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on Game Theory |
| By: | Marco LiCalzi (Dept. of Management, Università Ca' Foscari Venice); Roland Muhlenbernd (Dept. of Management, Università Ca' Foscari Venice) |
| Abstract: | We study a model where agents face a continuum of two-player games and categorize them into a finite number of situations to make sense of their complex environment. Each agent can cooperate or defect, conditional on the perceived category. Agents may not share the same categorization. The games are fully ordered by one parameter, interpreted as the temptation to break joint cooperation by defecting. We prove that in equilibrium agents must share the same categorization. Most equilibria achieve less cooperation than it would be possible if agents could fully discriminate games. All the equilibira are evolutionary stable, but the only stochastically stable profile leads to defection everywhere, destroying all opportunities for cooperation. We then study agents' social learning when they imitate successful players over similar games, but lack any information about the categorization of other players. We show how imitation leads to a shared categorization that achieves higher cooperation than under full discrimination. |
| Keywords: | categorization, cooperation, evolutionary stability, learning by imitation, prisoners' dilemma, stag hunt |
| JEL: | C72 D91 C73 D83 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:vnm:wpdman:162&r=gth |
| By: | Andersson, Lina (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | This paper uses the framework of stochastic games to propose a model of emotions in repeated interactions. An emotional player, who transitions between different states of mind as a response to observed actions taken by the other player, can be in either a friendly, a neutral, or a hostile state of mind. The state of mind determines the player's psychological payoff that together with a material payoff constitutes his utility. In the friendly (hostile) state of mind the player has a positive (negative) concern for the other player's material payoffs. Emotions can both facilitate and obstruct cooperation in the repeated prisoners' dilemma game. If finitely repeated, then a traditional player (who cares only for own material payoffs) can have an incentive to manipulate an emotional player into a friendly state of mind for future gains. If infinitely repeated, then two emotional players may require less patience to sustain cooperation. However, emotions can also obstruct cooperation if the players are either unwilling to punisheach other, or become revengeful when punished. |
| Keywords: | Emotions; cooperation; repeated prisoners dilemma; stochastic games |
| JEL: | C73 D01 D91 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0747&r=gth |
| By: | Kiho Yoon (Department of Economics, Korea University, Seoul, Republic of Korea) |
| Abstract: | We characterize the optimal robust mechanisms for the allocation of private objects, where robust mechanisms are those mechanisms that satisfy dominant strategy incentive compatibility, ex-post individual rationality, and ex-post no budget deficit, and optimal robust mechanisms are the ones that maximize the expected sum of players' payoffs among all robust mechanisms. With a certain assumption on the payoff of the lowest possible type, we provide a complete description of optimal robust mechanisms with any number of players and objects. |
| Keywords: | robust mechanism design, dominant strategy, budget balance, ex-post individual rationality |
| JEL: | C72 D82 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:iek:wpaper:1803&r=gth |
| By: | Emilson C.D. Silva; Chikara Yamaguchi |
| Abstract: | We examine the formation of multilateral, hub-and-spoke and bilateral international R&D strategic alliances (overlapping climate clubs) to reduce CO2 emissions. R&D provision in clubs produces two types of positive externalities: a global public good (i.e., reduction of CO2 emissions) and knowledge spillovers in joint R&D agreements. The latter is a club good. It is perfectly excludable. Its (direct) benefits are enjoyed by the club members only. Trust plays a central role in the type of alliance formation, if any at all. Lack of trust generates transaction costs, which increase with the number of R&D collaborators. We utilize the perfectly-coalition-proof-Nash equilibrium (PCPNE) concept to refine the set of Nash equilibria. Multilateral and hub-and-spoke coalitional structures are PCPNE, even in large economies containing all nations in the globe, in the absence of income transfers, for different values of transaction costs. With income transfers, fully participated multilateral coalitional structures are not stable; however, the size of the stable coalition increases as the economy expands. |
| Keywords: | climate change, climate clubs, trust, coalition-proof equilibrium, overlapping coalitions, carbon capture and storage, hub-and-spoke, international environmental agreements |
| JEL: | C70 D60 D70 H40 H70 Q40 R50 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7319&r=gth |
