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on Game Theory |
| By: | Eleni Batziou; John Fearnley; Abheek Ghosh; Rahul Savani |
| Abstract: | We prove that computing an $\epsilon$-approximate Nash equilibrium of a win-lose bimatrix game with constant sparsity is PPAD-hard for inverse-polynomial $\epsilon$. Our result holds for 3-sparse games, which is tight given that 2-sparse win-lose bimatrix games can be solved in polynomial time. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.18380 |
| By: | Fedor Sandomirskiy; Ben Wincelberg |
| Abstract: | We ask when a normal-form game yields a single equilibrium prediction, even if players can coordinate by delegating play to an intermediary such as a platform or a cartel. Delegation outcomes are modeled via coarse correlated equilibria (CCE) when the intermediary cannot punish deviators, and via the set of individually rational correlated profiles (IRCP) when it can. We characterize games in which the IRCP or the CCE is unique, uncovering a structural link between these solution concepts. Our analysis also provides new conditions for the uniqueness of classical correlated and Nash equilibria that do not rely on the existence of dominant strategies. The resulting equilibria are robust to players' information about the environment, payoff perturbations, pre-play communication, equilibrium selection, and learning dynamics. We apply these results to collusion-proof mechanism design. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.21470 |
| By: | Simon Finster; Paul W. Goldberg; Edwin Lock; Matilde Tullii |
| Abstract: | We explore stability and fairness considerations in decentralized networked markets with bilateral contracts, building on the trading networks framework [Hatfield et al., 2013]. In our trading network game, we show that a well-defined subset of Nash equilibria can be supported as competitive equilibria. Considering an offer-based trading dynamic as well as a stochastic price clock market, we prove new convergence results to Nash equilibrium and competitive equilibrium, providing a rationale for stability properties in decentralized, dynamic trading networks. Turning to the tension between fairness and (core) stability, we prove several negative results: inessential agents always receive zero utility in any core outcome, and even essential agents can get zero utility in all core outcomes. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.20868 |
| By: | David Gill; Victoria Prowse; J. Lucas Reddinger |
| Abstract: | Teamwork and collaboration are increasingly important. To understand the dynamics of teamwork skill formation, we provide the first systematic analysis of dynamic investment in teamwork skill. First, adopting a dynamic game approach, we develop a novel theoretical framework where investment in team skill creates persistent benefits and externalities for teammates, but where investment is risky because the benefits depend on successful team coordination. Second, we take this framework to the laboratory to study empirically the factors that influence dynamic investment in team skill. We find underinvestment compared to the efficient benchmark. However, investment in team skill responds strongly to incentives, in line with specific patterns predicted by our theory. We also find that people’s theory of mind and propensity to coordinate predict how much they invest in team skill. We conclude that careful design of team incentives and selection of team members can facilitate the dynamic development of teamwork skills. |
| Keywords: | Teamwork, investment, skill, coordination, theory of mind, dynamic game, repeated game, basin of attraction, subgame-perfect Nash equilibrium, Stag Hunt game, experiment, machine learning |
| JEL: | C73 C92 D91 J24 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:pur:prukra:1355 |
| By: | Ferreira, José Luis; Ruiz-Castillo, Javier |
| Abstract: | We study the mode of production of the first populations of Homo erectus about 2.5 million years ago. It is characterized by a dual strategy unprecedented in human history: (i) a division of labor into big game hunting and gathering, and (ii) the sharing of the food obtained from both sources. We view these two characteristics as a form of increasing productivity through individual specialization, and a form of insurance. When big game hunters fail to capture a large piece –a highly frequent event–, they rely on the food collected by gatherers. In turn, a successful hunter who could only consume in situ a portion of a large kill, shares the catch with the rest of the group. We present a simple mathematical model of the situation, consisting of a non-cooperative repeated game whose equilibria exhibit the two innovations just mentioned. A sufficient condition for a sexual division of labor where women gather and men hunt is that men are relatively more productive than women in hunting. We compare this model with a number of alternatives found in the literature, and discuss its main shortcoming: the failure to include a third key feature of the hunting-gathering mode of production, namely, the specific study of intergenerational food transfers that may involve three types of agents –children, adults, and grandparents. |
| Keywords: | Homo Erectus; Hunter-Gatherers; Division Of Labor; Food Sharing; Insurance; Specialization; Non-Cooperative Repeated Games; Subgame Perfect Nash Equilibrium |
