Long-term causal effects of economic mechanisms on agent incentives

TL;DR

This paper develops a causal inference framework to evaluate the long-term effects of economic mechanisms on agent incentives, accounting for strategic interactions and dynamic multi-agent systems, with application to kidney exchange mechanisms.

Contribution

It introduces a novel methodology that incorporates game-theoretic priors to estimate long-term causal effects of mechanisms on incentives in dynamic settings.

Findings

Game-theoretic prior improves long-term effect estimates.

Method captures strategic behavior in multi-agent systems.

Application to kidney exchanges demonstrates effectiveness.

Abstract

Economic mechanisms administer the allocation of resources to interested agents based on their self-reported types. One objective in mechanism design is to design a strategyproof process so that no agent will have an incentive to misreport its type. However, typical analyses of the incentives properties of mechanisms operate under strong, usually untestable assumptions. Empirical, data-oriented approaches are, at best, under-developed. Furthermore, mechanism/policy evaluation methods usually ignore the dynamic nature of a multi-agent system and are thus inappropriate for estimating long-term effects. We introduce the problem of estimating the causal effects of mechanisms on incentives and frame it under the Rubin causal framework \citep{rubin74, rubin78}. This raises unique technical challenges since the outcome of interest (agent truthfulness) is confounded with strategic interactions and, interestingly, is typically never observed under any mechanism. We develop a methodology to estimate such causal effects that using a prior that is based on a strategic equilibrium model. Working on the domain of kidney exchanges, we show how to apply our methodology to estimate causal effects of kidney allocation mechanisms on hospitals' incentives. Our results demonstrate that the use of game-theoretic prior captures the dynamic nature of the kidney exchange multiagent system and shrinks the estimates towards long-term effects, thus improving upon typical methods that completely ignore agents' strategic behavior.