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on Game Theory |
| By: | Andrea Collevecchio; Tuan-Minh Nguyen; Ziwen Zhong |
| Abstract: | Best Response Dynamics (BRD) is a class of strategy updating rules to find Pure Nash Equilibria (PNE) in a game. At each step, a player is randomly picked and they switches to a "best response" strategy based on the strategies chosen by others, so that the new strategy profile maximises their payoff. If no such strategy exists, a different player will be chosen randomly. When no player wants to change their strategy anymore, the process reaches a PNE and will not deviate from it. On the other hand, either PNE could not exist, or BRD could be "trapped" within a subgame that has no PNE. We prove that BRD typically converges to PNE when the game has $N$ players, each having two actions. Our results are more general and are described as follows. We study a class of random walks in a random medium on the $N$-dimensional hypercube. The medium is determined by a random game with $N$ players, each with two actions available, and i.i.d. payoffs. The medium contains obstacles that can be of two types. The first type is composed of the PNE of the game, while the other obstacles are known in the literature as traps or sink equilibria. The class of processes we analyze includes BRD, simple random walks on the hypercube, and many other nearest neighbour processes. We prove that, with high probability, these processes reach a PNE before hitting any trap. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.09732&r= |
| By: | Fabian Alex |
| Abstract: | This paper investigates the determinants of the probability that a cen- tral bank chooses to make its financial sector green. We derive a mixed- strategy Nash equilibrium from a strategic setting of two monetary au- thorities choosing simultaneously between the alternatives of greening and conducting business as usual. Using a very general setup, we obtain a model that nests most of the usual 2×2-situations in game theory. “Green†avoids a country’s contribution to an externality experienced by both, but also encompasses a sacrifice of slowing down economic performance. The prob- ability of greening is found to decrease whenever “greening†means a larger sacrifice for the other country, while it increases with the size of at least one of the two countries, the rate of internalization applied to the externality as well as the severity of this externality. Unlike the typical (pure) free-riding approach to international coordination on environmental issues, we find some willingness of countries to sacrifice wealth for the sake of avoiding a worst case. In a repeated setting, cooperative solutions can be estab- lished. The influence of discounting on the stability of these solutions is ambiguous. Finally, the model allows us to sketch the path along which the structure of our world’s climate game may evolve over time. |
| Keywords: | Environment, Environmental Economics, Green Economics, Game Theoretic, Game Theory, Games, Mixed Strategy, Two Player, Pub- lic Goods Game, Strategic Game |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:bav:wpaper:234_fabian_alex&r= |
| By: | Detemple, Julian |
| Abstract: | Experiments are an important tool in economic research. However, it is unclear to which extent the control of experiments extends to the perceptions subjects form of such experimental decision situations. This paper is the first to explicitly elicit perceptions of the dictator and trust game and shows that there is substantial heterogeneity in how subjects perceive the same game. Moreover, game perceptions depend not only on the game itself but also on the order of games (i.e., the broader experimental context in which the game is embedded) and the subject herself. This highlights that the control of experiments does not necessarily extend to game perceptions. The paper also demonstrates that perceptions are correlated with game behavior and moderate the relationship between game behavior and field behavior, thereby underscoring the importance and relevance of game perceptions for economic research. |
| Keywords: | dictator game, trust game, game perceptions |
| JEL: | C90 D01 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:297999&r= |
| By: | Bernhard Kasberger; Simon Martin; Hans-Theo Normann; Tobias Werner |
| Abstract: | Algorithms play an increasingly important role in economic situations. These situations are often strategic, where the artificial intelligence may or may not be cooperative. We study the deter-minants and forms of algorithmic cooperation in the infinitely repeated prisoner’s dilemma. We run a sequence of computational experiments, accompanied by additional repeated prisoner’s dilemma games played by humans in the lab. We find that the same factors that increase human cooperation largely also determine the cooperation rates of algorithms. However, algorithms tend to play different strategies than humans. Algorithms cooperate less than humans when cooperation is very risky or not incentive-compatible. |
| Keywords: | artificial intelligence, cooperation, large language models, Q-learning, repeated prisoner’s dilemma |
| JEL: | C72 C73 C92 D83 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11124&r= |
| By: | Gilli, Mario; Sorrentino, Andrea |
