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on Game Theory |
| By: | Christoph Riedl; Rory Smead |
| Abstract: | The structure and dynamics of complex networks are intimately linked. Despite immense progress in statistically characterizing these systems, a generalized mechanistic framework explaining why specific mesoscale structures emerge remains elusive. Here we introduce the game-graph equilibrium, the stable rest point of a payoff-driven partner-choice dynamic, analogous to a Nash equilibrium. This reveals network structure as the fossilized record of strategic interaction. We prove analytically that two-type games have exactly four network topologies, which are their exhaustive thermodynamic phases: assortative, disassortative, and two core-peripheries. This result generalizes to $K^K$ topological classes for $K$-type interactions. Furthermore, four distinct Nash equilibria produce core-periphery topologies, yet their payoffs reveal whether the underlying dynamic is cooperative or exploitative. To recover the generating dynamics from observed networks, we develop mechanistic inference by constraining a block model to lie on a low-dimensional, game-theoretic manifold. Applied to real-world networks, the model yields interpretable quantities, distinguishes states that look identical to conventional methods, predicts network topologies it has never seen without retraining, and controls its own complexity without hand-tuned penalties. Networks such as international trade are well described by the model despite the hard constraint, suggesting that real-world systems are organized by payoff-driven partner choice. Our framework resolves a foundational ambiguity by offering a precise, mechanistic definition of communities: strategic equivalence. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.24792 |
| By: | Gondauri, Davit |
| Abstract: | We develop a deterministic approximation algorithm for rational bimatrix games with payoffs in [0, 1] and prove a universal (0.30919 + δ)-approximate Nash equilibrium guarantee, for every rational δ > 0, with bit complexity polynomial in the input length and 1/δ. The result refines the algorithm's original 0.3092 + δ bound without changing its six-candidate construction. The method retains one enlarged stationary dual certificate, solves four fixed-side linear programs in two rounds, searches a rational strategy rectangle, and evaluates a joint cross-round candidate. A same-execution reduction preserves all five retained dual masses. New guarded discriminant and supporting inequalities permit a complete global exclusion at the exact rational threshold 30919/100000. A separate integer interval implementation accepts all 850, 267 records, including every contraction and closed subdivision, with no unresolved region. Exact general-sum examples establish that the sixth candidate can improve on the entire continuous stationary rectangle. Full certified executions complete 22 of 24 scheduled trials at sizes 100, 200, 500, and 1000, including all six 1000 × 1000 trials; their median core time is 30.771 seconds. Two repetitions of one 200×200 input remain censored. An explicit finite-accuracy reconstruction of Tsaknakis-Spirakis, with a proved error ledger, supports 52 certified comparisons at a common guaranteed target. The archive contains the proof trees, independent checkers, protocols, and exact execution records. Exact game worst-case sharpness and uniform practical throughput remain open. |
| Keywords: | approximate Nash equilibrium, bimatrix games, stationary descent, linear programming duality, exact interval certificates, computational game theory |
| JEL: | C72 C61 C63 C62 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:344144 |
| By: | Barış Kaymak |
| Abstract: | This paper compares equilibrium bidding strategies in a first-price sealed-bid auction with two asymmetric bidders who have dependent private valuations. Modeling bidder strength via a stochastic asymmetry condition – where one bidder is systematically more likely to hold the maximum valuation – I show that the globally weak bidder, facing a competitive disadvantage at all top valuation levels, bids more aggressively at every valuation. Conversely, the stronger bidder wins more frequently, generalizing Maskin and Riley (2000) to dependent private-value environments. When the stochastic asymmetry flips once, so that each bidder is stronger over a different range, the bid distributions cross once, with each bidder bidding more aggressively where their competitive disadvantage is most acute. In both environments, allocative inefficiency is an inherent feature of the equilibrium, driven by the stronger bidder's heightened incentives to shade bids relative to their valuation. The results translate to procurement auctions and wage competition between employers, and extend to interdependent-value auctions and the war of attrition under modified conditions. |
| Keywords: | asymmetric auctions; bid shading; first price auctions; dependent valuations |
| JEL: | D44 C72 D82 |
| Date: | 2026–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:103917 |
| By: | Federico Echenique; Yu-Ting Ho |
| Abstract: | We analyze auctions with interdependent values and horizontally differentiated bidders, where good news for one bidder is bad news for the other bidders. This generates a winner's bliss, reversing the well-known winner's curse: winning means buying an object that is more valuable than a na\"{\i}ve estimate suggests. Our main result is about the English auction. We introduce the ``own effect property, '' generalizing the single-crossing condition, to prove the existence of an efficient ex-post equilibrium. Regarding revenue, we show that with affiliated signals, the English auction yields no more revenue than the second-price auction, while independent signals yield the standard revenue equivalence. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.25576 |
