Microeconomics
http://lists.repec.orgmailman/listinfo/nep-mic
Microeconomics
2016-06-25
Reputation Building under Uncertain Monitoring
http://d.repec.org/n?u=RePEc:cwl:cwldpp:2042&r=mic
We study a canonical model of reputation between a long- run player and a sequence of short-run opponents, in which the long-run player is privately informed about an uncertain state that determines the monitoring structure in the reputation game. The long-run player plays a stage-game repeatedly against a sequence of short-run opponents. We present necessary and sufficient conditions (on the monitoring structure and the type space) to obtain reputation building in this setting. Specifically, in contrast to the previous literature, with only stationary commitment types, reputation building is generally not possible and highly sensitive to the inclusion of other commitment types. However, with the inclusion of appropriate dynamic commitment types, reputation building can again be sustained while maintaining robustness to the inclusion of other arbitrary types.
Joyee Deb
Yuhta Ishii
2016-05
Endogenous Competence and a Limit to the Condorcet Jury Theorem
http://d.repec.org/n?u=RePEc:wvu:wpaper:16-12&r=mic
The seminal contribution, known as the Condorcet Jury Theorem, observes that under a specific set of conditions an increase in the size of a group tasked with making a decision leads to an improvement in the group's ability to make a good decision. An assumption under-appreciated is that the competency of the members of the group is assumed to be exogenous. In numerous applications, members of the group make investments to improve the accuracy of their decision making (e.g. pre-meeting efforts). We consider the collective action problem that arises. We show that if competence is endogenous, then increases in the size of the group encourages free riding. This trades off with the value of information aggregation. Thus, the value of increased group size is muted. Extensions illustrate that if committee members are allowed to exit/not participate, then the equilibrium committee size is reduced. Additionally, (non-decisive supermajority voting rules encourage the investments and, consequently, individual competence.
Bryan McCannon
Paul Walker
committee decision making, Condorcet Jury Theorem, endogenous competence, group size, majority voting, supermajority voting
2016-06
Competitive Search with Ex-post Opportunism
http://d.repec.org/n?u=RePEc:hai:wpaper:201607&r=mic
We consider a frictional market where buyers are uncoordinated and sellers cannot commit ex-ante to either a per-unit price or quantity of a divisible good. Sellers then can exploit their local monopoly power by adjusting prices or quantities once the local demand is realized. We find that when sellers can adjust quantities ex-post, there exists a unique symmetric equilibrium where the increase in the buyer-seller ratio leads to higher quantities and prices in equilibrium. When sellers post ex-ante quantities and adjust prices ex-post, a symmetric equilibrium does not exist.
Pere Gomis-Porqueras
Benoit Julien
Liang Wang
Competitive Search, Price Posting, Quantity Posting
Holding an Auction for the Wrong Project
http://d.repec.org/n?u=RePEc:pra:mprapa:72108&r=mic
How does the probability of being involved in a renegotiation during the execution of a procurement contract affect the behavior of the interested contractors? What are its implications for the optimal contractual choice made by the buyer? We investigate these issues in a context characterized by uncertainty about the adequateness of the project initially specified by the buyer. We determine under which circumstances the buyer may find it profitable to hold an auction for a project design which ex-ante does not have the highest probability of being adequate.
De Chiara, Alessandro
Asymmetric Auctions, Procurement, Renegotiation.
2015-06-04
Strategic schools under the Boston mechanism revisited
http://d.repec.org/n?u=RePEc:zbw:wzbmbh:spii2016204&r=mic
We show that Ergin & Sönmez's (2006) results which show that for schools it is a dominant strategy to truthfully rank the students under the Boston mechanism, and that the Nash equilibrium outcomes in undominated strategies of the induced game are stable, rely crucially on two assumptions. First, (a) that schools need to be restricted to find all students acceptable, and (b) that students cannot observe the priorities set by the schools before submitting their preferences. We show that relaxing either assumption eliminates the strategy dominance, and that Nash equilibrium outcomes in undominated strategies for the simultaneous induced game in case (a) and subgame perfect Nash equilibria in case (b) may contain unstable matchings. We also show that when able to manipulate capacities, schools may only have an incentive to do so if students submit their preferences after observing the reported capacities.
Bó, Inácio
Heller, C.-Philipp
Mechanism Design,Two-Sided Matching,Boston Mechanism,School Choice
2016
Strategy-Proofness and Efficiency for Non-quasi-linear Common-Tiered-Object Preferences: Characterization of Minimum Price Rule
http://d.repec.org/n?u=RePEc:dpr:wpaper:0971&r=mic
We consider the allocation problem of assigning heterogeneous objects to a group of agents and determining how much they should pay. Each agent receives at most one object. Agents have non-quasi-linear preferences over bundles, each consisting of an object and a payment. Especially, we focus on the cases: (i) objects are linearly ranked, and as long as objects are equally priced, agents commonly prefer a higher ranked object to a lower ranked one, and (ii) objects are partitioned into several tiers, and as long as objects are equally priced, agents commonly prefer an object in the higher tier to an object in the lower tier. The minimum price rule assigns minimum price (Walrasian) equilibrium to each preference profile. We establish: (i) on a common-object-ranking domain, the minimum price rule is the only rule satisfying efficiency, strategy-proofness, individual rationality and no subsidy, and (ii) on a common-tiered-object domain, the minimum price rule is the only rule satisfying these four axioms.
