nep-mic New Economics Papers
on Microeconomics
Issue of 2011‒10‒01
sixteen papers chosen by
Jing-Yuan Chiou
IMT Lucca Institute for Advanced Studies

  1. Work for Image and Work for Pay By Dessi, Roberta; Rustichini, Aldo
  2. A Multitask Model Without Any Externalities By Meg Sato; Kazuya Kamiya
  3. Multi-Period Contract Problems with Verifiable and Unverifiable Outputs By Kazuya Kamiya; Meg Sato
  4. Make it challenging : motivation through goal setting By Joaquín Gómez Miñambres
  5. Information revelation in procurement auctions with two-sided asymmetric information By Nicola Doni; Domenico Menicucci
  6. Spence Revisited: Signaling and the Allocation of Individuals to Jobs By Timothy Perri
  7. A Model of Persuasion with a Boundedly Rational Agent By Jacob Glazer; Ariel Rubinstein
  8. When overconfident agents slow down collective learning By Juliette Rouchier; Emily Tanimura
  9. See No Evil: Information Chains and Reciprocity in Teams By Eva-Maria Steiger; Ro'i Zultan
  10. A characterization of the 2-additive Choquet integral through cardinal information By Brice Mayag; Michel Grabisch; Christophe Labreuche
  11. A Representation of Preferences by the Choquet Integral with Respect to a 2-Additive Capacity By Brice Mayag; Michel Grabisch; Christophe Labreuche
  12. Do Bayesians learn their way out of ambiguity? By Alexander Zimper
  13. Finitely repeated games with social preferences By Oechssler, Jörg
  14. Experimental Social Choice: The Impact of Nosy Preferences on Efficiency By Chetan Dave; Stefan Dodds; Sheryl Ball; Rachel Croson
  15. Do People Care about Social Context? Framing Effects in Dictator Games By Dreber, Anna; Ellingsen, Tore; Johannesson, Magnus; Rand, David
  16. A Decade of Editing the European Economic Review By Eckstein, Zvi; Gal-Or, Esther; Gylfason, Thorvaldur; von Hagen, Jürgen; Pfann, Gerard A.

  1. By: Dessi, Roberta (Toulouse School of Economics (IDEI and GREMAQ), and CEPR); Rustichini, Aldo (University of Minnesota)
    Abstract: Standard economic models with complete information predict a positive, monotonic relationship between pay and performance. This prediction does not always hold in experimental tests: offering a small payment may result in lower performance than not offering any pay- ment. We test experimentally two main explanations that have been put forward for this result: the "incomplete contract" hypothesis views the payment rule as a signal given to subjects on purpose of the activity. The "informed principal" hypothesis views it as a signal concerning the characteristics of the agent or of the task. The incomplete contract view appears to oer the best overall explanation for our results. We also nd that high-powered monetary incentives do not "crowd out" intrinsic motivation, but may elicit "too much" eort when intrinsic motivation is very high.
    Date: 2011–09–10
  2. By: Meg Sato (The Australian National University (ANU) - Crawford School of Economics and Government); Kazuya Kamiya (University of Tokyo - Faculty of Economics)
    Abstract: This paper shows that offering a fixed wage maximizes the principal's welfare when the agent needs to engage in multitask and that the effort needed to achieve one task can be induced by suppressing the effort needed for the other task, in the absence of externalities. In the existing literature, it is argued that these results are obtained because externalities exist between the costs of tasks or production of tasks. The former is typically represented by a perfect substitute in the cost function. In this paper, we demonstrate that if the agent is engaged in multitask in which one task produces verifiable output and the other task produces unverifiable output, the same results are obtained without externalities.
    Keywords: Multitask, Unverifiable Outputs, Unverifiable Investments
    JEL: D86 J41 J31
    Date: 2011–07
  3. By: Kazuya Kamiya (University of Tokyo - Faculty of Economics); Meg Sato (The Australian National University (ANU) - Crawford School of Economics and Government)
    Abstract: Labour contracts tend to be more complicated than one simple short or long-term contract which is the basis of previous studies. Combinations of different length contracts become essential when principals expect to maximize not only verifiable outputs but also observable but unverifiable outputs, e.g., leadership. This paper is the first to develop a theoretical model of multi-period contracts that combine short-, mid-, and long-term contracts. We show that combinations of different length contracts vary by the relative importance of verifiable and unverifiable outputs and relative efficiency of investments in human capital made for each output. We also determine thresholds where the principal switches from offering one type of contract to the other.