| By: | Lukyanov, Georgy; Yosifov, Yaroslav |
| Abstract: | Global games select a unique cutoff when a player’s incentive moves monotonically with private information. We show that this logic can fail when a privately informed participant can take a costly, simultaneous, and unobserved action that defends the status quo. In a currency-attack model, the defender acts only at intermediate signals. Along the traders’ cutoff equation, this interval response creates an endogenous defense-loss term that vanishes at the endpoints of an activation component but can dominate the decreasing benchmark payoff margin in between. We establish a primitive region in which defense is inactive and uniqueness survives, and a finite-CDF overshoot condition under which two active defense cutoff roots coexist with the inactive benchmark root. Because marginal indifference need not imply global incentives, we also give sufficient conditions for a genuine monotone cutoff best response. Finally, outward-rounded interval arithmetic proves that a proper-prior parameter vector has exactly three symmetric monotone-cutoff equilibria and that this topology persists locally. The result isolates a payoff-based boundary of global-game selection: hidden intervention can restore multiplicity without public signalling or a perturbation of the information hierarchy. |
| Keywords: | global games; regime change; active defense; private information; equilibrium multiplicity; computer-assisted proof |
| JEL: | C72 D82 F31 |
| Date: | 2026–10–14 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:132281 |
| By: | Linchen Zhang |
| Abstract: | I study the coarse revenue guarantee (CRG) of the single-unit first-price auction with common values. The CRG is the minimum expected revenue over all information structures and all Bayes coarse correlated equilibria (BCCE), the equilibrium notion to which no-regret learning leads. Identical play, in which all bidders submit the same bid, attains the worst-case revenue, and this reduction yields a closed-form characterization. The coarse guarantee is positive and increases with the number of bidders $N$. It lies strictly below the revenue guarantee of Bergemann, Brooks and Morris (2017) at every finite $n$, and the gap between the two closes at rate $\log N / N$. I extend the analysis to reserve prices, symmetric and asymmetric priors, other standard auctions, and an unknown value distribution. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.24901 |
| By: | Nemanja Antic; Harry Pei |
| Abstract: | We study steady-state equilibria of a sequential learning game in which each agent chooses between a safe action and a risky action of unknown profitability. Before choosing, each agent observes how many of the last $m$ agents adopted the risky action, but not whether they were informed or what their adoption costs were. We show that uninformed agents' imitation decisions can be strategic complements: the more likely uninformed agents are to join risky-action herds, the more informative those herds become about the action's profitability. When this complementarity gives rise to multiple equilibria, the one that maximizes the probability of imitation by uninformed agents also maximizes agents' welfare. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.25539 |
| By: | Lukyanov, Georgy |
| Abstract: | Success under a demanding method does not show that its additional demands are worthwhile. I study this distinction in a model of intergenerational learning with hidden effort. Moderate effort is informative about the value of a less demanding method; high effort produces more successes but no information about that question. I first characterize efficient experimentation with a complete record. I then show that parents who underweight descendants’ effort costs can induce earlier retirement from experimentation. On an explicit region of priors, a paternalistic equilibrium stops after one failed experiment, whereas an aligned equilibrium allows two. Both transmit the relevant record truthfully and withstand communication deviations: every sender already obtains its preferred full-record continuation. Nevertheless, paternalism lowers discounted material welfare, raises long-run effort and success, and leaves less informative public evidence. Under stronger paternalism, parents may instead conceal knowledge to induce experimentation. I characterize a pooling continuation, establish its local communication stability, and show that it can occur in a full equilibrium. The results distinguish the efficient limits to learning from the additional loss of evidence caused by disagreement over effort costs. |
| Keywords: | experimentation; intergenerational communication; paternalism; effort; social learning |
| JEL: | C72 C73 D64 D83 |
| Date: | 2026–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:132286 |
| By: | Bühler, Benno; Fischer, Dominik; Ganglmair, Bernhard |