| By: | Chih-Sheng Hsieh; Michael D. König; Xiaodong Liu; Christian Zimmermann |
| Abstract: | We study the impact of research collaborations in coauthorship networks on research output and how optimal funding can maximize it. Through the links in the collaboration network, researchers create spillovers not only to their direct coauthors but also to researchers indirectly linked to them. We characterize the equilibrium when agents collaborate in multiple and possibly overlapping projects. We bring our model to the data by analyzing the coauthorship network of economists registered in the RePEc Author Service. We rank the authors and research institutions according to their contribution to the aggregate research output and thus provide a novel ranking measure that explicitly takes into account the spillover effect generated in the coauthorship network. Moreover, we analyze funding instruments for individual researchers as well as research institutions and compare them with the economics funding program of the National Science Foundation. Our results indicate that, because current funding schemes do not take into account the availability of coauthorship network data, they are illdesigned to take advantage of the spillover effects generated in scientific knowledge production networks. |
| Keywords: | coauthor networks, scientific collaboration, spillovers, key player, research funding, economics of science |
| JEL: | C72 D85 D43 L14 Z13 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7309&r=gth |
| By: | Joyee Deb (Cowles Foundation, Yale University); Aniko Oery (Cowles Foundation, Yale University); Kevin R. Williams (Cowles Foundation, Yale University) |
| Abstract: | We study reward-based crowdfunding campaigns, a new class of dynamic contribution games where consumption is exclusive. Two types of backers participate: buyers want to consume the product while donors just want the campaign to succeed. The key tension is one of coordination between buyers, instead of free-riding. Donors can alleviate this coordination risk. We analyze a dynamic model of crowdfunding and demonstrate that its predictions are consistent with high-frequency data collected from Kickstarter. We compare the Kickstarter mechanism to alternative platform designs and evaluate the value of dynamically arriving information. We extend the model to incorporate social learning about quality. |
| Keywords: | Crowdfunding, Contribution Games, Dynamic Models, Kickstarter |
| JEL: | C73 L26 M13 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2149&r=gth |
| By: | Tilman Borgers (Department of Economics, University of Michigan); Jiangtao Li (Dept. of Economics, National University of Singapore (NUS)) |
| Abstract: | We de?ne and investigate a property of mechanisms that we call “strategic simplicity,” and that is meant to capture the idea that, in strategically simple mechanisms, strategic choices require limited strategic sophistication. We de?ne a mechanism to be strategically simple if choices can be based on ?rst-order beliefs about the other agents’ preferences and ?rst-order certainty about the other agents’ rationality alone, and there is no need for agents to form higher-order beliefs, because such beliefs are irrelevant to the optimal strategies. All dominant strategy mechanisms are strategically simple. But many more mechanisms are strategically simple. In particular, strategically simple mechanisms may be more flexible than dominant strategy mechanisms in the bilateral trade problem and the voting problem. |
| Keywords: | Mechanism design, Complexity |
| JEL: | D82 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2148&r=gth |
| By: | Andersson, Tommy (Department of Economics, Lund University); Dur, Umut (Department of Economics, North Carolina State University); Ertemel, Sinan (Department of Economics, Istanbul Technical University); Kesten , Onur (Tepper School of Business, Carnegie Mellon University) |
| Abstract: | Motivated by school admission systems used in, e.g., Turkey and Sweden, this paper investigates a sequential two-stage admission system with public and private schools. To perform the analysis, relevant axioms and equilibrium notions need to be tailored for the considered dynamic setting. In particular, a notion of truthfulness, referred to as straightforwardness, is introduced. In sharp contrast to classic one-stage admission systems, sequentiality leads to a trade-off between the existence of a straightforward (i.e., truthful) equilibrium and non-wastefulness. Given this insight, we identify the unique set of rules for two-stage admission systems that guarantees the existence of a straightforward equilibrium and, at the same time, reduces the number of wasted school seats. Several existing admission systems are also theoretically analyzed within our general framework and empirically evaluated using school choice data from Sweden. The latter analysis allows us to quantify various trade-offs in sequential admission systems. |
| Keywords: | market design; sequential school choice; private schools; public schools; straightforward SPNE; non-wastefulness |