| Date: | 2026–02–24 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:49470 |
| By: | Alistair Barton |
| Abstract: | Recent papers in communication games construct equilibria by conditioning an agent's strategy on private, payoff-irrelevant information. I prove this is impossible in general games if there is any amount of realistic privacy in agents' preferences, generalizing previous results from cheap talk games to mediated cheap talk and communication with receiver commitment. Applying the result to repeated games with public+conditionally independent private monitoring, all equilibria without private randomization are perfect public equilibria, and non-trivial belief free equilibria are impossible. This result can be avoided if information is slightly correlated, or pay-off relevant. Due to undesirable properties of public perfect equilibria in some settings, I argue for further study of belief-based equilibria to understand equilibria of repeated games with noisy monitoring. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.23098 |
| By: | Kine Josefine Aurland-Bredesen; Tor Håkon Jackson Inderberg; Snorre Kverndokk |
| Abstract: | Public acceptance has influenced the evolution of carbon capture and storage (CCS) in Europe. To study the mechanisms behind this, we use evolutionary game theory where the governmental policy towards CCS, such as subsidies to the industry, is dependent on public acceptance. Public acceptance further depends on the perceived benefits and costs for individuals of CCS. We show that in this model, multiple equilibria may exist, and the starting point as well as the heterogeneity of firms will determine the equilibrium that will be reached over time. While the subsidy is tied to public acceptance, the government can affect development by correcting other imperfections in the market. Using such policy instruments, a new equilibrium may develop with a higher share of investments in CCS. The model also suggests an explanation of the different situations in many countries today with respect to CCS investments and investment plans. |
| Keywords: | carbon capture and storage, evolutionary games, public acceptance, climate change |
| JEL: | C73 H23 Q35 Q38 Q54 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12412 |
| By: | Joseph Root; Evan Sadler |
| Abstract: | We demonstrate that a ubiquitous feature of network games, bilateral strategic interactions, is equivalent to having player utilities that are additively separable across opponents. We distinguish two formal notions of bilateral strategic interactions. Opponent independence means that player i's preferences over opponent j's action do not depend on what other opponents do. Strategic independence means that how opponent j's choice influences i's preference between any two actions does not depend on what other opponents do. If i's preferences jointly satisfy both conditions, then we can represent her preferences over strategy profiles using an additively separable utility. If i's preferences satisfy only strategic independence, then we can still represent her preferences over just her own actions using an additively separable utility. Common utilities based on a linear aggregate of opponent actions satisfy strategic independence and are therefore strategically equivalent to additively separable utilities--in fact, we can assume a utility that is linear in opponent actions. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.16071 |
| By: | Siyuan Fan; Zhonghong Kuang; Jingfeng Lu |
| Abstract: | We study the $n$-dimensional contest between two asymmetric players with different marginal effort costs, with each dimension (i.e., battle) modeled as a Tullock contest. We allow general identity-independent and budget-balanced prize allocation rules in which each player's prize increases weakly in the number of their victories, e.g., a majority rule if $n$ is odd. When the discriminatory power of the Tullock winner-selection mechanism is no greater than $2/(n+1)$, a unique equilibrium arises where each player exerts deterministic and identical effort across all dimensions. This condition applies uniformly to all eligible prize allocation rules and all levels of players' asymmetry, and it is tight. Under this condition, we derive the effort-maximizing prize allocation rule: the entire prize is awarded to the player who wins more battles than his opponent by a pre-specified margin, and the prize is split equally if neither player does. When $n$ is odd, and players are symmetric, the majority rule is optimal. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.21564 |
| By: | Christian Keller; Michael C. Tseng |
| Abstract: | We generalize the seminal framework of Kyle (1985) to a many-asset setting, bridging the gap between informed-trading theory and modern trading practices. Specifically, we formulate an infinite-dimensional Bayesian trading game in which the informed trader's private information may concern arbitrary aspects of the cross-sectional payoff structure across a continuum of traded assets. In this general setting, we obtain a parsimonious equilibrium characterized by a single scalar fixed point, yielding closed-form characterizations of equilibrium trading strategy, price impact within and across markets, and the informational efficiency of equilibrium prices. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.21125 |
