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Operations Management / (M.Sc.(Operation Research))

This thesis consists of three papers which contribute to the literatures on regulation and organizational economics.<p><p><p>The first part of the dissertation addresses questions related to the procurement decisions of private and public organizations. In particular it focuses on how the anticipation of renegotiating the contractual terms during the execution of a procurement contract affects the initial arrangements between the parties. Renegotiation may involve the design itself of the goods which are procured, and not just their price or the time of their delivery. A plausible explanation for its pervasiveness is the existence of transaction costs which prevents contracts from being complete. This is especially true for more sophisticated and customized goods, such as new infrastructures or cars' and aircrafts' parts or components. Ex-post these goods may fail to fit the buyer's specific needs and/or may exhibit flaws unforeseen at the planning stage.<p><p><p>In the first two chapters, I show that the anticipation of ex-post adaptations has critical implications for many procurement choices, such as that of the contractual agreement, the award mechanism, and the delegation of the design task to the suppliers. Therefore, a proper inclusion of design failures into the analysis of procurement contracts can help broaden our understanding of the wide variety of procurement modes and outcomes observed in the real world. My analysis offers an explanation for the procurement practices adopted in complex manufacturing and construction industries. Moreover, it can provide useful guidance for public procurement. Governments face tight restrictions in their choices of the procurement modes and for this reason they should carefully evaluate whether or not to adopt the best practices of the private sector.<p><p><p>The second part of the dissertation concerns the optimal design of an organization. In many organizations the task of evaluating an agent's performance is delegated to a third party, a supervisor, who can opportunistically misreport information. The question of how the provision of incentives in hierarchies is affected by the supervisor's opportunism is of great importance since it can improve our understanding of the internal organization of firms and can have broad applications to regulatory design.<p><p><p>The third chapter of the thesis, co-authored with Luca Livio (ECARES, FNRS), contributes to this line of research by studying the optimal task a supervisor should be charged with in the presence of corruption concerns. We highlight the existence of a trade-off between monitoring the agent's effort choice and auditing it ex-post, which arises when the two faces of corruption, collusion and extortion, are present. / Doctorat en Sciences économiques et de gestion / info:eu-repo/semantics/nonPublished

In this thesis we define and study the existence of an equilibrium situation in which producers maximize their profits relative to the production vectors in their production sets, consumers satisfy their preferences in their consumption sets under certain budget constraint, and for every commodity total demand equals total supply. This competitive equilibrium situation is referred to as the Walrasian equilibrium. The existence of this equilibrium is investigated from a various mathematical points of view. These include microeconomic theory, simplicial spaces, global analysis and lattice theory.

Advertising is the economic engine of the internet. It allows online platforms to fund services that are free at the point of use, while providing businesses the opportunity to target their ads at relevant users. The mechanism of choice for selling these advertising opportunities is real-time auctions: whenever a user visits the platform, an auction is run among interested advertisers, and the winner gets to display their ad to the user. The entire process runs in milliseconds and is implemented via automated algorithms which bid on behalf of the advertisers in every auction. These automated bidders take as input the high-level objectives of the advertiser like value-per-click and budget, and then participate in the auctions with the goal of maximizing the utility of the advertiser subject to budget constraints. Thus motivated, this thesis develops a theory of bidding in auctions under budget constraints, with the goal of informing the design of automated bidding algorithms and analyzing the market-level outcomes that emerge from their simultaneous use. First, we take the perspective of an individual advertiser and tackle algorithm-design questions. How should one bid in repeated second-price auctions subject to a global budget constraint? What is the optimal way to incorporate data into bidding decisions? Can data be incorporated in a way that is robust to common forms of variability in the market? As we analyze these questions, we go beyond the problem of bidding under budget constraints and develop algorithms for more general online resource allocation problems. In Chapter 2, we study a non-stationary stochastic model of sequential auctions, which despite immense practical importance has received little attention, and propose a natural algorithm for it. With access to just one historical sample per auction/distribution, we show that our algorithm attains (nearly) the same performance as that possible under full knowledge of the distributions, while also being robust to distribution shifts which typically occur between the sampling and true distributions. Chapter 3 investigates the impact of uncertainty about the total number of auctions on the performance of bidding algorithms. We prove upper bounds on the best-possible performance that can be achieved in the face of such uncertainty, and propose an algorithm that (nearly) achieves this optimal performance guarantee. We also provide a fast method for incorporating predictions about the total number of auctions into our algorithm. All of our proposed algorithms implement some version of FTRL/Mirror-Descent in the dual space, making them ideal for large-scale low-latency markets like online advertising. Next, we look at the market as a whole and analyze the equilibria which emerge from the simultaneous use of automated bidding algorithms. For example, we address questions like: Does an equilibrium always exist? How does the auction format (first-price vs second-price) impact the structure of the equilibria? Do automated bidding algorithms always efficiently converge to some equilibrium? What are the social welfare properties of these equilibrium outcomes? We systematically examine such questions using a variety of tools, ranging from infinite-dimensional fixed-point arguments for proving existence of structured equilibria, to computational complexity results about finding them. In Chapter 4, we start by establishing the existence of equilibria based on pacing—a practically-popular and theoretically-optimal budget management strategy—for all standard auctions, including first-price and second-price auctions. We then leverage its structure to establish a revenue equivalence result and bound the price of anarchy of liquid welfare. Chapter 5 looks at the market from a computational lens and investigates the complexity of finding pacing-based equilibria. We show that the problem is PPAD complete, which in turn implies the impossibility of polynomial-time convergence of any pacing-based automated bidding algorithms (under standard complexity-theoretic assumptions). Finally, in Chapter 6, we move beyond pacing-based strategies and investigate throttling, which is another popular method for managing budgets in practice. Here, we describe a simple tâtonnement-style algorithm which efficiently converges to an equilibrium in first-price auctions, and show that no such algorithm exists for second-price auctions (under standard complexity-theoretic assumptions). Furthermore, we prove tight bounds on the price of anarchy for liquid welfare, and compare platform revenue under throttling and pacing.