| JEL: | C71 C78 D71 D78 D82 |
| Date: | 2018–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2018_039&r=gth |
| By: | Dunia López-Pintado (Universidad Pablo de Olavide); Miguel A. Meléndez-Jiménez (Universidad de Málaga) |
| Abstract: | We study the role of competitive behavior in a social network. Agents gain a competitive premium by obtaining a higher outcome than their neighbors (i.e., their reference group). We assume societies in which the level of competition can be strong, mild or weak (i.e., agents compare themselves with the best, the average or the worst outcome in their reference group, respectively). Surprisingly, we find that in a more competitive society less aggregate effort is provided. An increase in the density and homogeneity of the network decreases total effort in the strong-competitive case, whereas the opposite occurs in the weak-competitive setting. |
| Keywords: | behavioral economics, reference points, social comparisons, competition, social networks. |
| JEL: | D01 D85 Z13 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:18.12&r=gth |
| By: | David Gill; Eduardo Fe |
| Abstract: | In this paper, we investigate how observable cognitive skills influence the development of strategic sophistication. To answer this question, we study experimentally how psychometric measures of theory-of-mind and cognitive ability (or‘fluid intelligence')work together with age to determine the strategic ability and level-k behavior of children in a variety of incentivized strategic interactions. We find that better theory-of-mind and cognitive ability predict strategic sophistication in competitive games. Furthermore, age and cognitive ability act in tandem as complements, while age and theory-of-mind operate independently. Older children respond to information about the cognitive ability of their opponent, which provides support for the emergence of a sophisticated strategic theory-of-mind. Finally, theory-of-mind and age strongly predict whether children respond to intentions in a gift-exchange game, while cognitive ability has no influence, suggesting that different psychometric measures of cognitive skill correspond to different cognitive processes in strategic situations that involve the understanding of intentions. |
| Keywords: | Cognitive skills; theory-of-mind; cognitive ability; fluid intelligence; strategic sophistication; age; children; experiment; level-k; bounded rationality; non-equilibrium thinking; intentions; gift-exchange game; competitive game; strategic game; strategic interaction. |
| JEL: | C91 D91 J24 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:pur:prukra:1310&r=gth |
| By: | Balogh, Tamás László; Tasnádi, Attila |
| Abstract: | Production to order and production in advance have been compared in many frameworks. In this paper we investigate a production in advance version of the capacityconstrained Bertrand-Edgeworth mixed duopoly game and determine the solution of the respective timing game. We show that a pure-strategy (subgame-perfect) Nashequilibrium exists for all possible orderings of moves. It is pointed out that unlike the production-to-order case, the equilibrium of the timing game lies at simultaneous moves. An analysis of the public firm's impact on social surplus is also carried out. All the results are compared with those of the production-to order version of the respective game and with those of the mixed duopoly timing games. |
| Keywords: | Bertrand-Edgeworth, mixed duopoly, timing games |
| JEL: | D43 L13 |
| Date: | 2018–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:cvh:coecwp:2018/08&r=gth |
| By: | Maria Carmela Aprile; Bruno Chiarini; Elisabetta Marzano |
| Abstract: | This paper presents a simple strategic model (defined as a shortsighted game) to highlight the incentives for local governments to allow the exploitation of land in areas not suitable for such exploitation due to environmental or other risks. Municipal discretionary policy inevitably produces strategic complementarities and guides individuals to use the land (to choose the most beneficial “shortsighted” Nash equilibrium). In light of these results, it seems possible to state that the definition of non-exploitable territory and the decisions concerning it should not be left to local governments. |
| Keywords: | land exploitation, municipal policy, strategic complementarities, myopic equilibrium |
| JEL: | C72 H31 H77 Q24 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7344&r=gth |
| By: | Armstrong, Mark; Vickers, John |
| Abstract: | We study mixed-strategy equilibrium pricing in oligopoly settings where consumers vary in the set of suppliers they consider for their purchase---some being captive to a particular firm, some consider two particular firms, and so on. In the case of "nested reach" we find equilibria, unlike those in more standard models, in which firms are ranked in terms of the prices they might charge. We characterize equilibria in the three-firm case, and contrast them with equilibria in the parallel model with capacity constraints. A theme of the analysis is how patterns of consumer interaction with firms matter for competitive outcomes. |