| By: | Gurkirat Wadhwa |
| Abstract: | In many consumer electronics and appliance markets, manufacturers sell products through competing retailers while simultaneously relying on take-back programs to recover used items for remanufacturing. Designing such programs is challenging when firms compete on prices and consumers differ in their willingness to return products. Motivated by these settings, this paper develops a game theoretic framework to analyze pricing and take-back decisions in a dual-channel closed loop supply chain (CLSC) with two competing manufacturers and two competing retailers. Manufacturers act as Stackelberg leaders, simultaneously determining wholesale prices and consumer take-back bonuses, while retailers engage in Nash competition over retail prices. The model integrates three key elements: (i) segmented linear demand with cross-price effects, (ii) deterministic product returns, and (iii) an inertia responsiveness allocation mechanism governing the distribution of returned products between manufacturers. Closed form Nash equilibria are derived for the retailer subgame, along with symmetric Stackelberg equilibria for manufacturers. We derive a feasibility threshold for take-back incentives, identifying conditions under which firms optimally offer positive bonuses to consumers. The results further demonstrate that higher remanufacturing value or return rates lead the manufacturers to lower wholesale prices in order to expand sales and capture additional return volumes, while high consumer inertia weakens incentives for active collection. Numerical experiments illustrate and reinforce the analytical results, highlighting how consumer behavior, market structure and product substitutability influence prices, bonuses, and return volumes. Overall, the study provides managerial insights for designing effective take-back programs and coordinating pricing decisions in competitive circular supply chains. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.14288 |
| By: | Raman Ebrahimi; Sepehr Ilami; Babak Heydari; Isabel Trevino; Massimo Franceschetti |
| Abstract: | Standard models of bounded rationality typically assume agents either possess accurate knowledge of the population's reasoning abilities (Cognitive Hierarchy) or hold dogmatic, degenerate beliefs (Level-$k$). We introduce the ``Connected Minds'' model, which unifies these frameworks by integrating iterative reasoning with a parameterized network bias. We posit that agents do not observe the global population; rather, they observe a sample biased by their network position, governed by a locality parameter $p$ representing algorithmic ranking, social homophily, or information disclosure. We show that this parameter acts as a continuous bridge: the model collapses to the myopic Level-$k$ recursion as networks become opaque ($p \to 0$) and recovers the standard Cognitive Hierarchy model under full transparency ($p=1$). Theoretically, we establish that network opacity induces a \emph{Sophisticated Bias}, causing agents to systematically overestimate the cognitive depth of their opponents while preserving the log-concavity of belief distributions. This makes $p$ an actionable lever: a planner or platform can tune transparency, globally or by segment (a personalized $p_k$), to shape equilibrium behavior. From a mechanism design perspective, we derive the \emph{Escalation Principle}: in games of strategic complements, restricting information can maximize aggregate effort by trapping agents in echo chambers where they compete against hallucinated, high-sophistication peers. Conversely, we identify a \emph{Transparency Reversal} for coordination games, where maximizing network visibility is required to minimize variance and stabilize outcomes. Our results suggest that network topology functions as a cognitive zoom lens, determining whether agents behave as local imitators or global optimizers. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.10053 |
| By: | Brian Roberson (Purdue University, Department of Economics and Economic Science Institute, Chapman University) |
| Abstract: | We study incentive design when multiple principals simultaneously design mechanisms for their respective teams in environments with strategic spillovers. In this environment, each principal’s set of incentive-compatible mechanisms—those that satisfy their own agents’ incentive compatibility constraints— depends on the mechanisms offered by the other teams. Following a classic example by Myerson (1982), such games may lack equilibrium due to discontinuities in the correspondence of incentive-compatible mechanisms. We establish general conditions for equilibrium existence by introducing a novel approach that involves tracking both the outcome distributions along the truthful-obedient path and the sets of outcome distributions achievable through unilateral deviations, thereby providing a foundation for analyzing a wide range of multi-principal mechanism design with team production and agency problems. |
| Keywords: | Mechanism Design, Principal-Agent Problems, Equilibrium Existence, Generalized Games, Multiple Principals, Stochastic Production, Team Production |
| JEL: | C72 D82 D86 L13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:chu:wpaper:26-02 |
| By: | Matthias Lang (LMU Munich); Cédric Wasser (University of Basel) |
