Microeconomics
http://lists.repec.org/mailman/listinfo/nep-mic
Microeconomics
2019-02-18
Incorporating Belief-Dependent Motivation in Games
http://d.repec.org/n?u=RePEc:igi:igierp:642&r=mic
Psychological game theory (PGT), introduced by Geanakoplos, Pearce & Stacchetti (1989) and signi cantly generalized by Battigalli & Dufwenberg (2009), extends the standard game theoretic framework by letting playersutility at endnodes depend on their interactive beliefs. While it is understood that a host of applications that model and/or test the role of emotional and other psychological forces nd their home in PGT, the framework is abstract and comprises complex mathematical objects, such as playersin nite hierarchies of beliefs. Thus, PGT provides little guidance on how to model speci c belief-dependent motivations and use them in game theoretic analysis. This paper takes steps to fi ll this gap. Some aspects are simplifi ed e.g., which beliefs matter but others are refi ned and brought closer to applications by providing more structure. We start with belief-dependent motivations and show how to embed them in game forms to obtain psychological games. We emphasize the role of time and of the perception of players' intentions. We take advantage of progress made on the foundations of game theory to expand and improve on PGT solution concepts. JEL classi fication: C72; C73; D81; D82; D92Keywords: Psychological game theory; Belief-dependent motivation; Intentions; Time; Rationalizability; Self-confi rming equilibrium; Bayesian sequential equilibrium
Pierpaolo Battigalli
Roberto Corrao
Martin Dufwenberg
2019
INFORMATIVE ADVERTISING IN MONOPOLISTICALLY COMPETITIVE MARKETS
http://d.repec.org/n?u=RePEc:pra:mprapa:92126&r=mic
In their seminal paper Grossman and Shapiro (1984) find that informative advertising is socially excessive in an oligopoly (entry is also socially excessive). However, the analysis assumed that all consumers receive at least one advertisement. Christou and Vettas (2008), among others, present counter-examples in alternative settings, showing when the assumption does not hold, the equilibrium advertising may, instead, be inefficiently low. Christou and Vettas (2008) also show there may be non-existence due to discontinuities from undercutting, that quasiconcavity may not hold, and present examples in which the equilibrium does not exist as firms would deviate to a higher price. We revisit the question by modeling firms (like consumers) as a continuum, which mitigates the discontinuity that exists in both papers and allows the general analysis to include the cases when some consumers receive no advertisements. As a result, we are able to derive explicit and intuitive conditions for an equilibrium. More importantly, we find, instead, that advertising is socially insufficient regardless of the fraction of the consumers who receive an ad, including when all consumers receive at least one ad. We also find that there is insufficient entry instead of excess entry. We provide intuition for the difference between our and previous results.
Creane, Anthony
Manduchi, Agostino
Informative advertising, product differentiation, monopolistic competition, welfare.
2019-02-11
Social Acceptability of Condorcet Committees
http://d.repec.org/n?u=RePEc:gat:wpaper:1906&r=mic
We define and examine the concept of social acceptability of committees, in multi-winner elections context. We say that a committee is socially acceptable if each member in this committee is socially acceptable, i.e., the number of voters who rank her in their top half of the candidates is at least as large as the number of voters who rank her in the least preferred half, otherwise she is unacceptable. We focus on the social acceptability of Condorcet committees, where each committee member beats every non-member by a majority, and we show that a Condorcet committee may be completely unacceptable, i.e., all its members are unacceptable. However, if the preferences of the voters are single-peaked or single-caved and the committee size is not "too large" then a Condorcet committee must be socially acceptable, but if the preferences are single-crossing or group-separable, then a Condorcet committee may be socially acceptable but may not. Furthermore, we evaluate the probability for a Condorcet committee, when it exists, to be socially (un)acceptable under Impartial Anonymous Culture (IAC) assumption. It turns to be that, in general, Condorcet committees are significantly exposed to social unacceptability.