| Keywords: | Oligopoly, Bertrand competition, Bertrand-Edgeworth competition, Consideration sets, Mixed strategies |
| JEL: | C72 D43 D83 L1 L15 |
| Date: | 2018–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90362&r=gth |
| By: | Seung Han Yoo (Department of Economics, Korea University, Seoul, Republic of Korea) |
| Abstract: | This paper studies an environment in which a seller seeks to sell two different items to buyers. The seller designs a membership mechanism that assigns positive allocations to members only. Exploiting the restrictive set, the seller finds a revenue-maximizing incentive compatible mechanism. We first establish the optimal allocation rule for this membership mechanism given a regularity condition for a modified valuation distribution reflecting the set, which provides the existence of a member set and the optimal payment rule. The optimal allocation enables us to compare the membership with separate selling of the two items, suggesting conditions under which the membership dominates the separate selling: interplay between the number of bidders and the degree of the stochastic dominance of valuation distributions. |
| Keywords: | Mechanism design, Multidimensional screening, Auction |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:iek:wpaper:1804&r=gth |
| By: | Mark Whitmeyer |
| Abstract: | We consider a two player dynamic game played over $T \leq \infty$ periods. In each period each player chooses any probability distribution with support on $[0, 1]$ with a given mean, where the mean is the realized value of the draw from the previous period. The player with the highest realization in the period achieves a payoff of $1$, and the other player, $0$; and each player seeks to maximize the discounted sum of his per-period payoffs over the whole time horizon. We solve for the unique subgame perfect equilibrium of this game, and establish properties of the equilibrium strategies and payoffs in the limit. |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1811.11664&r=gth |
| By: | Peyman Khezr (School of Economics, University of Queensland, Brisbane); Ian A. MacKenzie (School of Economics, University of Queensland, Brisbane) |
| Abstract: | The most contentious design issue within pollution markets is the choice of initial allocation mechanism. Within this debate, auctions have become the predominant method of initial permit allocation. Although auctions provide potential gains—such as revenue generation, allocative efficiency and clear price discovery—these benefits are rarely fully realized due to firms submitting non-truthful bids. We propose a mechanism that can improve on existing auctions. In our design the regulator determines the supply (up to an upper bound) once all bids have been submitted. This simple and applicable design incites truthful revelation of firms’ private abatement costs, maximizes revenue, and allocates the permits efficiently. This design is relevant to all existing permit auctions including those in the European Union Emissions Trading Scheme (EU-ETS), Regional Greenhouse Gas Initiative (RGGI), and the California Cap-and-Trade Program. |
| Keywords: | multi-unit auction, pollution permit |
| JEL: | D44 Q52 |
| Date: | 2018–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:601&r=gth |
| By: | Soham R. Phade; Venkat Anantharam |
| Abstract: | We show that, in a resource allocation problem, the ex ante aggregate utility of players with cumulative-prospect-theoretic preferences can be increased over deterministic allocations by implementing lotteries. We formulate an optimization problem, called the system problem, to find the optimal lottery allocation. The system problem exhibits a two-layer structure comprised of a permutation profile and optimal allocations given the permutation profile. For any fixed permutation profile, we provide a market-based mechanism to find the optimal allocations and prove the existence of equilibrium prices. We show that the system problem has a duality gap, in general, and that the primal problem is NP-hard. We then consider a relaxation of the system problem and derive some qualitative features of the optimal lottery structure. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.00501&r=gth |
| By: | Isabelle Lebon (CREM (UMR CNRS 6211), University of Caen Normandie, 14 000 Caen, France, and Condorcet Center); Antoinette Baujard (GATE Lyon Saint-Etienne (UMR CNRS 5824), University Jean Monnet and University of Lyon, 42 023 Saint-Etienne, France); Frédéric Gavrel (CREM (UMR CNRS 6211), University of Caen Normandie, 14 000 Caen, France, and Condorcet Center); Herrade Igersheim (CNRS and Beta (UMR CNRS 7522), University of Strasbourg, 67 085 Strasbourg, France); Jean-François Laslier (CNRS and PJSE (UMR CNRS 8545), 75014 Paris, France) |