| Abstract: | We study the welfare effects of ambiguous product information for a buyer with α-max-min preferences and a price-setting seller. The buyer privately receives information about her valuation. We show that the seller or the buyer can benefit when this information is ambiguous, and we characterize all possible combinations of producer and consumer surplus, as evaluated under ambiguity-sensitive preferences. Ambiguity concerning the valuation perceived by the buyer when making the purchase decision can induce the seller to change the price. Before receiving information, ambiguity concerning the purchase decision can make the buyer optimistic about buying only for high valuations, which relaxes the participation constraint. |
| Keywords: | Ambiguity; uncertainty; information design; bayesian persuasion; strategic learning; pricing; bargaining; |
| JEL: | D42 D81 D82 D83 L12 |
| Date: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:564 |
| By: | Wojciech Misiak; Marcin Dziubi\'nski |
| Abstract: | We study convergence rates of random-order best-response dynamics in games on networks with linear best responses and strategic substitutes. Combining formal analysis with numerical simulations we identify phenomena that lead to slow convergence. One of the key such phenomena is convergence to stable strategy profiles in parts of the network neighboring sets of nodes which remain inactive until the dynamics is close to converging and then switch to activity, initiating convergence to profiles with a new set of active agents and possibly leading to another iteration of such behavior. We identify structural properties of graphs which make such phenomena more likely. These properties go beyond the spectrum of a graph, which we demonstrate analyzing convergence rates on co-spectral mates. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.15986 |
| By: | Nicholas H. Kirk |
| Abstract: | Once failure is irreversible, continuation payoffs cannot be meaningfully aggregated across strategies that differ in their survival properties. Standard scalar evaluation sidesteps this by arbitrarily completing payoffs beyond termination, but such completions are extrinsic to the game form. This paper introduces continuation-performance decomposition (CPD), proving that any evaluation satisfying natural regularity conditions, such as failure-completion invariance, survival locality, and local expected-utility coherence -- must separate continuation from performance lexicographically. Continuation priority thus emerges as a consequence of well-posed evaluation, not as a behavioral assumption. We establish equivalence between CPD and the limit of games with diverging failure penalties, show that viability is a game-form invariant independent of payoffs, and apply the framework to bank runs: preemptive withdrawals reflect rational viability vetoes rather than coordination failure when continuation is distributively asymmetric. CPD resolves a representational problem, not a preference problem. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.08074 |
| By: | Markus Pasche (Friedrich Schiller University Jena) |
| Abstract: | It is shown that staggered and sticky price adjustment is possible without ad hoc frictions, and without suspending full price flexibility. I consider an oligopoly with n price-setting firms which can strategically choose the timing of price decisions and thus the stage in a n-stage Stackelberg oligopoly game. After a shock, firms can credibly signal to delay their price adjustment for some time to (re-)establish a leader-follower structure. From the calculus behind this decision, it is derived which firm will adjust at which time and henceforth stage of the game. The delays are in general asymmetric with respect to direction and size of the shock, and they depend on market power, making the model consistent with a variety of empirical observations. Strategically delayed adjustment of firm prices implies also inertia in aggregated price level adjustment which plays a key role in macroeconomics. |
| Keywords: | oligopoly, leader-follower structures, price dispersion, delayed price adjustment, cost shock, aggregated price dynamics, inflation |
| JEL: | D21 D43 L11 L16 E31 |
| Date: | 2026–02–11 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2026-002 |
| By: | Christoph Carnehl; Anton Sobolev; Konrad Stahl; André Stenzel |
| Abstract: | We study information design in a vertically differentiated market. A third party publicly discloses information about the product qualities of two competing firms. More precise information improves consumer matching but increases perceived differentiation, enabling firms to raise prices. Disclosing the product ranking alone suffices to maximize industry profits in a fully covered market. Consumer surplus, however, is maximized by a rank-preserving policy that withholds any information that overturns the prior ranking, as gains from price competition outweigh losses from allocative inefficiency. The conflict between profit- and consumer-optimal policies persists in settings with endogenous participation and nonlinear or asymmetric costs. |
| Keywords: | Information Design, Vertical Product Differentiation, Quality Rankings, Competition |
| JEL: | D43 D82 L13 L15 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_700v2 |