    Keywords: Different Length Contracts, Unverifiable Outputs, Unverifiable Investments, Unverifiable Ability
    JEL: D86 J41 J31
    Date: 2011–04
  4. By: Joaquín Gómez Miñambres
    Abstract: We study a principal agent model where agents derive a sense of pride when accomplishing production goals. As in classical models, the principal offers a pay-per-performance wage to the agent, determining the agent’s extrinsic incentives. However, in our setting, the principal does also want to set goals that affect the agents’ intrinsic motivation to work. Agents differ in their personal standard which determines what becomes challenging and rewarding to them, and hence the intensity of their intrinsic motivation to achieve goals. We show that, at the optimal contract, the agents’ production, as well as the goals set by the principal, increase with the agents’ personal standards. Thus, although goal setting is payoff irrelevant, since it does not directly affect agents’ wage, it increases agents’ achievement and hence the principal’s profits. Moreover, we show that a mediocre standard agent could end up being the most satisfied one
    Keywords: Intrinsic motivation; Goal-setting; Reference dependent preference
    JEL: D82 D86 M50 Z13
    Date: 2011–08
  5. By: Nicola Doni (Università degli Studi di Firenze,); Domenico Menicucci (Dipartimento di Matematica per le Decisioni)
    Abstract: A buyer needs to procure a good from either of two potential suppliers offering differentiated products and with privately observed costs. The buyer privately observes the own valuations for the products and (ex ante) decides how much of this information should be revealed to suppliers before they play a first score auction. We show that the more significant is each supplier’s private information on the own cost, the less information the buyer should reveal. Part of our analysis is linked to the comparison between a first and a second price auction in an asymmetric setup with a distribution shift.
    Keywords: Asymmetric auctions
    JEL: D44 D82
    Date: 2011
  6. By: Timothy Perri
    Abstract: Spence (1974a) considered a variant of his signaling model in which there are two types of jobs, and in which signaling can increase wealth by improving the allocation of individuals to jobs. Using results in signaling games since Spence’s work---the Riley outcome (Riley, 1979), the intuitive criterion (Cho and Kreps, 1987), and undefeated equilibrium (Mailath et al., 1993)---it is possible to be more precise than Spence was in determining when signaling would occur and what the effect of signaling on wealth would be. We find the likelihood of efficient signaling, inefficient signaling, and pooling equilibria depends on the fraction of more able individuals in the population. With non-trivial gains from job allocation, inefficient signaling does not appear to be the most likely outcome. Key Words: signaling, pooling, Riley outcome, intuitive criterion, and undefeated equilibrium
    JEL: D82
    Date: 2011
  7. By: Jacob Glazer; Ariel Rubinstein
    Date: 2011–09–22
  8. By: Juliette Rouchier (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Emily Tanimura (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper presents a model of influence where agents' beliefs are based on an objective reality, such as the properties of an environment. The perception of the objective reality is not direct: all agents know is that the more correct a belief, the more successful the actions that are deduced from this belief. (A pair of agents can influence each other when )Agents can influence eachother by pair when they perform a joint action. They are not only defined by individual beliefs, but also idyosynchratic confidence in their belief - this means that they are not all willing to (engage in action with) act with agents with a different belief and to be influenced by them. We show here that the distribution of confidence in the group has a huge impact on the speed and quality of collective learning and in particular that a small number of overconfident agents can prevent the whole group frow learning properly.
    Date: 2011–07–06
  9. By: Eva-Maria Steiger (Max Planck Institute of Economics, Jena); Ro'i Zultan
    Abstract: Transparency in teams can induce cooperation. We study contribution decisions by agents when previous decisions can be observed. We find that an information chain, in which each agent directly observes only the decision of her immediate predecessor, is at least as effective as a fully-transparent protocol in inducing cooperation under increasing returns to scale. In a comparable social dilemma, the information chain leads to high cooperation both when compared to a non-transparent protocol for early movers, and when compared to a fully-transparent protocol for late movers. we conclude that information chains facilitate cooperation by balancing positive and negative reciprocity.
    Keywords: team production, public goods, incentives, externality, information, transparency, conditional cooperation
    JEL: C72 C92 D21 J31 M52
    Date: 2011–09–23
  10. By: Brice Mayag (LGI - Laboratoire Génie Industriel - EA 2606 - Ecole Centrale Paris); Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Christophe Labreuche (UMP CNRS/THALES - Unité mixte de physique CNRS/Thalès - CNRS : UMR137 - THALES)
    Abstract: In the context of multiple criteria decision analysis, we present the necessary and sufficient conditions to represent a cardinal preferential information by the Choquet integral w.r.t. a 2-additive capacity. These conditions are based on some complex cycles called cyclones.
    Keywords: MCDA; Choquet integral; 2-Additive capacity; MACBETH methodology
    Date: 2011
  11. By: Brice Mayag (LGI - Laboratoire Génie Industriel - EA 2606 - Ecole Centrale Paris); Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Christophe Labreuche (UMP CNRS/THALES - Unité mixte de physique CNRS/Thalès - CNRS : UMR137 - THALES)
    Abstract: In the context of Multiple criteria decision analysis, we present the necessary and sufficient conditions allowing to represent an ordinal preferential information provided by the decision maker by a Choquet integral w.r.t a 2-additive capacity. We provide also a characterization of this type of preferential information by a belief function which can be viewed as a capacity. These characterizations are based on three axioms, namely strict cycle-free preferences and some monotonicity conditions called MOPI and 2-MOPI.
