nep-mic New Economics Papers
on Microeconomics
Issue of 2005‒09‒17
seven papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. CONSUMER PRICE SETTING IN ITALY By Silvia Fabiani; Angela Gattulli; Roberto Sabbatini; Giovanni Veronese
  2. On the Existence of Monotone Pure Strategy Equilibria in Bayesian Games By Philip J Reny
  3. Informational Herding and Optimal Experimentation By Lones Smith; Peter Norman Sørensen
  4. On the Political Economy of Adverse Selection By Hervé Crès; Mich Tvede
  5. Stable Networks and Convex Payoffs By Sudipta Sarangi; Robert P. Gilles
  6. (Non-)Existence and Scope of Nash Networks By Sudipta Sarangi; Hans Haller; Jurjen Kamphorst
  7. Corporate Design for Regulability. A Principal-Agent-Supervisor Model By Christoph Engel

  1. By: Silvia Fabiani (BANK OF ITALY); Angela Gattulli (BANK OF ITALY); Roberto Sabbatini (BANK OF ITALY); Giovanni Veronese (BANK OF ITALY)
    Abstract: This paper investigates the microeconomic behaviour of consumer prices in Italy using the individual price records underlying the Italian CPI dataset collected by Istat. We discuss how to analyse price stickiness using such a detailed database and compute a quantitative measure of the unconditional degree of price rigidity in the Italian economy. The analysis focuses on the monthly frequency of price changes and on the duration of price spells, with a sectoral breakdown as well as with a classification by type of outlet. Prices are in general found to be rather sticky, remaining unchanged on average for around 10 months; price spells last longer for non-energy industrial goods and services, much less for energy products. Prices are revised more frequently upwards than downwards, while the size of price changes is quite symmetric. Price st ickiness is found to be less marked in large modern stores than in smaller traditional shops. Price changes display considerable synchronisation, in particular in the services sector. The average frequency of price changes and the probability of observing a price change over time and across items are positively related to headline inflation and increases in VAT rates and negatively related to the share of attractive prices. These findings are consistent with the ones reported in similar national studies for other countries of the euro area, which were conducted by the National Central Banks within the Eurosystem Inflation Persistence Network.
    Keywords: consumer prices, nominal rigidity, frequency of price change
    JEL: D21 D40 E31
    Date: 2005–06
  2. By: Philip J Reny
    Date: 2005–09–09
  3. By: Lones Smith (Department of Economics, University of Michigan); Peter Norman Sørensen (Department of Economics, University of Copenhagen)
    Abstract: We show that far from capturing a formally new phenomenon, informational herding is really a special case of single-person experimentation - and `bad herds' the typical failure of complete learning. We then analyze the analogous team equilibrium, where individuals maximize the present discounted welfare of posterity. To do so, we generalize Gittins indices to our non-bandit learning problem, and thereby characterize when contrarian behaviour arises: (i) While herds are still constrained efficient, they arise for a strictly smaller belief set. (ii) A log-concave log-likelihood ratio density robustly ensures that individuals should lean more against their myopic preference for an action the more popular it becomes.
    Keywords: herding; optimal learning; experimentation; contrarianism
    JEL: D82 D83
    Date: 2005–08
  4. By: Hervé Crès (HEC School of Management); Mich Tvede (Department of Economics, University of Copenhagen)
    Abstract: We consider a standard insurance economy where consumers are supposed to vote over menus of insurance contracts: A menu of contracts is majority stable if there does not exist another menu which is supported by an appropriate majority of consumers. We compute the smallest level of super majority for which there always exists a stable menu of contracts, and such that all stable menus of contracts are Pareto optimal. Lower super majority voting rules may ensure existence of stable menus if individual states and/or types of consumers are aggregated, but then stable menus of contracts need not be Pareto optimal: hence a trade-off between Pareto optimality and conservativeness of the voting rule is exhibited.
    JEL: D7 D8
    Date: 2005–05
  5. By: Sudipta Sarangi; Robert P. Gilles
    Abstract: Recently a variety of link-based stability concepts have emerged in the literature on game theoretic models of social network formation. We investigate two basic formation properties that establish equivalence between some well known types of stable networks and their natural extensions. These properties can be identified as convexity conditions on the network payoff structures.
  6. By: Sudipta Sarangi; Hans Haller; Jurjen Kamphorst
    Abstract: For the connections model of strategic network formation, with two-way flow of information and without information decay, specific parameter configurations are given for which Nash networks do not exist. Moreover, existence and the scope of Nash network architectures are briefly discussed.
  7. By: Christoph Engel (Max-Planck-Institute for Research on Collective Goods)
    Abstract: Corporate actors differ from individuals in one important respect: technically, it may be possible to observe the formation of the corporate will from outside, and to impact on its formation. This feature can be exploited by regulators. One technology is inducing corporate actors to hire an interface actor, representing the regulatory cause at the interior of the firm. Regulators are corporate actors as well. Statutes usually do not fully determine their behaviour. Therefore, firms may induce the regulator to give an interface actor access to the regulatory arena. This interface actor has the task of representing the commercial cause in regulatory decision-making. The paper uses a principal-agent-supervisor model to analyse each of these cases separately, and to demonstrate how the reciprocal nature of the relationship may be exploited.
    Keywords: principal-agent-supervisor, corporate actor, corporate governance, regulatory procedure, governance, interface actor
    JEL: C72 D23 D73 K22 K23 K32 L51
    Date: 2005–09

This nep-mic issue is ©2005 by Joao Carlos Correia Leitao. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.