| By: | Martin Peitz; Anton Sobolev; Paul Wegener |
| Abstract: | Advertisers place ads on publishers’ websites to attract the attention of multihoming consumers. Because of competition in the product market, advertisers may have an incentive to partially or fully foreclose their rivals. A gatekeeper may be able to limit publishers’ access to some of the consumers. We fully characterize the equilibrium in which the gatekeeper, publishers, and advertisers make strategic pricing decisions. We show how the presence of the gatekeeper affects the advertisers’ foreclosure decisions and the surplus of the different market participants. |
| Keywords: | gatekeeper, ad-funded media, advertiser competition, ad blocking, uniform pricing, foreclosure, imperfect competition |
| JEL: | L12 L13 L15 M37 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_731 |
| By: | Patrick Rey (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Yossi Spiegel (TAU - Tel Aviv University); Ernst Konrad Stahl (University of Mannheim = Universität Mannheim) |
| Abstract: | We study the feasibility and profitability of predation in a dynamic environment, using a parsimonious infinite-horizon, complete information setting in which an incumbent repeatedly faces potential entry. When a rival enters, the incumbent chooses whether to accommodate or predate it; the entrant then decides whether to stay or exit. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, monopolization, and recurrent predation. We then analyze and compare the welfare effects of different antitrust policies, accounting for the possibility that recurrent predation may be welfare improving. |
| Keywords: | arkov perfect equilibrium, legal rules, entry, accommodation, predation |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05483810 |
| By: | Noémi Berlin (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Mamadou Gueye (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique); Stéphanie Monjon (LEDA-CGEMP - Centre de Géopolitique de l’Energie et des Matières Premières - LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In this paper, we use a laboratory experiment to analyze the effect of information provision (feedback) on individual sorting behavior. Effective sorting requires both quantity and quality, yet increasing quantity may reduce quality due to the higher risk of contamination. We conduct a collective sorting behavior experiment consisting of a two-stage coordination game in which two subjects are paired and then individually decide whether or not to participate in a collective sorting task. The performance achieved depends on the quantity and quality of sorting, and the payoff depends on the decision and performance of both subjects in the task. Information about the subject's own past performance, and information about the partner's past performance, are included as feedback treatments. Using a between-subjects experimental design, we find that the feedback type has very different effects on participation, performance and coordination (defined as both subjects succeeding in the sorting task). Only feedback about one's own performance leads to better performance and more coordination. Although this experiment is not contextualized, the results provide useful pointers for waste sorting policies. |
| Keywords: | experiment, sorting task, cooperation, informational feedback |
| Date: | 2024–12–30 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05460234 |
| By: | Alex L. Brown; Ethan Park; Rodrigo A. Velez |
| Abstract: | We test whether lying aversion can steer equilibrium selection in mechanism design. In a principal-worker environment, the direct mechanism admits two dominant-strategy equilibria: the designer's target and a worker-optimal outcome. We show this limitation persists for all robust mechanisms, then ask whether framing misreports as explicit lies helps. We develop a 2X2 experiment that varies direct vs. extended mechanisms with implicit vs. explicit messages. We find that framing misreporting of type as an explicit lie shifts play away from the worker-optimal outcome toward truthful reporting, raising designer payoffs with minimal efficiency loss. These findings indicate that lying aversion is an effective lever for aligning behavior with social objectives. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.16973 |
| By: | Josephine Auer (JDepartment of Economics, MIT, Cambridge); Lana Friesen (School of Economics, University of Queensland); Ian A. MacKenzie (School of Economics, University of Queensland) |
| Abstract: | This article investigates the existence of bid caps in budget-constrained procurement auctions. We analyze the design and (non)disclosure of a bid cap and how this impacts aggregate market outcomes and strategic bidding behavior in a budget-constrained envi-ronment. We use a laboratory experiment to analyze two potential bid cap designs—a disclosed versus undisclosed bid cap—as well as comparing both to a baseline case without a bid cap. We find adoption of either a disclosed or non-disclosed cap significantly im-proves cost effectiveness. A non-disclosed cap, however, significantly increases the informa-tion rent to participants and, consequently, performs relatively worse than a disclosed cap. We consider two common but distinct auction formats (discriminatory ‘pay-your-bid’ and a uniform price) and show that a discriminatory auction improves cost effectiveness com-pared to a uniform-price auction when the cap is disclosed. Our findings have important policy implications that demonstrate the benefits of implementing bid caps for improving budgetary cost-effectiveness while highlighting potential tradeoffs between efficiency and worsening information rents. |