Yu Zhou
Shigehiro Serizawa
2016-05
A "fractal" solution to the chopstick auction
http://d.repec.org/n?u=RePEc:zur:econwp:229&r=mic
The present paper constructs a novel solution to the chopstick auction, and thereby disproves a conjecture of Szentes and Rosenthal (Games and Economic Behavior, 2003a, 2003b). In contrast to the existing solution, the identi fied equilibrium strategy allows a simple and intuitive characterization. Moreover, its best-response set has the same Hausdorff dimension as its support, which may be seen as a robustness property. The analysis also reveals some new links to the literature on Blotto games.
Christian Ewerhart
Chopstick auction, exposure problem, self-similarity, blotto games
2016-06
Implementing Tax Coordination and Harmonization through Voluntary Commitment
http://d.repec.org/n?u=RePEc:cdi:wpaper:1815&r=mic
Pareto-improving tax coordination, and even tax harmonization, are Nash implementable between sovereign countries without any supranational tax authorities. Following Schelling's approach, we consider voluntary commitment, which constrains countries' respective tax rate choices. We develop a commitment game where countries choose their strategy sets in preliminary stages and play consistently during the final one. We determine the set of tax rates, which are implementable by commitment. This allows countries to reach Pareto-improving equilibriums. We also establish that complete tax harmonization may emerge as the subgame perfect Nash equilibrium of the commitment game as long as the asymmetry between countries remains limited. Our analysis contributes to the rationale of tax ranges and, more broadly, of non binding but self-enforcing commitments (not equivalent to cheap talk) in the context of tax competition.
Grégoire ROTA-GRAZIOSI
Tax coordination, Commitment.
2016-06
Decisiveness, Peace, and Inequality in Games of Conflict
http://d.repec.org/n?u=RePEc:gra:wpaper:16/04&r=mic
In this paper, we study two games of conflict characterized by unequal access to productive resources and finitely repeated interaction. In the Noisy Conflict game, the winner of the conflict is randomly determined depending on a players’ relative conflict expenditures. In the Decisive Conflict game, the winner of the conflict is simply the player who spends more on conflict. By comparing behavior in the two games, we evaluate the effect that “decisiveness” has on the allocation of productive resources to conflict, the resulting inequality in the players’ final wealth, and the likelihood that players from long-lasting peaceful relations..
Juan A. Lacomba
Francisco M. Lagos
Ernesto Reuben
Frans Van Winden
conflict; decisiveness; inequality; peace; rent seeking
2016-05-30
Entry under an information-gathering monopoly
http://d.repec.org/n?u=RePEc:jau:wpaper:2016/09&r=mic
The effects of information-gathering activities on a basic entry model with asymmetric information are analyzed. In the basic entry game, an incumbent monopoly faces potential entry by one firm without knowing with certainty whether this potential entrant is weak or strong. If the entrant decides to enter, the monopoly must compete with him and decide whether to accommodate or to fight. To include information-gathering activities, it is considered that the monopoly has access to an Intelligence System (IS) of a certain precision (exogenous and common knowledge) that generates a noisy signal about the entrant's type. When the monopoly believes that the entrant is weak, the probability of market entry increases only for the relatively inaccurate precision of the IS and decreases for relatively accurate precision. If the monopoly is not sure about the entrant’s level of strength or considers him to be strong, the information-gathering activities either have no effect on market entry or decrease the probability of entry. Not only do these results suggest that to inform the entrant credibly about information-gathering activities can be considered as a monopoly’s entry deterrence strategy, but they also provide give an idea about when to allow or not allow monopoly’s information-gathering activities.
Alex Barrachina
Entry Deterrence, Information-Gathering, Asymmetric Information, Credible Communication
2016
Virtual Demand and Stable Mechanisms
http://d.repec.org/n?u=RePEc:lau:crdeep:16.11&r=mic
We study conditions for the existence of stable, strategy-proof mechanisms in a many-to-one matching model with discrete salary space (the discrete Kelso-Crawford model). Workers and firms want to match many-to-one and agree on the terms of their match. Firms demand different sets of workers at different salaries. Workers have preferences over different firm-salary combinations. Workers' preferences are monotone in salaries. We show that for this model a descending auction mechanism is the only candidate for a stable mechanism that is strategy-proof for workers. Moreover, we identify a maximal domain of demand functions for firms, such that the mechanism is stable and strategy-proof. For each demand function in our domain, we can construct a related demand function that we call a virtual demand function. Replacing demand functions by virtual demand functions will not change the outcome of our mechanism. Known conditions (gross substitutability and the law of aggregate demand) can be applied to the virtual demand profile to check whether the mechanism is stable and strategy-proof. Our result gives a sense in which gross substitutability and the law of aggregate demand are necessary for the existence of a stable and strategy-proof mechanism. In the special case where demand functions are generated by quasi-linear profit functions, demand functions and virtual demand functions agree. Thus for this case, our domain reduces to the domain of demand functions under which workers are gross substitutes.
Jan Christoph Schlegel
Matching with contracts; Matching with salaries; Gross Substitutes; Virtual Demand
2016-06
"Rationalizable Implementation of Correspondences"
http://d.repec.org/n?u=RePEc:bro:econwp:2016-4&r=mic
We come close to characterizing the class of social choice correspondences that are implementable in rationalizable strategies. We identify a new condition, which we call set-monotonicity, and show that it is necessary and almost sufficient for rationalizable implementation. Set-monotonicity is much weaker than Maskin monotonicity, which is the key condition for Nash implementation and which also had been shown to be necessary for rationalizable implementation of social choice functions. Set-monotonicity reduces to Maskin monotonicity in the case of functions. We conclude that the conditions for rationalizable implementation are not only starkly different from, but also much weaker than those for Nash implementation, when we consider social choice correspondences.
Takashi Kunimoto
Roberto Serrano
2016