| Abstract: | In this paper we consider a deterministic complete information two groups contest where the effort choices made by the teammates are aggregated into group performance by the weakest-link technology (perfect complementarity), that is a “max-min group contest”, as defined by Chowdhury et al. (2016). However, instead of a continuum effort set, we employ a binary action set. Further, we consider private good prizes, so that there is a sharing issue within the winning group. Therefore, we include two stages: the first one about the setting of a sharing rule parameter and the second one about simultaneous and independent actions’ choices. The binary action set allow us to innovate on the existing literature by (i) characterizing the full set of the second stage equilibrium actions; (ii) computationally characterizing in MATLAB the set of within-group symmetric subgame perfect Nash equilibria in pure strategies in the entire game. We find conditions such that the set of within-group symmetric subgame perfect Nash equilibria in pure strategies have the cardinality of the continuum. We also check whether this paper’s results are due to discreteness or to binary choice, proving that in this case there are no subgame perfect Nash equilibria in pure strategies, as proved in the continuum case in Gilli and Sorrentino (2024). |
| Keywords: | Public Economics |
| Date: | 2024–06–12 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:343494&r= |
| By: | Roy Long |
| Abstract: | The game theoretic concepts of rationalizability and iterated dominance are closely related and provide characterizations of each other. Indeed, the equivalence between them implies that in a two player finite game, the remaining set of actions available to players after iterated elimination of strictly dominated strategies coincides with the rationalizable actions. I prove a dimensionality result following from these ideas. I show that for two player games, the number of actions available to the opposing player provides a (tight) upper bound on how a player's pure strategies may be strictly dominated by mixed strategies. I provide two different frameworks and interpretations of dominance to prove this result, and in doing so relate it to Radon's Theorem and Carath\'eodory's Theorem from convex geometry. These approaches may be seen as following from point-line duality. A new proof of the classical equivalence between these solution concepts is also given. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.16050&r= |
| By: | Alastair Langtry; Sarah Taylor; Yifan Zhang |
| Abstract: | This paper studies the general class of games where agents: (1) are embedded on a network, (2) have two possible actions, and (3) these actions are strategic complements. We use a measure of network cohesiveness -- the k-core -- to provide a novel characterisation of the equilibria. After transforming the network appropriately, the k-core fully describes both the minimal and maximal equilibria, and also provides a partial characterisation of all others. This framework is also the binary action version of the large class of network games with strategic complements and continuous actions. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.04540&r= |
| By: | Jiarui Xie |
| Abstract: | We study a multi-stage admission system, known as the Tiered Deferred Acceptance mechanism, designed to benefit some schools over others. The current US public school and Chinese college admission systems are two examples. In this system, schools are partitioned into tiers, and the Deferred Acceptance algorithm is applied within each tier. Once assigned, students cannot apply to schools in subsequent tiers. This mechanism is not strategyproof. Therefore, we study the Nash equilibria of the induced preference revelation game. We show that Nash equilibrium outcomes are nested in the sense that merging tiers preserves all equilibrium outcomes. We also identify within-tier acyclicity as a necessary and sufficient condition for the mechanism to implement stable matchings in equilibrium. Our findings suggest that transitioning from the Deferred Acceptance mechanism to the Tiered Deferred Acceptance mechanism may not improve student quality at top-tier schools as intended. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.00455&r= |
| By: | Emanuele Bacchiega (Department of Computer Science and Engineering, University of Bologna, Italy); Elias Carroni (Department of Economics, University of Bologna, Italy); Alessandro Fedele (Faculty of Economics and Management, Free University of Bozen-Bolzano, Italy) |
| Abstract: | The Hotelling model is the workhorse for analyzing platform competition in two-sided markets. In this setup, the degree of platform differentiation must be high relative to cross-group benefits to eschew the alleged non-existence of Nash equilibria. The present paper shows instead that Nash equilibria exist even for relatively low differentiation; at such equilibria, platforms avoid competition by replicating a collusive outcome. This result widens our knowledge of the two-sided Hotelling model and is relevant for a large array of markets --especially digital ones-- where platforms operate in relatively low-differentiation environments. |
| Keywords: | Hotelling model; Platform competition; Two-sided markets; Equilibrium existence. |
| JEL: | L13 C72 D21 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bzn:wpaper:bemps106&r= |
