Mitchell Watt

We introduce markup equilibrium—an extension of Walrasian equilibrium in which consumers pay a fixed percentage markup over producer prices. In quasilinear markets, markup equilibria exist despite non-convexities. They are resource-feasible and envy-free, incur no budget deficit, and require little more communication and computation than the ordinary Walrasian equilibrium. The associated markup mechanism is asymptotically incentive-compatible. We also introduce a Bound-Form First Welfare Theorem, which states that for any feasible allocation, the welfare loss compared to the first-best is bounded, using any price vector, by the sum of the resulting (i) budget surplus and (ii) rationing losses suffered by the participants. Using producer prices, this bound implies that any markup equilibrium with a small markup and few unallocated goods is nearly efficient.

This paper studies how small perturbations—misreports, supply shocks, or changes in market participants—affect Walrasian equilibrium prices in finite exchange economies. A sequence of economies is perturbation-proof if the price effect of any bounded perturbation shrinks in proportion to market size. Perturbation-proofness captures both robustness of equilibrium prices to small misspecifications and approximate incentive-compatibility of Walrasian mechanisms. Strong monotonicity is the key driver of this property: it is necessary and sufficient for perturbation-proofness in replica economies and implies it with high probability in i.i.d. random economies. Applying these results to indivisible goods markets shows that sufficient heterogeneity in buyers’ demand yields perturbation-proofness even when individual demand is inelastic. Previously circulated as Strong Monotonicity and Perturbation-Proofness of Exchange Economies.

Many matching markets are suspected to suffer from inefficient levels of congestion. We show this is a real concern in an online labor market and present results of two market-wide experiments designed to reduce congestion.

The first intervention introduced a “soft” cap on the number of applications that could be received for a job opening and the number of days applications were accepted. Despite reducing the number of applications per opening, the intervention did not reduce the hiring probability or reported match quality. A second, more complex intervention that attempted to price externalities directly failed. We find that application fees introduced by the platform reduced hire rates and competition among candidates, suggesting that these fees may have been miscalibrated or higher than socially efficient.

This paper studies how topping up—allowing recipients of in-kind transfers to supplement subsidized consumption in a private market—affects optimal redistribution. Consumers can access a competitive private market, while a social planner offers an alternative nonlinear price schedule. We show that the effect of topping up depends on the correlation between redistributive priority and demand. When the correlation is positive, topping up does not affect the optimal mechanism. When the correlation is negative, topping up weakens screening and reduces redistribution. At the extensive margin, topping up reduces the set of environments in which intervention is optimal. At the intensive margin, topping up weakly reduces both the scope of a free public option and the mass of consumers served, and shifts redistribution away from the consumers with the highest redistributive priority. We characterize the optimal mechanisms and show how topping up changes the comparative statics of optimal redistribution with respect to redistributive priorities.