| Abstract: | We develop a licensing-litigation model to analyze how different injunction frameworks affect bargaining behavior, equilibrium royalties, and litigation outcomes in standard-essential patent (SEP) disputes. Motivated by recent developments in German case law, we compare two legal frameworks that differ only in whether the patent holder's licensing offer conditions the availability of injunctive relief. We show that removing the patent holder's offer from the injunction analysis raises equilibrium royalties and the risk of patent hold-up when courts are sufficiently imprecise in assessing FRAND compliance; when courts are predictable, the two frameworks coincide. Higher royalties arise because SEP holders make more aggressive, non-FRAND, licensing offers, while implementers respond with higher counteroffers to reduce the risk of an injunction. The same mechanism, however, can reduce the incidence of injunctions, so injunction frequency is an imperfect measure of hold-up. Whether the higher royalties raise or lower welfare depends on where the socially optimal royalty lies relative to the rates the two frameworks produce. |
| Keywords: | bargaining, FRAND, hold-up, injunction, legal uncertainty, licensing negotiations, litigation, standard-essential patents (SEP) |
| JEL: | C78 K21 K41 L24 O31 O34 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:344104 |
| By: | Dominik Atella-Suri (University of Bonn); Annalena Tetzner (University of Bonn); Sebastian Kube (University of Bonn); Jan Börner (University of Bonn) |
| Abstract: | Negative income shocks may increase households' reliance on common-pool resources and thereby undermine sustainable resource management. We study this in a preregistered laboratory experiment with 120 participants playing a dynamic resource extraction game framed around a community forest. Participants in the Control condition play the baseline game three times, whereas participants in the Shock condition experience a temporary loss of exogenous income in the second part before income is restored in the third. This design allows us to distinguish responses to the income shock from common changes associated with repeated play and to observe behavior after the shock ends. We find that forest extraction increases in Part 2 for the Shock treatment relative to the ongoing baseline in the Control condition. After income is restored in Part 3, extraction decreases and the forest partially recovers. However, the equivalence tests do not clearly show whether behavior fully returns to its pre-shock level or whether some of the shock effect remains. Our findings support previous evidence that economic hardship can increase pressure on shared natural resources. |
| Keywords: | Resource extraction game; Forest commons; Income shock; Lab experiment; Cooperation |
| JEL: | D70 Q20 Q23 Q50 Q56 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:432 |
| By: | Paolo Bertoletti |
| Abstract: | Alternative market allocations are compared in a linear setting with product differentiation. With two commodities, assuming that both Ramsey and Cournot quantities are positive, the Cournotian quantities are shown to be not larger than their Bertrand counterparts, regardless of product substitutability. It also turns out that the case of a Bertrand price exceeding its Cournotian counterpart (which requires product complementarity) and the existence of a "subordinate" commodity receiving a negative price-cost margin à la Ramsey are equivalent conditions. |
| Keywords: | Bertrand vs Cournot; Ramsey pricing; subordinate commodity; product differentiation |
| JEL: | D11 D43 L13 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:582 |
| By: | Elshan Garashli (University of Graz, Austria) |
| Abstract: | Multiple experts often observe information that is nearly, but not exactly, common. We study a multi-sender cheap talk model with an ε-mixture prior that varies correlation while holding marginals fixed. Correlation determines which message profiles are governed by Bayes' rule. Full revelation can be supported at perfect correlation, but any independent component rules it out. This is not a collapse of communication. Informative equilibria still exist with almost common information and can be partitional or nonpartitional. With similar information, partitional equilibria survive only on a strict subset of their perfect-correlation bias region, while nonpartitional equilibria remain feasible throughout their perfect-correlation bias region. |
| Keywords: | Cheap talk, communication, information transmission, correlation, robustness |
| JEL: | C72 D82 D83 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2026-22 |
| By: | Qin, Cheng-Zhong (Center for Mathematical Economics, Bielefeld University); Trockel, Walter (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | How many commodities are required to represent a totally balanced game with transferable utility? The answer depends on whether the representing economy reproduces only coalition values or also makes the assumed utility transfers feasible. Hart’s (n − 1)-commodity bound concerns a reduced-form market representing coalition values by aggregate surplus. Its complete quasi-linear representation contains an additional transferable numéraire, which is necessary for payoff feasibility as well as competitive exchange. Counting this commodity yields a sharp worst-case bound of n, already without an equilibrium requirement. We then establish a lower bound for Walrasian representation: every concave pure-exchange representation of the n-player unanimity game that realizes even one core payoff vector at nonzero equilibrium prices requires at least n commodities. The proof expresses Hart’s commodity lower bound through the rank of net trades and combines it with individual budget balance. Building on Shapley and Shubik’s classical direct-market construction, we make explicit its budget-feasible realization of the core. A self-contained proof distinguishes trading-profit maximization with monetary settlement from utility maximization under physical-commodity budgets; the two interpretations yield the same set of payoff vectors, but need not use the same allocation. A coalition-value criterion extends the lower bound beyond unanimity and yields a quantitative welfare bound for low-dimensional representing economies. The analysis separates commodity accounting, transferable-payoff feasibility, and Walrasian implementation. |