| By: | Mathieu Lambotte (Univ Rennes, CNRS, CREM – UMR6211, F-35000 Rennes France) |
| Abstract: | I introduce asymmetry in the analysis of peer effects, microfounded on a network game for a binary outcome. Indeed, overdoing and underdoing relatively to the social norm might lead to asymmetric social penalties. The extent and direction of this asymmetry depends on the behavior under scrutiny. I develop conditions under which this network game results in an unique Bayes-Nash equilibrium depending on rational expectations about peers’ behavior and propose an estimation strategy based on an nested fixed point maximum likelihood estimator. The model is brought to the data with an application to smoking and alcohol drinking behaviors of high-school students in the United States. |
| Keywords: | peer effects, asymmetry, social norm, binary outcome, rational expectations |
| JEL: | C31 C35 C57 C72 D84 R41 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:tut:cremwp:2024-05&r= |
| By: | Gregorio Curello |
| Abstract: | Agents exert hidden effort to produce randomly-sized innovations in a technology they share. Returns from using the technology grow as it develops, but so does the opportunity cost of effort, due to an ‘exploration-exploitation’ trade-off. As monitoring is imperfect, there exists a unique (strongly) symmetric equilibrium, and effort in any equilibrium ceases no later than in the single-agent problem. Small innovations may hurt all agents in the symmetric equilibrium, as they severely reduce effort. Allowing agents to discard innovations increases effort and payoffs, preserving uniqueness. Under natural conditions, payoffs rise above those of all equilibria with forced disclosure. |
| Keywords: | dynamic games, imperfect monitoring, public goods, private information |
| JEL: | C73 D82 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_566&r= |
| By: | Masaaki Fujii; Masashi Sekine |
| Abstract: | This paper presents an asset pricing model in an incomplete market involving a large number of heterogeneous agents based on the mean field game theory. In the model, we incorporate habit formation in consumption preferences, which has been widely used to explain various phenomena in financial economics. In order to characterize the market-clearing equilibrium, we derive a quadratic-growth mean field backward stochastic differential equation (BSDE) and study its well-posedness and asymptotic behavior in the large population limit. Additionally, we introduce an exponential quadratic Gaussian reformulation of the asset pricing model, in which the solution is obtained in a semi-analytic form. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.02155&r= |
| By: | Mayaki, Alfred Anate |
| Abstract: | In this paper, the Nash equilibrium reversion is used as an optimal tool for clearing dynamic prices and wages. The balanced growth path of the efficiency wage and the outcome of repeated household/firm wage bargaining decisions are determined by various exogenous competitive rigidities. A location model is pursued to explore the extent to which a downstream spatial co-operation agreement might affect the price equilibrium. There is also an endogenous hiring function and a knowledge base which is increasing in output, as is the real wage. As the article demonstrates, after accounting for real rigidities in the baseline model, the effect of wage growth on household utility through staggered bargaining can be best catered for by adopting a policy of point scoring on the mobility of skilled labour against the model’s key rigidities. Finally, labour mobility is explored. Mobility point scores, which serve to encourage mobility from skilled labour within the model, not only increase the knowledge base but also place upward pressure on nominal wage growth. |
| Keywords: | labour, wages, mobility, signalling, game theory, competition |
| JEL: | D19 D21 D31 D61 L16 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:298827&r= |
| By: | Giorgio Fabbri; Silvia Faggian; Giuseppe Freni |
| Abstract: | This study examines the dynamics of the exploitation of a natural resource distributed among and flowing between several nodes connected via a weighted, directed network. The network represents the locations and interactions of the resource nodes. A regulator decides to designate some of the nodes as natural reserves where no exploitation is allowed. The remaining nodes are assigned (one-to-one) to players, who exploit the resource at the node. It is demonstrated how the equilibrium exploitation and resource stocks depend on the productivity of the resource sites, the structure of the connections between the sites, and the number and preferences of the agents. The best locations to host nature reserves are identified per the model’s parameters and correspond to the most central (in the sense of eigenvector centrality) nodes of a suitably redefined network that considers the nodes’ productivity. |
| Keywords: | Harvesting, Spatial Models, Differential Games, Nature Reserves |
| JEL: | Q20 Q28 R11 C73 |
| Date: | 2023–05 |
| URL: | https://d.repec.org/n?u=RePEc:gbl:wpaper:2024-03&r= |
| By: | Gregorio Curello; Ludvig Sinander |