| Abstract: | In two laboratory surveys run in France during the 2014 European Elections, we asked the participants to provide their personal evaluations of the parties in terms of ideological proximity, and asked how they would vote under three proportional, closed-list voting rules : the (official) single-vote rule, a split-my-vote rule, and a list-approval rule. The paper analyzes the relation between opinions and vote, under the three systems. Compared to multi-vote rules, the single-vote system leads to voters’ decisions that are more often strategic but also more often sincere. Sincere voting and strategic voting therefore appear to be more consistent than contradictory. Multi-vote rules allow the voter to express complex behavior, and the concepts of “sincere” and “strategic” voting are not always sufficient to render this complexity. |
| Keywords: | Approval voting, Cumulative voting, Proportional systems, Contextualized experiment, Laboratory experiment, Strategic voting |
| JEL: | D72 C93 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1833&r=gth |
| By: | Pietro Battiston; Simona Gamba; Matteo Rizzolli; Valentina Rotondi |
| Abstract: | Are public good games really capturing individuals' willingness to contribute to real-life public goods? To answer this question, we conducted a lab-in-the-field experiment with communities who own collective goods. In our experiment, subjects voluntarily contribute to a common pool, which can either be subdivided in individual vouchers, as in standard public good games, or used to acquire collective goods, as it happens for real-life public goods. We show that participants' contributions are larger when the voucher is paid individually, suggesting that individuals' willingness to contribute to public goods may be overestimated when based on results from laboratory experiments. |
| Keywords: | ublic goods, lab-in-the-field experiment, cooperation, group behavior, community, indivisibility |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:don:donwpa:125&r=gth |
| By: | Åshild A. Johnsen; Ola Kvaløy |
| Abstract: | We study to what extent collusive behavior is affected by the awareness of negative externalities. Theories of outcome-based social preferences suggest that negative externalities make collusion harder to sustain than predicted by standard economic theory, while sociological theories of social ties and intergroup comparisons suggest that bilateral cooperation can be strengthened if there exist outsiders that gain from cooperative break down. We investigate this in a laboratory experiment. Subjects play the infinitely repeated prisoner’s dilemma with and without a negative externality. The externality is implemented by letting subjects make a positive contribution to a public good if they choose to defect from cooperation, i.e. cooperation is collusive since the gains are at the expense of the public. We find that this negative externality increases collusive behavior. Subjects cooperate more if it hurts a third party. |
| Keywords: | infinitely repeated prisoner’s dilemma game, negative externality, cooperation, collusion, experiment |
| JEL: | C91 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7308&r=gth |
| By: | Simone D'Alessandro; Caterina Giannetti; Pietro Guarnieri |
| Abstract: | Relying on a threshold public good game, we experimentally investigate the effect of two types of incentives on prosocial behaviours. On the one hand, a private type of incentive targets individuals by reducing their cost of contribution. On the other hand, a public type of incentive targets groups by providing an investment that directly support the achievement of the collective objective (i.e. the threshold in the public good game). Thus, we study how expectations on others determine the impact of incentives on prosocial behaviours and how incentives themselves affect these expectations in turn. We interpret this mutual relation as reflecting an endogenous relation between incentive provision and social trust. |
| Keywords: | Motivation crowding, Social Norms, Incentives |
| JEL: | C92 D04 |
| Date: | 2018–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2018/240&r=gth |
| By: | Vahab Mirrokni; Renato Paes Leme; Pingzhong Tang; Song Zuo |
| Abstract: | We are interested in the setting where a seller sells sequentially arriving items, one per period, via a dynamic auction. At the beginning of each period, each buyer draws a private valuation for the item to be sold in that period and this valuation is independent across buyers and periods. The auction can be dynamic in the sense that the auction at period $t$ can be conditional on the bids in that period and all previous periods, subject to certain appropriately defined incentive compatible and individually rational conditions. Perhaps not surprisingly, the revenue optimal dynamic auctions are computationally hard to find and existing literatures that aim to approximate the optimal auctions are all based on solving complex dynamic programs. It remains largely open on the structural interpretability of the optimal dynamic auctions. In this paper, we show that any optimal dynamic auction is a virtual welfare maximizer subject to some monotone allocation constraints. In particular, the explicit definition of the virtual value function above arises naturally from the primal-dual analysis by relaxing the monotone constraints. We further develop an ironing technique that gets rid of the monotone allocation constraints. Quite different from Myerson's ironing approach, our technique is more technically involved due to the interdependence of the virtual value functions across buyers. We nevertheless show that ironing can be done approximately and efficiently, which in turn leads to a Fully Polynomial Time Approximation Scheme of the optimal dynamic auction. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1812.02993&r=gth |
