total profit: (140-100)70+(215-150)30=4,750
№17 слайд
![Application Coach COACH sells](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img16.jpg)
Содержание слайда: Application: Coach
COACH sells designer handbags, wallets, shoes, jewelry etc. It has two methods of sale:
1. Full price at its own stores and at selected retailers. Full price only, never any discount. Average age of shopper is 35; average expenditure is $1,100.
2. Discount outlet stores that sell last season’s products for less. Stores usually 100km away from nearest full-price retailer. Average age of shopper is 45; average expenditure is $770.
№19 слайд
![Example Incentives for effort](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img18.jpg)
Содержание слайда: Example 2: Incentives for effort
Incentives for effort
manager/employees
Source of incomplete information: the manager cannot observe how hard employees work, consequently employees may not work as hard as they are supposed to (moral hazard).
Mechanism design: align the incentives of the employee to the incentives of the manager.
№20 слайд
![Moral hazard examples](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img19.jpg)
Содержание слайда: Moral hazard examples
Insurance
Health Insurance -- Insured are more willing to eat poorly, smoke etc.
Home Insurance -- less willing to install alarms and better locks
Car Insurance -- take more risks while driving
Work
Employees may not produce high effort, and still get paid.
№23 слайд
![Observable effort If the firm](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img22.jpg)
Содержание слайда: Observable effort
If the firm can observe effort, contracts are simple:
Either work hard or be fired.
To induce the manager to exert high effort, we must pay him at least $160k:
u= √0.16-0.1=0.3
If we pay less than $160k, he will resign and take the outside option
Simple contract: The employee is paid $160k in exchange for high effort.
№24 слайд
![Unobservable effort Suppose](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img23.jpg)
Содержание слайда: Unobservable effort
Suppose effort can not be observed.
The manager’s output may be observed, but not his effort level.
How to induce high effort?
Compensation contract must rely on something that can be directly observed and verified.
Project’s success or failure -- Related to effort.
Imperfect but relevant information.
Compensation rule:
Pay a basic wage (x) if the project fails
Pay more (y) if the project succeeds, such that y>x
№29 слайд
![Solving y . means y . , or k](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img28.jpg)
Содержание слайда: Solving
√y=0.6 means y=0.36, or $360k
√x=0.2 means x=0.04, or $40k
The manager is paid $40k if the project fails and $360k if it succeeds.
The reward for success must be large enough to compensate for:
the cost of effort (0.1)
the risk of receiving no bonus in case the project fails (50%)
№32 слайд
![Applications Store managers](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img31.jpg)
Содержание слайда: Applications
Store managers:
profitability of local outlet depends on store managers’ staffing and stocking decisions (effort is important).
Profits are easy to measure at store level.
CEOs:
compensation based on the stock price.
stock price is an imperfect measure of firm performance.
№33 слайд
![Case study Safelite Glass](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img32.jpg)
Содержание слайда: Case study: Safelite Glass Corporation
Largest installer of automobile glass in the US.
1994: CEO Garen Staglin instituted a new compensation scheme for glass installers.
A very competitive industry so costs and productivity really matters to get prices down and response time up.
№34 слайд
![Previous System Paid an](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img33.jpg)
Содержание слайда: Previous System
Paid an hourly wage rate and overtime.
Pay did not vary with number of windows installed.
Installer’s job is monitored and they are required to meet minimum quality standards.
Managers were worried that installers just did the minimum number of windows per week to keep their jobs.
№35 слайд
![New System Installers would](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img34.jpg)
Содержание слайда: New System
Installers would be paid each week the maximum of:
Amount they would have made according to the old hourly wage system
A fixed amount per job completed
Consequently, enterprising installers could do a lot better.
Possibility to sometimes double compensation compared to the old system.
№36 слайд
![Outcomes Increased](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img35.jpg)
Содержание слайда: Outcomes
Increased productivity per worker
Number of windows installed per week increased by 44%
Changed behaviour
Technicians didn’t drive as far for a job
Checked they had parts at beginning of day
Maintained tools
Unit labour costs fell from $44.43 to $35.24 per window
Average compensation per worker rose but productivity rose even more
№37 слайд
![Summary Incomplete](/documents_6/8ef90394a4a8ba1830257835e0766e9b/img36.jpg)
Содержание слайда: Summary
Incomplete information is the rule rather than the exception.
Less-informed players put systems in place to create motives for the more-informed player to take actions beneficial to them. (mechanism design).
Discriminate between buyers
Encourage effort
Mechanism design is not perfect; but it is an improvement for the less-informed compared to not using mechanism design.
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