| Keywords: | market games, totally balanced games, transferable utility, commodity bounds, competitive solutions, Walrasian equilibrium |
| Date: | 2026–10–08 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:770 |
| By: | Stéphane Auray; Frédéric Loss (CY Cergy Paris Université, THEMA) |
| Abstract: | Geopolitical tensions, cyber operations, and supply-chain disruptions have made firms’ resilience to hostile shocks a central concern for economic policy. We develop a unified framework in which firms invest in resilience, a strategic attacker decides whether to strike, and a regulator subsidizes resilience under costly public funds. We analyze static and dynamic environments under symmetric and asymmetric information. In the static benchmark, we characterize the optimal subsidy scheme and show how Myersonian virtual costs distort resilience investment downward and increase attack incentives relative to full information. We then extend the model to repeated interactions in which resilience is a depreciating stock. We derive dynamic virtual costs and characterize stationary first-best and second-best resilience paths, showing that information frictions permanently reduce resilience and raise attack intensity. Three additional extensions examine declining defensive effectiveness, endogenous attack technology, and a forward-looking attacker who strategically erodes resilience over time. These settings generate, respectively, persistent underinvestment as defenses lose effectiveness, an arms race between attackers and defenders, and stationary Markov-perfect equilibria. Across all specifications, asymmetric information and costly public funds systematically reduce resilience investment, with persistent consequences for attack intensity, defensive effectiveness, technological adaptation, and attackers’ strategic incentives. |
| Keywords: | resilience, geopolitical risk, cyber security, dynamic mechanism design, virtual costs, regulation, strategic attacker |
| JEL: | D82 D86 H23 H56 L51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2026-15 |
| By: | Sarah Auster (University of Bonn, Department of Economics & CEPR); Helene Mass (Department of Economics & University of Vienna) |
| Abstract: | We study the value of commitment in verifiable disclosure games when the receiver faces non-quantifiable uncertainty about the evidence environment. The sender has stochastic access to hard evidence and may disclose or suppress it; the receiver chooses a decision rule to maximize her payoff guarantee. When ambiguity concerns the payoff state, the receiver has strict incentives to soften her standards ex post after non-disclosure, making commitment strictly valuable. When ambiguity concerns the sender’s expertise, incentives reverse: the receiver prefers a stricter reaction than is ex-ante optimal, so prespecified, hard-wired rules for non-disclosure improve payoffs for both sides. |
| Keywords: | Ambiguity, Commitment |
| JEL: | D81 D82 D86 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:435 |
| By: | Jan Morgan; Anchi Xia |
| Abstract: | We provide a theory of optimal trade sanctions with three strategic players: Home (sanctioner), Foreign (target), and Bystander. Bystander may act unilaterally or ally with either party subject to a participation constraint. We derive three novel results. First, members of a coalition generically set different tariffs either under Stackelberg timing or when transfers are imperfect. Second, as sanctions tighten, Home's welfare can improve even beyond the unilateral terms-of-trade optimum due to strategic interactions. Third, we characterize feasible sanctions targets when Home and Foreign compete for Bystander's support. An alternative implementation arises with competition: Home lets Foreign win, but Foreign's transfer to Bystander implements the sanctions target. We apply our model to sanctions against Russian crude. In a calibration exercise, cooperation among India, China, and Russia best matches observed data. Sanctions could have been roughly 70% more effective had China and India acted unilaterally or had the sanctioning coalition made them a better offer. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.22830 |
| By: | Dilek Sevim; Stefan Felder; Yu Deng; Hans Gersbach |
| Abstract: | We study the formation of an international antimicrobial resistance (AMR) club, a two-country coalition in which members jointly finance a new antibiotic and get early access, while non-members wait out an exclusivity period. The countries are linked by cross-border mobility, and the drug is financed through a fund-and-refund scheme that pays the developer a fixed reward during development plus a refund proportional to the use of the new antibiotic after launch. Our analysis highlights an exclusivity-mobility tradeoff that distinguishes antibiotic innovation from other global public goods. A longer exclusivity window strengthens internal stability of the coalition by increasing the cost of defection, but leads to higher resistance in non-member countries which feeds back to the club members through mobility. Exclusivity and member contributions are complementary in sustaining the grand coalition, while exclusivity and mobility act as substitutes at the margin. Extending the analysis to countries of different sizes raises the minimum exclusivity window needed to sustain cooperation, but uniquely identifies the larger country as the financier under partial cooperation. |