| Abstract: | In the canonical persuasion model, comparative statics has been an open question. We answer it, delineating which shifts of the sender's interim payoff lead her optimally to choose a more informative signal. Our first theorem identifies a coarse notion of 'increased convexity' that we show characterises those shifts of the senders interim payoff that lead her optimally to choose no less informative signals. To strengthen this conclusion to 'more informative' requires further assumptions: our second theorem identifies the necessary and sufficient condition on the sender's interim payoff, which strictly generalises the 'S' shape commonly imposed in the literature. We identify conditions under which increased alignment of interests between sender and receiver lead to comparative statics, and study a number of applications. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_564&r= |
| By: | Allmis, Patrick; Pin, Paolo; Vega-Redondo, Fernando |
| Abstract: | We propose a simple micro-founded model of trading with ex-ante asymmetric information similar to one proposed by Kyle (1985) in which the equilibrium price is fully revealing under rational expectations. We analyze under which conditions a privately informed trader may want to share her information with other traders for free. Despite the strictly competitive setupand conventional wisdom, we show that there is a unique separating equilibrium in which the informed trader reveals some signals and conceals others. A consequence of this is that the price need not be fully revealing of the aggregate information in the market (even if traders are risk neutral), which in turn has welfare implications on the distribution of the social surplusat equilibrium. We establish these results for a context where the pattern of communication among traders is restricted by a given social network, studying as well what network arises when links are established endogenously. |
| Keywords: | Information Sharing; Market Efficiency; Financial Markets; Information Aggregation; Communication Network; Network Formation |
| Date: | 2024–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:43966&r= |
| By: | Dirk Bergemann (Yale University); Benjamin Brooks (University of Chicago); Stephen Morris (Massachusetts Institute of Technology) |
| Abstract: | Producers of heterogeneous goods with heterogeneous costs compete in prices. When producers know their own production costs and the consumer knows their values, consumer surplus and total surplus are aligned: the information structure and equilibrium that maximize consumer surplus also maximize total surplus. We report when alignment extends to the case where either the consumer is uncertain about their own values or producers are uncertain about their own costs, and we also give examples showing when it does not. Less information for either producers or consumer may intensify competition in a way that benefits the consumer but results in inefficient production. We also characterize the information for consumer and producers that maximizes consumer surplus in a Hotelling duopoly. |
| Date: | 2024–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2373r1&r= |
| By: | Irene Maria Buso; Daniela Di Cagno; Werner Gueth; Lorenzo Spadoni |
| Abstract: | We investigate, both theoretically and experimentally, an institutional mechanism designed to enhance cooperation. In this mechanism, contributors have the option to voluntarily contribute to the public good and decide whether to join a (sub)group where partners equally share the contribution cost. Theoretically, stable cost-sharing partnerships enhance efficiency since their partners fully contribute, while outsiders would free-ride. Our data reveal that individual joining and contribution behaviors do not always align with benchmark predictions: partnerships are not always formed, and when they are, they are not always of the optimal size; partners often contribute less than maximally, and outsiders more than minimally. Nonetheless, we document systematic evidence of partnership formation and significantly improved provision of public goods across rounds. |
| Keywords: | Public Good, Group Formation, Group Size, Experiments |
| JEL: | C92 H41 D85 |
| Date: | 2024–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:pie:dsedps:2024/309&r= |
| By: | Yingkai Li; Boli Xu |
| Abstract: | A principal can propose a project to an agent, who then decides whether to accept. Their payoffs from launching the project depend on an unknown binary state. The principal can obtain more precise information about the state through a test at no cost, but crucially, it is common knowledge that she can falsify the test result. In the most interesting case where players have conflicted interests, the optimal test is a binary lemon-detecting test. We also find that coordination is possible when the principal is pessimistic but not when the agent is pessimistic. Moreover, when the agent has private information about the state, a single binary lemon-detecting test remains optimal even though the principal has the option to screen the agent by providing a menu of tests. Our finding is consistent with observed tests in real practice. |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2405.18521&r= |
| By: | Niklas Klarnskou; Philippos Louis; Wouter Passtoors |