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The interaction of theoretical computer science with game theory and economics has resulted in the emergence of two very interesting research directions. First, it has provided a new model for algorithm design, which is to optimize in the presence of strategic behavior. Second, it has prompted us to consider the computational aspects of various solution concepts from game theory, economics and auction design which have traditionally been considered mainly in a non-constructive manner. In this thesis we present progress along both these directions. We first consider optimization problems that arise in the design of combinatorial auctions. We provide an online algorithm in the important case of budget-bounded utilities. This model is motivated by the recent development of the business of online auctions of search engine advertisements. Our algorithm achieves a factor of $1-1/e$, via a new linear programming based technique to determine optimal tradeoffs between bids and budgets. We also provide lower bounds in terms of hardness of approximation in more general submodular settings, via a PCP-based reduction. Second, we consider truth-revelation in auctions, and provide an equivalence theorem between two notions of strategy-proofness in randomized auctions of digital goods. Last, we consider the problem of computing an approximate Nash equilibrium in multi-player general-sum games, for which we provide the first subexponential time algorithm.

This dissertation consists of three independent essays. We briefly introduce these essays in chapter 1 and leave a comprehensive introduction to each essay. Chapter 2 considers a vertically separated industry where production takes time and vertical mergers shorten production time. We investigate the impact of vertical mergers on the downstream firms' ability to collude and show that vertical mergers facilitate downstream collusion. Chapter 3 provides a theoretical foundation for a puzzling empirical observation that advertising follows an inverted U shape for some new products. Chapter 4 analyzes an incumbent's response to a competitive entry. We show that if the quality of the entrant is uncertain, the incumbent can "jam" the quality signalling of the entrant. Finally, chapter 5 summarizes main conclusions of three essays. / text

[Truncated abstract] The core objective of this thesis is summarised by its title: “Understanding the World Wool Market: Trade, Productivity and Grower Incomes”. Thus, we wish to aid understanding of the economic mechanisms by which the world wool market operates. In doing so, we analyse two issues trade and productivity and their effect on, inter alia, grower incomes. To achieve the objective, we develop a novel analytical framework, or model. The model combines two long and rich modelling traditions: the partial-equilibrium commodity-specific approach and the computable-general-equilibrium approach. The result is a model that represents the world wool market in detail, tracking the production of greasy wool through five off-farm production stages ending in the production of wool garments. Capturing the multistage nature of the wool production system is a key pillar in this part of the model . . . The estimated welfare gain for China is 0.1% of real income; this is a significant welfare gain. For three losing regions Italy, Germany and Japan the results are robust and we can be highly confident that these regions are the largest losers from the complete removal of 2005 wool tariffs. In both wool tariff liberalisation scenarios, regions whose exports are skewed towards wool textiles and garments gain the most as it is these wool products that have the highest initial tariff rates. The overall finding of this work is that a sophisticated analytical framework is necessary for analysing productivity and trade issues in the world wool market. Only a model of this kind can appropriately handle the degree of complexity of interactions between members (domestic and foreign) of the multistage wool production system. Further, including the nonwool economy in the analytical framework allows us to capture the indirect effects of changes in the world wool market and also the effects on the nonwool economy itself.