1. Ecosel as an Example of Subscription Games
Lecture 12 (5/24/2017)

2. The ECOSEL Concept Bundle 3 Bundle 31 2 Old-Forest: 534.79 ac Carbon:
25,087 MgC
Reserve Price:
$80
Bundle 1
Bundle 3
Bundle 3
Bundle 28
Bundle 31
Bundle 31
Bundle 43
Bundle 31
Old-Forest: ac
Carbon:
76,743 MgC
Reserve Price:
$291 2

3. The ECOSEL Concept (cont.)
Bundle 1 (Max Timber Profit)
Bundle 18
reserve price
Bundle 31 3

4. The Auction Component 4

5. Classification ECOSEL is a multi-unit, multi-dimension,
public good subscription game
with incomplete information
and asymmetric preferences
Subscription games: Bagnoli and Lippman 1989 5

6. Mathematical Characterization
Notation:
I = the set of bundles available in the auction (i indexes I);
K = the set of players who play the game (k indexes K);
= valuation or utility that Player k assigns to Bundle k;
= the final bid that Player k places on Bundle i; and
ri is the reserve price of Bundle i 6

7. Mathematical Characterization Cont.
Social Surplus:
Note: Social surplus does not depend on the value of final bids 7

8. Mathematical Characterization Cont.
Theoretical Welfare Maximum: 8

9. Mathematical Characterization Cont.
Winning Conditions and Efficiency: 9

10. Mathematical Characterization Cont.
Payoff Function for Player : 10

11. Mechanism Design Design options Maximize social surplus
Maximize seller revenue
Methods
Theoretical testing (game theory and simulation)
Empirical testing (experimental economics)
Software development 11

12. Mechanism Design cont. Design variables: Reserve price disclosure
Communication policy
Bid withdrawal policy
Refund policy
Number of bundles
Auction sequencing
And many more…. 12

13. Website

14. How it works

15. How it works

16. How it works