On Monday, February 15th, ISET and the Faculty of Business and Economics of the University of Lausanne (Switzerland) jointly organized a workshop on economic theory and related fields. The workshop took place in the conference hall at ISET from the afternoon until the late evening, interrupted only by various coffee breaks, which gave the attending students from ISET and HEC Lausanne the opportunity to connect with the presenters, build up their professional networks, and discuss frontier research in economics.

The most senior speakers of the workshop were international academics associated with ISET and HEC Lausanne.

Daniel Levy, who is teaching at ISET but has his main appointment at Bar Ilan University in Israel, spoke about hidden price increases. Yet, how can companies increase prices without customers noticing it? They do it by decreasing the package sizes while not altering the package prices. The paper he presented fathomed this phenomenon empirically and asked how consumers react to such changes.

Battal Dogan from HEC Lausanne discussed how affirmative action measures can be implemented in a centralized matching mechanism, for example in school choice. His work relates to the 2012 Nobel Prizes that were awarded to Alvin Roth and Lloyd Shapley for their contributions to game theory.

Motty Perry, whose main appointment is at the University of Warwick but who regularly teaches game theory at ISET, presented a paper that analyzes how one can extract information in crowdsourcing systems. For example, if an app reports the driving time people need to go to their work and uses this information to make route recommendations to other drivers, there must be some people who are recommended to travel on unknown roads. Otherwise, there will be no information about the traffic conditions on those roads, and the recommendations that are made to other drivers cannot be optimal. In the paper, which is under revision and resubmission at the Journal of Political Economy, one of the three highest-ranked economics journals of the world, Professor Perry proposes a mechanism that incentivizes commuters to follow the route recommendation even if sometimes they will be sent into unchartered territory, i.e. recommended to drive on a new road where traffic conditions are unknown.

Florian Biermann represented the local ISET faculty at the workshop with a game-theoretic model of friendship networks which he had co-authored with two of his former master’s thesis students (Saba Devdariani, recently admitted to the Ph.D. program of Caltech, California, the USA, and Nikoloz Pkhakadze, Ph.D. candidate at Georgetown University in DC, USA). If people have a limited “friendship potential”, i.e. they cannot be friends with everyone, how would their preferences over different people translate into a network of friendship connections? The model answers this question and allows for predictions on how such a network would look like. The predictions can be tested empirically in real-world friendship networks.

Among the presenters were also several students from HEC Lausanne and ISET. Panos Panagiotis, a Ph.D. student at HEC Lausanne, presented his thesis work, which is about preference aggregation, a classic problem in economics. Laura Manukyan and Gela Gelashvili, students at ISET, discussed the respective ideas of their master’s theses. Laura will analyze whether private settlement of conflicts can be fostered if a court “threatens” to impose a decision if no solution was found after a certain time. Gela Gelashvili presented an extension of a famous model of housing markets. The 1974 paper by Shapley (the already mentioned Nobel Prize Winner of 2012!) and Scarf offers a mechanism that leads to an allocation of houses to agents which is optimal in some sense. Gela attempts to improve the mechanism and make it more realistic by introducing money into the model, which without doubt plays an important role in real-world housing markets.