| Keywords: | auction, experiment, bid cap, procurement |
| JEL: | C91 C92 D44 H57 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:qld:uq2004:672 |
| By: | Yasushi Asako (Faculty of Political Science and Economics, Waseda University); Yoshio Kamijo (Faculty of Political Science and Economics, Waseda University); Daiki Kishishita (Graduate School of Economics, Hitotsubashi University); Masayuki Odora (Global Education Center, Waseda University) |
| Abstract: | The diffusion of fake news on social media poses a growing challenge to society. This study develops a theoretical model and laboratory experiment to examine whether user-to-user feedback such as likes or negative comments can reduce fake news sharing. We construct a sender-receiver game in which the sender receives a signal from potentially unreliable sources and decides whether to share it, while feedback from the receiver enables learning about information quality over time. The model predicts that (i) peer feedback induces self-selection: individuals with unreliable sources learn to stop sharing, and (ii) fake news spreads more when senders are motivated by reputation rather than accuracy, though this effect is modest. We test these predictions by developing a novel lab experiment based on the ball-and-urn experimental design. Consistent with the theory, feedback reduces fake news sharing, but effects are weaker due to underreaction in belief updating and noisy decisions. Differences across motivational incentives are minimal. These findings highlight both the potential and limits of peer feedback in preventing fake news sharing, offering implications for platforms seeking to curb misinformation through user-to-user feefback. |
| Keywords: | Fake news; Communication; Social learning; Peer feedback; Social media |
| JEL: | L82 D83 C92 D72 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2531 |
| By: | Maria Andraos; Mario Ghossoub; Bin Li; Benxuan Shi |
| Abstract: | We study Stackelberg Equilibria (Bowley optima) in a monopolistic centralized sequential-move insurance market, with a profit-maximizing insurer who sets premia using a distortion premium principle, and a single policyholder who seeks to minimize a distortion risk measure. We show that equilibria are characterized as follows: In equilibrium, the optimal indemnity function exhibits a layer-type structure, providing full insurance over any loss layer on which the policyholder is more pessimistic than the insurer's pricing functional about tail losses; and no insurance coverage over loss layers on which the policyholder is less pessimistic than the insurer's pricing functional about tail losses. In equilibrium, the optimal pricing distortion function is determined by the policyholder's degree of risk aversion, whereby prices never exceed the policyholder's marginal willingness to insure tail losses. Moreover, we show that both the insurance coverage and the insurer's expected profit increase with the policyholder's degree of risk aversion. Additionally, and echoing recent work in the literature, we show that equilibrium contracts are Pareto efficient, but they do not induce a welfare gain to the policyholder. Conversely, any Pareto-optimal contract that leaves no welfare gain to the policyholder can be obtained as an equilibrium contract. Finally, we consider a few examples of interest that recover some existing results in the literature as special cases of our analysis. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.16401 |
| By: | Thomas R. Cook; Sophia Kazinnik; Zach Modig; Nathan M. Palmer |
| Abstract: | Large language models (LLMs) are now used for economic reasoning, but their implicit "preferences" are poorly understood. We study these preferences by analyzing revealed choices in canonical allocation games and a sequential job-search environment. In dictator-style allocation games, most models favor equal splits, consistent with inequality aversion. Structural estimation of Fehr-Schmidt parameters suggests this aversion exceeds levels typically observed in human experiments. However, LLM preferences prove malleable. Interventions such as prompt framing (e.g., masking social context) and control vectors reliably shift models toward more payoff-maximizing behavior, while persona-based prompting has more limited impact. We then extend our analysis to a sequential decision-making environment based on the McCall job search model. Here, we recover implied discount factors from accept/reject behavior, but find that responses are less consistently rationalizable and preferences more fragile. Our findings highlight two core insights: (i) LLMs exhibit structured, latent preferences that often align with human behavioral norms, and (ii) these preferences can be steered, albeit more effectively in simple settings than in complex, dynamic ones. |
| Keywords: | Behavioral economics; Game theory; Search and matching models |
| JEL: | C63 C68 C61 D14 D83 D91 E20 E21 |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:102439 |