| Abstract: | We use a lab experiment to examine the effect of feedback on bidder behavior in procurement e-auctions. We compare ‘Rank-only’ to ‘show lead bid’ feedback, two regimes applied frequently by procurement professionals. A choice among the two is often based on rules-of-thumb that rely on initial ‘bid compression’, i.e. the spread of the bids submitted pre-auction. The use of such criteria finds no support in existing economic theory. A common assumption in theoretical auction models is that bidders face no opportunity cost from participating in a dynamic auction. This may not hold in situations where the expected value of a contract does not justify a long-time commitment to the bidding process on the part of bidders. In our experiment participants face the choice of remaining active in an auction vs. exiting and being rewarded with a diminishing outside option. Showing the lead bid accelerated bidders’ learning. In the presence of opportunity costs, this can lead to substantially different outcomes conditional on the initial bid compression. With low bid compression, the bidder with the lowest cost wins more frequently, enhancing efficiency, but faces reduced competition by the others, which hurts the buyer’s potential outcome. The opposite is true when bid compression is high. Rank only feedback achieved similar overall levels of efficiency, with higher benefits for the buyer. Crucially, these outcomes are not as sensitive to initial bid compression as in the case of ‘show lead bid’ feedback. A discouragement effect emerging in the ‘Show-lead-bid’, but not in the ‘Rank-only’ regime can explain these results. |
| Keywords: | Procurement auctions, feedback, opportunity cost, competition, bid compression, discouragement effect, lab experiment |
| JEL: | C92 D44 D83 |
| Date: | 2024–06–14 |
| URL: | https://d.repec.org/n?u=RePEc:ucy:cypeua:04-2024&r= |
| By: | Marion Dupoux; Benjamin Ouvrard |
| Abstract: | Pigouvian taxes are often unpopular among the general public. We test the effectiveness of social information provision to improve support for such taxes. In a lab experiment that involves a market game with externalities, we provide subjects with information about other participants’ personal opinions about the “right thing to do” (voting, or not, for tax implementation). To gain insight into the causal mechanism by which social information impacts subjects’ votes, we also elicit personal, normative, and positive beliefs. Our findings demonstrate a causal effect of social information provision on subjects’ support for the tax, and that subjects’ changes in beliefs is a causal mechanism through which this increased support for the tax is made possible. We also show that subjects who experience the tax are more likely to support it, and that the tax significantly reduces externalities in the game. We therefore highlight the pivotal role of beliefs in voting behaviors and the acceptability of Pigouvian taxes. |
| Keywords: | Beliefs, Externality Game, Pigouvian Taxes, Social Information, Voting Behavior |
| JEL: | C92 D91 H23 |
| Date: | 2023–05 |
| URL: | https://d.repec.org/n?u=RePEc:gbl:wpaper:2024-05&r= |
| By: | Foerster, Manuel; Hellmann, Tim; Vega-Redondo, Fernando |
| Abstract: | We set out a model of social media influencer marketing in which a firmmay hire influencers to inform consumers about an innovation. Influencersgenerate sales through purchases of their followers and followers' social networks and set prices for their endorsements. In turn, the firm decides whichinfluencers to hire, which story to convey via the influencers, and sets the retail price of the innovation. In equilibrium, influencers price according totheir marginal contribution to industry profits and increase consumers' willingnessto pay with their stories. In particular, under a weak condition itis the influencers with the most reactive followers who are hired and obtainpositive profits in equilibrium. Finally, we show that the firm may be betteroff if it could commit to hire fewer influencers. |
| Keywords: | Strategic Product Marketing; Social Media Influencer; Innovation; Social Networks; Bertrand Competition. |
| Date: | 2024–06–17 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:43985&r= |
| By: | Pierpaolo Battigalli; Giovanni Di Bartolomeo; Stefano Papa |
| Abstract: | We examine the interplay between guilt aversion and inequality in decision-making, speci…cally in the context of a dictator game. Considering different initial allocations of the surplus, we investigate how the material opportunity cost of reducing inequality in‡uences sharing behavior, revealing complex relationship among guilt-driven choices and opportunity costs. |
| Keywords: | guilt aversion; psychological games; dictator games; second-order beliefs |
| JEL: | A13 C91 D01 D64 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:sap:wpaper:wp252&r= |
| By: | Franziska Heinicke; Wladislaw Mill; Henrik Orzen |