    Keywords: multicriteria decision making; Choquet integral; 2-additive capacity; MACBETH
    Date: 2011
  12. By: Alexander Zimper
    Abstract: In standard models of Bayesian learning agents reduce their uncertainty about an eventÂ’s true probability because their consistent estimator concentrates almost surely around this probabilityÂ’s true value as the number of observations becomes large. This paper takes the empirically observed violations of SavageÂ’s (1954) sure thing principle seriously and asks whether Bayesian learners with ambiguity attitudes will reduce their ambiguity when sample information becomes large. To address this question, I develop closed-form models of Bayesian learning in which beliefs are described as Choquet estimators with respect to neo-additive capacities (Chateauneuf, Eichberger, and Grant 2007). Under the optimistic, the pessimistic, and the full Bayesian update rule, a Bayesian learnerÂ’s ambiguity will increase rather than decrease to the effect that these agents will express ambiguity attitudes regardless of whether they have access to large sample information or not. While consistent Bayesian learning occurs under the Sarin-Wakker update rule, this result comes with the descriptive drawback that it does not apply to agents who still express ambiguity attitudes after one round of updating.
    Keywords: Non-additive Probability Measures, Bayesian Learning, Choquet Expected Utility Theory
    JEL: C11 D81 D83
    Date: 2011
  13. By: Oechssler, Jörg
    Abstract: A well—known result from the theory of finitely repeated games states that if the stage game has a unique equilibrium, then there is a unique subgame perfect equilibrium in the finitely repeated game in which the equilibrium of the stage game is being played in every period. Here I show that this result does in general not hold anymore if players have social preferences of the form frequently assumed in the recent literature, for example in the inequity aversion models of Fehr and Schmidt (1999) or Bolton and Ockenfels (2000). In fact, repeating the unique stage game equilibrium may not be a subgame perfect equilibrium at all.
    Keywords: social preferences; finitely repeated games; inequity aversion; ERC
    Date: 2011–09–22
  14. By: Chetan Dave; Stefan Dodds; Sheryl Ball; Rachel Croson
    Abstract: A foundational paradox in social choice theory is that liberalism (freedom of action) and Pareto efficiency, the standard in evaluating economic outcomes, can conflict with each other (Sen 1970). We capture this tension in a series of sequential Battle of the Sexes game experiments. We find that most individuals are willing to waive rights to achieve efficient outcomes. In addition efficiency is higher when participants may claim new rights than when they may relinquish them or when only one player possesses them. This evidence may help resolve the tensions between efficiency and liberty that lie at the heart of social choice and political philosophy.
    Keywords: Pareto Optimality, Sen’s Paradox, Social Choice, Minimal Liberalism, preferences, rights, Battle of the Sexes game  
    Date: 2011
  15. By: Dreber, Anna (Dept. of Economics, Stockholm School of Economics); Ellingsen, Tore (Dept. of Economics, Stockholm School of Economics); Johannesson, Magnus (Dept. of Economics, Stockholm School of Economics); Rand, David (Harvard University)
    Abstract: Many previous experiments document that behavior in multi-person settings responds to the name of the game and the labeling of strategies. Usually these studies cannot tell whether frames affect preferences or beliefs. In this Dictator game study, we investigate whether social framing effects are also present when only one of the subjects makes a decision, in which case the frame may only affect preferences. We find that behavior is insensitive to social framing.
    Keywords: beliefs; preferences; framing effects; altruism; cooperation
    JEL: C70 C91 D64
    Date: 2011–09–14
  16. By: Eckstein, Zvi (Tel Aviv University); Gal-Or, Esther (University of Pittsburgh); Gylfason, Thorvaldur (University of Iceland); von Hagen, Jürgen (University of Bonn); Pfann, Gerard A. (Maastricht University)
    Abstract: This story describes the circumstances that led to all five of us starting as editors at the same time, the unexpected things we have found, the unanticipated reactions we have encountered, how we worked as an editorial team, the central role of the editorial office manager, how we managed to work with five different publishers in ten years, the various initiatives we have developed to involve associate editors and referees, the early electronic editing system, and the creation of the essential database of potential referees. We will also describe the difficulties we have encountered in reaching one of our early goals to reduce the median time of first response to less than four months. Along the way, we will share a few anecdotes to illustrate the work of an academic journal editor.
    Keywords: journal, editing, economics
    JEL: A11 A14
    Date: 2011–09

This nep-mic issue is ©2011 by Jing-Yuan Chiou. 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.