Mostapha Diss
Muhammad Mahajne
Voting, Multiwinner Elections, Committee, Condorcet, Social Acceptability
2019
Research funding and price negotiation for new drugs
http://d.repec.org/n?u=RePEc:gat:wpaper:1902&r=mic
Pharmaceutical innovations result from the successful achievement of basic research, produced by an upstream lab, and applied research, produced by a downstream lab. We focus on the negotiation process to finance basic research by setting public and private grants and to agree on the final price of a new drug. We show that exclusive funding of basic research is desirable. To increase consumers’ surplus and reduce negotiated prices for new drugs, basic and applied research should be integrated if the lab producing applied research has a relatively large bargaining power. When instead the health authority has the larger bargaining power, integration with the producer of basic research increases negotiated prices for new drugs and should be avoided, unless the gain in bargaining power after the integration is extremely high.
Francesca Barigozzi
Izabela Jelovac
Pharmaceutical innovation, drug prices, negotiation, basic research, applied research
2019
The role of markets and preferences on resource conflicts
http://d.repec.org/n?u=RePEc:str:wpaper:1819&r=mic
This article investigates a generalized resource curse. The existing empirical and theoretical literature on the resources-conflict nexus argues that higher resource rents (or a lower opportunity cost of appropriation) exacerbates conflict. We demonstrate that these widely accepted results rely on two fundamental elements relating to market conditions and agentsâ€™ preferences. When resource prices are treated as exogenous, we obtain the conventional result, where an increase in the profitability of either the appropriative or productive activity incentivizes agents to reorient efforts accordingly. However, when the price of the contestable resource is endogeneously set (i.e., locally determined), we find the opposite result may hold depending on the nature of agentsâ€™ preferences: conflict can increase when the contestable resource becomes scarcer. Intuitively, if the contestable resource is abundant, playersâ€™ relative marginal utility of the resource will be low, thereby resulting in low relative prices. Increases in the size of the contestable resource will lead to a reduction in appropriation effort, whereas scarcities will be conducive to conflict. We show an identical result is obtained if markets are absent for the contestable resource, such as when considering civil liberties and political rights.
Alex Dickson
Ian A MacKenzie
Petros G Sekeris
Resource curse, conflict
2018-12
Local Circularity of Six Classic Price Indexes
http://d.repec.org/n?u=RePEc:qld:uqcepa:131&r=mic
In this paper we characterize local circularity for the Laspeyres, Paasche and Fisher price indexes. In the first two cases we begin by deriving a sufficient condition for achieving circularity that establishes that at least one of two proposed equalities must hold. We end up showing that the sufficient condition is also necessary. We continue with the Fisher price index that is the geometric mean of the two, and we find a sufficient circularity condition that is a direct consequence of the corresponding sufficient conditions for its two component indexes. However we also show that, unlike its Laspeyres and Paasche components, this sufficient circularity condition for the Fisher price index is not necessary. We reach different conclusions when we consider the circularity properties of the geometric Laspeyres, geometric Paasche and Törnqvist price indexes, for which none of the proposed sufficient conditions is necessary. Throughout we distinguish local circularity, which all six price indexes satisfy, from global circularity, which none of the price indexes satisfies.
Jesus T. Pastor
C. A. Knox Lovell
price index, local circularity
2019-02
The relation between degrees of belief and binary beliefs: A general impossibility theorem
http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-01999527&r=mic
Agents are often assumed to have degrees of belief ("credences") and also binary beliefs ("beliefs simpliciter"). How are these related to each other? A much-discussed answer asserts that it is rational to believe a proposition if and only if one has a high enough degree of belief in it. But this answer runs into the "lottery paradox": the set of believed propositions may violate the key rationality conditions of consistency and deductive closure. In earlier work, we showed that this problem generalizes: there exists no local function from degrees of belief to binary beliefs that satisfies some minimal conditions of rationality and non-triviality. "Locality" means that the binary belief in each proposition depends only on the degree of belief in that proposition, not on the degrees of belief in others. One might think that the impossibility can be avoided by dropping the assumption that binary beliefs are a function of degrees of belief. We prove that, even if we drop the "functionality" restriction, there still exists no local relation between degrees of belief and binary beliefs that satisfies some minimal conditions. Thus functionality is not the source of the impossibility; its source is the condition of locality. If there is any non-trivial relation between degrees of belief and binary beliefs at all, it must be a "holistic" one. We explore several concrete forms this "holistic" relation could take.