| By: | Marie Obidzinski; Yves Oytanay |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:tep:teppwp:wp18-07&r=gth |
| By: | Biung-Ghi Ju, Seung Han Yoo (Department of Economics, Korea University, Seoul, Republic of Korea) |
| Abstract: | This paper examines the relationship between free riding and the role of heterogeneity of bidders in entry deterrence with a license auction. We show that the homogeneity of incumbents is a critical factor in deriving the free riding: a fully participating preemption may not arise without such symmetry. More interestingly, however, still, a partially participating preemption with some incumbents deterring can be prevailing even with asymmetry between incumbents. |
| Keywords: | License auctions, Free rider problem, Entry deterrence |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:iek:wpaper:1802&r=gth |
| By: | Laurens Cherchye; Thomas Demuynck; Bram De Rock; Mikhail Freer |
| Abstract: | We provide a revealed preference characterization of equilibrium behavior in first price sealed bid auctions. This defines testable conditions for equilibrium play that are intrinsically nonparametric, meaning that they do not require a non-verifiable specification of the individual utility functions. We characterize equilibrium play for a sequence of observations on private values and bids for a given individual. In a first step, we assume that the distribution of bids in the population is fully known. In a second step, we relax this assumption and consider the more realistic case that the empirical analyst can only use a finite number of i.i.d. observations drawn from the population distribution. We demonstrate the empirical usefulness ofour conditions through an illustrative application to an existing experimental data set of Neugebauer and Perote 2008. This application also shows the potential of our nonparametric characterization to study the behavioral phenomena learning and fatigue at the individual level. |
| Keywords: | first price auctions, equilibrium play, revealed preference characterization, testable implications, experimental data. |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/279160&r=gth |
| By: | Johannes Muthers; Toker Doganoglu (University Würzburg); Firat Inceoglu (University Würzburg) |
| Abstract: | We introduce a fairly general licensing model with an endogenous industry structure – in terms of number of active firms – and general licensing contracts. We show that when the patentee can employ contracts that can condition on market entry or price, it can implement an outcome that yields monopoly profits by awarding the license to a single firm. Furthermore, when the patentee can only use contracts based on the quantities of the licensees, it still captures the entire market via a single licensee, albeit not at the monopoly price. Commonly assumed two-part tariff contracts cannot duplicate this last outcome and yield lower profits. We discuss the welfare implications of various contractual schemes. |
| Keywords: | Patent licensing, free entry, quantity competition. |
| JEL: | D45 K11 L11 L13 L21 L41 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2018_12&r=gth |
| By: | Simon Jäger; Benjamin Schoefer; Samuel Young; Josef Zweimüller |
| Abstract: | Nonemployment is often posited as a worker’s outside option in wage setting models such as bargaining and wage posting. The value of this state is therefore a fundamental determinant of wages and, in turn, labor supply and job creation. We measure the effect of changes in the value of nonemployment on wages in existing jobs and among job switchers. Our quasi-experimental variation in nonemployment values arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit levels: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than 0.03. In contrast, a calibrated Nash bargaining model predicts a sensitivity of 0.39 – more than ten times larger. The empirical insensitivity holds even among workers with a priori low bargaining power, with low labor force attachment, with high predicted unemployment duration, among job switchers and recently unemployed workers, in areas of high unemployment, in firms with flexible pay policies, and when considering firm-level bargaining. The insensitivity of wages to the nonemployment value we document presents a puzzle to widely used wage setting protocols, and implies that nonemployment may not constitute workers’ relevant threat point. Our evidence supports wage-setting mechanisms that insulate wages from the value of nonemployment. |
| JEL: | J31 J60 J65 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7342&r=gth |