| Abstract: | This paper addresses bargaining with a nuclear option. Players with access to such an option have the power to cause enormous damage to their negotiation partners. Figurative nuclear options are available in many important real-world settings and, being the ultimate threat, are often seen as effective in putting maximal pressure on the other party and as possibly efficiency- improving. On the other hand, since going nuclear is typically also very costly to the nuclear-option holder herself, the credibility of a nuclear threat may be questionable. We report the results from unstructured one-shot bargaining experiments and examine to what extent a nuclear option increases bargaining power, makes agreements more likely, and affects efficiency. We find that nuclear-option holders do not generally benefit while the other party is worse off compared to a baseline setting, particularly when the other party is intrinsically—i.e., save for the nuclear threat itself—in a strong position. Furthermore, the nuclear option increases the number of negotiations that end in agreements that are not efficiency-improving. Thus, the presence of a nuclear option in our bargaining setting is overall detrimental. |
| Keywords: | Nuclear option; Power asymmetry; Bargaining; Experiment |
| JEL: | C91 D91 D01 C78 J52 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_559&r= |
| By: | Tsuritani, Ryosuke |
| Abstract: | Price discrimination has substantial social and policy implications and has received attention in the literature. However, prior research on input price discrimination has largely been limited to single-input situations. We explore the strategic desirability of uniform pricing, fill gaps in the prior literature regarding the “nondiscriminatory” aspect of input price discrimination, and contribute to the growing literature on perfectly complementary inputs in ver- tical markets. This study considers a vertically related market in which two symmetric upstream firms provide perfectly complementary inputs for two downstream manufacturers, one of which has a non-controlling interest in its rival. Each upstream firm can choose between two pricing regimes: discrim- inatory or uniform. This study shows that, although uniform pricing limits pricing flexibility, one upstream firm voluntarily chooses uniform pricing, and the other chooses discriminatory pricing in equilibrium. To our knowledge, this study is the first to demonstrate such an asymmetric pricing equilibrium. Furthermore, our findings have implications for policymakers deciding whether to prohibit discriminatory pricing. |
| Keywords: | uniform price; input price discrimination; complementary inputs; hori- zontal shareholding; self-regulation |
| JEL: | D43 G34 L11 L40 |
| Date: | 2023–10–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121176&r= |
| By: | Vives, Xavier; Vravosinos, Orestis |
| Abstract: | We examine the effects of overlapping ownership among existing firms deciding whether to enter a product market. We show that in most cases—and especially when overlapping ownership is already widespread, an increase in the extent of overlapping ownership will harm welfare by softening product market competition, reducing entry, thereby (in contrast to standard results) inducing insufficient entry, and magnifying the negative impact of an increase of entry costs on entry. Overlap-ping ownership can mostly be beneficial only under substantial increasing returns to scale, in which case industry consolidation (induced by overlapping ownership) leads to sizable cost efficiencies. |
| JEL: | D43 L11 L13 L21 L41 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129418&r= |
| By: | Yann Delaprez; Morgane Guignard |
| Abstract: | This paper analyzes a merger of large manufacturers with divestiture in the French coffee market. In contrast to previous approaches used to study the effects of upstream divestitures on prices and welfare, we model the vertical market structure. First, our results show that the standard policy recommendation to require divestiture to small recipient firms may not hold when asymmetric bargaining power between firms is considered. Second, we show that previous models significantly overestimate costs. We estimate costs that are 41 percent lower, and find that divestiture can lead to marginal cost savings for the buyer of the divested brand. |
| Keywords: | Merger, remedies, divestiture, vertical markets, bargaining power |
| JEL: | D12 L11 L51 L40 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2088&r= |
| By: | Lagos, Lorenzo (Brown University) |
| Abstract: | This paper studies the relation between the wage and amenity components of compensation under collective bargaining. Using the universe of collective bargaining agreements (CBAs) in Brazil, I augment information on workers' wages with the comprehensive set of amenities codified in the text of these contracts. I then estimate the effects of increasing union bargaining power with a difference-in-difference strategy that leverages 1) a judicial decision that prevented the expiration of existing CBA provisions—a policy known as ultractivity—and 2) gaps in CBA coverage across establishments when the policy was enacted. I find that boosting union power causes an increase in both wages and CBA clauses without a subsequent decrease in employment. A revealed preference approach to estimating the wage-equivalent value of negotiated clauses shows that amenity value also increases, comprising approximately 45% of workers' total gains in compensation. Results are consistent with collective bargaining functioning as a labor market institution that counters monopsony power, but where employers retain the right-to-manage the composition of their workforce. |
| Keywords: | collective bargaining, unions, amenities, compensating differentials |
| JEL: | J52 J32 J42 K31 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17034&r= |