Franz Dietrich
Christian List
binary beliefs (yes/no),subjective probabilities,construction of binary beliefs from subjective probabilities,impossibility theorem,croyances binaires (oui/non),probabilités subjectives,construction de croyances binaires à partir des probabilités subjectives,théorème d'impossibilité
2019-01
Stackelberg equilibrium of dynamic symmetric multi-players zero-sum game with a leader and followers without differentiability of payoff functions
http://d.repec.org/n?u=RePEc:pra:mprapa:91898&r=mic
This paper studies a Stackelberg type symmetric dynamic $n$-players zero-sum game. There is one leader and $n-1$ followers. Players have the symmetric payoff functions. The game is a two-stages game. In the first stage the leader determines the value of its strategic variable. In the second stage the followers determine the values of their strategic variables given the value of the leader's strategic variable. In the static game, on the other hand, all players simultaneously determine the values of their strategic variable. We do not assume differentiability of payoff functions. This paper shows that the sub-game perfect equilibrium of the Stackelberg type symmetric dynamic zero-sum game is equivalent to the equilibrium of the static game if and only if the game is fully symmetric.
Tanaka, Yasuhito
Stackelberg equilibrium, leader, follower, dynamic symmetric zero-sum game
2019-02-02
Strategic Product Design under Duopoly
http://d.repec.org/n?u=RePEc:hal:journl:hal-01992047&r=mic
Two duopolists first decide in which proportions to incorporate in their product two different Lancasterian characteristics and then compete in quantities or prices. In the Cournot case, minimum differentiation obtains at equilibrium whatever the degree of substituability between the characteristics. In the Bertrand one, the equilibrium depends crucially on the degree of substituability/complementarity between the two characteristics. Maximal differential obtains if and only if the characteristics are strong enough substitutes. On the contrary as characteristics become closer and closer complements one obtains in the limit a minimal differentiation result. JEL Codes: L13. Keyword: Horizontal Product Differentiation, Lancasterian Characteristics.
Didier Laussel
Horizontal Product Differentiation,Lancasterian Characteristics.,Duopoly
2018
Public-Private Partnerships with Infrastructure Funds: an Optimal Incentive Device
http://d.repec.org/n?u=RePEc:eti:dpaper:18085&r=mic
We study the scheme of public-private partnerships (PPP) from an incomplete contracting perspective. We show that PPP can implement an efficient level of investment in a public project with externalities through a bargaining game played by the public sector and the delegated private agent, which functions as a device in internalizing the externalities. Also, we analyze the governance role of an infrastructure fund in PPP through its interaction with the financial market.
ODA Keiichiro
2018-12
The good MOOC and the universities
http://d.repec.org/n?u=RePEc:gat:wpaper:1905&r=mic
We propose a model to analyze competition between an on-line course and a traditional brick-and-mortar supply for higher education. The brick and mortar supplier is physically located and students pay a transportation cost to attend the traditional course. On the contrary, the on-line course is free, without transportation cost but students incurred a fixed homogeneous disutility when choosing this type of course. We derive the optimal fee policy of a single university as a function of its location and the fixed cost associated with the on-line course. We also study the impact of distant learning on the competition between two brick and mortar universities. One university is assumed to enjoy a central position, whereas the other one is located at the extreme left of the town. We discuss equilibria and market sharing in non-regulated (i.e pure fee competition) and regulated (i.e. quantity competition) settings. Finally, public issues are addressed. In particular, the socially optimal provision of MOOC and the supply of MOOC by universities are carefully discussed.
Emilie Dargaud
Frédéric Jouneau-Sion
On-line learning, spatial competition
2019