pdworczak

Piotr
Dworczak

Piotr is an associate professor in the Economic Department at Northwestern University. His research interests include market, mechanism, and information design. Piotr's most recent work studies market-design responses to inequality.  

Starting in July 2022, Piotr will lead the ERC-funded project Inequality-aware Market Design (IMD) at GRAPE. The project studies optimal design of marketplaces in the presence of underlying inequalities between participants. The novelty of the approach lies in deploying a mechanism-design framework that identifies the optimal way to structure the market. 

 

 





Opublikowane | Published

  • An economic framework for vaccine prioritization | Quarterly Journal of Economics

    We propose an economic framework for determining the optimal allocation of a scarce supply of vaccines that become gradually available during a public health crisis, such as the Covid-19 pandemic. Agents differ in observable and unobservable characteristics, and the designer maximizes a social welfare function over all feasible mechanisms—accounting for agents’ characteristics, as well as their endogenous behavior in the face of the pandemic. The framework emphasizes the role of externalities and incorporates equity as well as efficiency concerns. Our results provide an economic justification for providing vaccines immediately and for free to some groups of agents, while at the same time showing that a carefully constructed pricing mechanism can improve outcomes by screening for individuals with the highest private and social benefits of receiving the vaccine. The solution casts light on the classic question of whether prices or priorities should be used to allocate scarce public resources under externalities and equity concerns.

    Piotr
    Dworczak
  • Redistributive allocation mechanisms | Journal of Political Economy

    Many scarce public resources are allocated below market-clearing prices (and sometimes for free). Such "non-market" mechanisms necessarily sacrifice some surplus, yet they can potentially improve equity by increasing the rents enjoyed by agents with low willingness to pay. In this paper, we develop a model of mechanism design with redistributive concerns. Agents are characterized by a privately observed willingness to pay for quality, and a publicly observed label. A market designer controls allocation and pricing of a set of objects of heterogeneous quality, and maximizes a linear combination of revenue and total surplus| with Pareto weights that depend both on observed and unobserved agent characteristics. We derive structural insights about the form of the optimal mechanism and describe how social preferences influence the use of non-market mechanisms.

    Piotr
    Dworczak
  • Redistribution through markets | Econometrica

    Policymakers frequently use price regulations as a response to inequality in the markets they control. In this paper, we examine the optimal structure of such policies from the perspective of mechanism design. We study a buyer-seller market in which agents have private information about both their valuations for an indivisible object and their marginal utilities for money. The planner seeks a mechanism that maximizes agents’ total utilities, subject to incentive and market-clearing constraints. We uncover the constrained Pareto frontier by identifying the optimal trade-off between allocative efficiency and redistribution. We find that competitive-equilibrium allocation is not always optimal. Instead, when there is substantial inequality across sides of the market, the optimal design uses a tax-like mechanism, introducing a wedge between the buyer and seller prices, and redistributing the resulting surplus to the poorer side of the market via lump-sum payments. When there is significant within-side inequality, meanwhile, it may be optimal to impose price controls even though doing so induces rationing.

    Piotr
    Dworczak

W toku | Work in progress

  • A mechanism-design approach to property rights

    We propose a framework for studying the optimal design of rights relating to the control of an economic resource - which we broadly refer to as property rights. An agent makes an investment decision, affecting her valuation for the resource, and then participates in a trading mechanism chosen by a principal in a sequentially rational fashion, leading to a hold-up problem. A designer - who would like to incentivize efficient investment and whose preferences may differ from those of the principal - can endow the agent with a menu of rights that determine the agent's set of outside options in the interaction with the principal. We characterize the optimal rights as a function of the designer's and the principal's objectives, and the investment technology. We find that optimal rights typically differ from a classical property right giving the agent full control over the resource. In particular, we show that the optimal menu requires at most two types of rights, including an option-to-own, which grants
    the agent control over the resource upon paying a pre-specified price.

    Piotr
    Dworczak
  • Incentive separability

    We consider a general mechanism-design environment in which the planner faces incentive constraints such as the ones resulting from agents' private information or ability to take hidden actions. We study the properties of optimal mechanisms when some decisions are incentive-separable: A set of decisions is incentive-separable if, starting at some initial allocation, perturbing these decisions along agents' indifference curves preserves incentive constraints. We show that, under regularity conditions, the optimal mechanism allows agents to make unrestricted choices over incentive-separable decisions, given some prices and budgets. Using this result, we extend and unify the Atkinson-Stiglitz theorem on the undesirability of differentiated commodity taxes and the Diamond-Mirrlees production efficiency result. We also demonstrate how the analysis of incentive separability can provide a novel justification for in-kind redistribution programs similar to food stamps.

    Piotr
    Dworczak
    Paweł
    Doligalski
    Joanna
    Krysta
    Filip
    Tokarski
  • Comparison of screening devices

    A designer relies on a costly screening device to allocate a set of goods, aiming to maximize a social welfare function. We provide conditions for one screening device to dominate another. We show that the performance of a screening device depends on two channels: (i) targeting effectiveness which measures the alignment between the implemented and desired assignments, and (ii) rent provision which determines the utilities of agents receiving the goods net of the screening costs. We link these two channels to distinct properties of the joint distribution of agents’ characteristics, leading to a number of simple empirical tests for comparing screening devices.

    Piotr
    Dworczak
  • A market-design response to the European energy crisis

    Due to surges in gas and electricity prices in Europe, many households will struggle to heat their homes this winter. This paper provides high-level guidance on designing a relief policy in a way that optimally trades off equity and efficiency. We argue that, contrary to conventional economic intuitions, an optimal policy may involve directly controlling prices. Because governments do not have perfect information about households' needs, price controls could improve the targeting of relief through screening out the most vulnerable by offering them discounts for reducing consumption. This could be achieved by “threshold price caps" that lower the price of all energy units below some consumption threshold and price units above the threshold at a higher rate.

    Piotr
    Dworczak
    Filip
    Tokarski
  • Equity-efficiency trade-off in quasi-linear environments

    I study a simple equity-efficiency problem:  A designer allocates a fixed amount of money to a population of agents differing in privately-observed marginal values for money. She can only screen agents by asking them to burn utility (through some socially wasteful activity). I show that giving a lump-sum payment is outperformed by a mechanism with utility burning when the agent with the lowest money-denominated cost of engaging in the wasteful activity has an expected value for money that exceeds the average value by more than a factor of two.

    Piotr
    Dworczak
  • Are simple mechanisms optimal when agents are unsophisticated?

    We study the design of mechanisms involving agents that have limited strategic sophistication. The literature has identified several notions of simple mechanisms in which agents can determine their optimal strategy even if they lack cognitive skills such as predicting other agents' strategies (strategy-proof mechanisms), contingent reasoning (obviously strategy-proof mechanisms), or foresight (strongly obviously strategy-proof mechanisms). We examine whether it is optimal for the mechanism designer who faces strategically unsophisticated agents to offer a mechanism from the corresponding class of simple mechanisms. We show that when the designer uses a mechanism that is not simple, while she loses the ability to predict play, she may nevertheless be better off no matter how agents resolve their strategic confusion.

    Piotr
    Dworczak