| Keywords: | antimicrobial resistance, coalition formation, club goods, antibiotic innovation, exclusivity, epidemiological spillovers, transfers, stewardship |
| JEL: | H41 H77 I18 O31 Q54 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13048 |
| By: | Hexiao Liu; Lijian Lu; Mingzheng Wang |
| Abstract: | Digital marketplaces increasingly earn revenue from transaction commissions and seller-facing data services. Sellers may purchase data to increase revenue or avoid competing with an informed rival. We examine how consumer disclosure rights shape these motives and the platform's incentive to provide data. We develop a game-theoretic model of a commissioned platform, two differentiated sellers, and privacy-sensitive consumers. Data generates value through bilateral sales-revenue gains and competition threats arising from asymmetric access. Under mandatory collection, the platform can monetize defensive adoption, even when bilateral personalization reduces seller revenue. Under voluntary disclosure, anonymous purchasing and strictly positive privacy costs make unilateral disclosure unattractive in the baseline. Exclusive access thus yields no usable information, restores sellers' no-data rejection payoffs, and eliminates defensive fees. Profitable provision therefore requires nonnegative bilateral revenue gains. Under full fee extraction, sellers retain their no-data net profits. This revenue alignment does not guarantee welfare gains: additional transactions may benefit consumers, whereas segmentation in an already covered market can raise anonymous prices and reduce welfare. Capping anonymous offers at their no-data benchmark protects individual consumers and limits positive-mass provision to the transaction-creation region. Extensions consider access choice, heterogeneous privacy costs, imperfect identification, and limited contractual credibility. Platforms should evaluate data services based on both bilateral-use and seller-rejection outcomes, and sellers should distinguish revenue-enhancing from defensive investments. Regulators should distinguish equal-access rules from effective consumer control and monitor pricing in anonymous channels. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.22864 |
| By: | Antoine Malezieux (BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne, CEREN - Centre de Recherche sur les Entreprises - BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne); Eli Spiegelman (BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne, CEREN - Centre de Recherche sur les Entreprises - BSB - Burgundy School of Business (BSB) - ESC Dijon-Bourgogne) |
| Abstract: | Over the last four decades, a broad stream of experimental literature has been published using the Common Pool Resource (CPR) game to study how people react to congestible resources, and how to keep such resources from socially harmful overexploitation. With the goal of providing guidance to future work on this still-important paradigm, we provide a narrative review of the literature, summarizing the results for several key aspects of the experimental operationalization. We classify these aspects into two broad categories. The first describes ‘environmental' assumptions on the modeled resource problem itself. This refers to aspects of the experimental environment reflecting factors such as group size, resource size and asymmetry of access, which generally constitute the nature of the dilemma. The second category involves ‘institutional' issues related to how people might solve the problem, such as user communication between subjects, information about previous subjects' choices, and regulatory measures. |
| Keywords: | Climate change, Common pool, Commons dilemma, Experiment, Harvesting |
| Date: | 2025–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05797893 |
| By: | Martin Bichler; Philip Hierhager; Kassian K\"ock; Fabian Pieroth |
| Abstract: | Repeated Bertrand competition is a stringent benchmark for algorithmic pricing: in homogeneous-goods markets, standard learning procedures typically select the stage-game Nash outcome with prices near marginal cost. We show that LLM pricing agents can escape this benchmark, depending on deployment decisions. LLMs outperform standard online learners through faster adaptation, but this advantage largely disappears against full-information learners. An extracted surrogate algorithm illustrates how LLMs in specific deployments profit from regularly undercutting slower learners. Agents that post one price every period from raw market histories that include rival prices can sustain supracompetitive regimes in self-play. Agents that periodically emit probability distributions from summarized histories of their own profits instead move toward the competitive region in self-play. Markets mixing these interfaces can generate dynamic regimes in which LLMs establish a high-price anchor and regularly undercut it to capture demand. These regimes can keep both competitors' prices above marginal cost. Deployment choices shape these outcomes, shifting the focus from stationary equilibria to dynamic pricing regimes. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.21711 |
| By: | Elshan Garashli (University of Graz, Austria) |
| Abstract: | Decision makers rely on experts who observe part of the information relevant to a choice. We study communication when an expert observes one component of a decision target but her observation also predicts a missing component. This indirect information can sustain communication despite conflicts of interest. The largest conflict consistent with informative communication depends on what extreme observations imply about the missing component, not on correlation alone. When this prediction is linear, higher correlation permits finer communication and raises the value of listening relative to no information. Yet this need not improve welfare because the decision itself becomes more difficult. |
| Keywords: | strategic communication, partial expertise, correlated information, price benchmarks |
| JEL: | C72 D82 D83 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2026-23 |
| By: | Nicolas Bonneton; Christopher Sandmann |
| Abstract: | We study equilibrium sorting in the canonical search-and-matching model with Nash bargaining and ex-ante and ex-post heterogeneity. Under standard conditions for assortative matching under search, match surplus retains two properties of Becker's frictionless benchmark---single-crossing and single-peakedness---but necessarily loses the third, reciprocity. Instead, search generates consensus: intervals of types share the same surplus-maximizing partner. For such intervals, mismatched pairs are more likely to match, conditional on meeting, than perfectly assortative ones. Two forces drive this: with search, outside options rise less than one-for-one with productivity and fall more for agents with fewer suitable partners. Globally, upper contour sets of the match-probability surface are lattices below an endogenous threshold but almost never above it. This means that MLRP fails for some log-concave survival function. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.24230 |
| By: | Duong Trinh (University of Graz, Austria); Tatiana Santiago Montoya-Blandón (University of Glasgow, United Kingdom) |
| Abstract: | This paper introduces a new econometric framework for modeling social interactions with heterogeneous peer responses, addressing endogenous link formation. Our Selection corrected Heterogeneous Spatial Autoregressive (SCHSAR) approach jointly models link formation and outcome determination. We incorporate a finite mixture structure to capture heterogeneity in peer effects and account for unobserved individual-specific factors driving both network formation and outcome equations, addressing network endogeneity for credible estimation of heterogeneous spillover effects. We propose a fully Bayesian data augmentation approach for estimation and inference, overcoming challenges posed to standard likelihood-based methods. A simulation study validates our approach. Our empirical application to an innovation network among U.S. firms reveals significant positive, yet heterogeneous, peer effects on corporate R&D investments, after accounting for endogenous network formation. The findings highlight a variety of firm responses to exogenous R&D policy shocks and we quantify firm-level direct and spillover effects, offering valuable insights for evidence-based targeted policy design. |
| Keywords: | Bayesian inference, Social-spatial interaction, Finite mixture models, Heterogeneous peer effects, Network formation, R&D investment |
| JEL: | C11 C31 C51 D85 O32 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2026-24 |
| By: | Mingyu Guo; Jiayuan Liu; Vincent Conitzer |
| Abstract: | We aim to design revenue-maximizing single-item auctions that are deterministic, strategy-proof, and ex post individually rational --- the quintessential fundamental model for optimal mechanism design. While Myerson's seminal work solved this model for independent bidders, straightforward extensions to correlated settings often result in non-monotonic, and therefore non-strategy-proof allocations. Critically, optimal allocation design for correlated bidders is NP-hard to approximate, rendering theoretical optimality guarantees in this domain computationally intractable. We establish a new standard of empirical rigor for this theoretically hard model by proposing an empirical pipeline. We synthesize neural interpolation of Myerson's greedy allocation based on marginal profits (the correlated variant of virtual valuation), formal neural verification to enforce exact strategy-proofness, and a constructive repair procedure. Empirically, our method is highly effective, consistently achieves near-optimal revenue across a wide range of distributions, including synthetic, adversarial, and real-world (consumer, financial, and industrial) datasets. Compared to existing manual and neural baselines, our approach shows substantial improvement, often reducing the revenue gap by an order of magnitude. Our study is also the first to introduce (unattainable) greedy revenue as a rigorous upper bound for empirical benchmarking, providing a definitive quantitative performance measure where true optima remain theoretically elusive. We demonstrate the generality of our approach by extending it to multi-unit auctions with unit demand and integrating our verification techniques into RegretNet to achieve exact strategy-proofness. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.24240 |