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on Microeconomics |
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Issue of 2012‒01‒25
fourteen papers chosen by Jing-Yuan Chiou IMT Lucca Institute for Advanced Studies |
| By: | [no author] |
| Abstract: | Economies with asymmetric information are encompassed by an extension of the model of general competitive equilibrium that does not require an explicit modeling of private information. Sellers have discretion over deliveries on contracts; this is in common with economies with default, incomplete contracts or price rigidities. Competitive equilibria exist and anonymous markets are viable. But, for a generic economy, competitive equilibrium allocations are constrained suboptimal: there exist Pareto improving interventions via linear, anonymous taxes. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ner:euiflo:urn:hdl:1814/19838&r=mic |
| By: | Mikhail Golosov (Yale University and NES); Vasiliki Skreta (New York University, Stern School of Business); Aleh Tsyvinski (Yale University and NES); Andrea Wilson (New York University) |
| Abstract: | This paper studies strategic information transmission in a dynamic environment where, each period, a privately informed expert sends a message and a decision maker takes an action. Our main result is that, in contrast to a static environment, full information revelation is possible. The gradual revelation of information and the eventual full revelation is supported by the dynamic rewards and punishments. The construction of a fully revealing equilibrium relies on two key features. The first feature is that the expert is incentivized, via appropriate actions, to join separable groups in which she initially pools with far-away types, then later reveals her type. The second feature is the use of trigger strategies. The decision maker is incentivized by the reward of further information revelation if he chooses the separation-inducing actions, and the threat of a stop in information release if he does not. Our equilibrium is non-monotonic. With monotonic partition equilibria, full revelation is impossible. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:eie:wpaper:1110&r=mic |
| By: | Martin Szydlowski |
| Abstract: | I study a dynamic principal agent model in which the effort cost of the agent is unknown to the principal. The principal is ambiguity averse, and designs a contract which is robust to the worst case effort cost process. Ambiguity divides the contract into two regions. After sufficiently high performance, the agent reaches the over-compensation region, where he receives excessive benefits compared to the contract without ambiguity, while after low performance, he enters the under-compensation region. Ambiguity also causes a disconnect between the current effort cost and the strength of incentives. That is, even when the agent is under-compensated, his incentives are as strong as in the over-compensation region, since the principal fears the agent might shirk otherwise. Under ambiguity, the agent’s true effort cost does not need to equal the worst-case. I analyze the agent’s incentives for this case, and show that the possibility of firing is detrimental to the agent’s incentives. I study several extensions concerning the timing structure and the nature of the principal’s ambiguity aversion. JEL Code: D82, D86, M52 |
| Keywords: | Dynamic contract, principal-agent model, ambiguity aversion, continuous time |
| Date: | 2012–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:nwu:cmsems:1543&r=mic |
| By: | Thorsten Chmura (Department of Economics, Ludwig-Maximilians-Universitat Munich); Sebastian Goerg (Max Planck Institute for Research on Collective Goods, Bonn); Reinhard Selten (cLaboratory for Experimental Economics (BonnEconLab), University of Bonn) |
| Abstract: | In this paper, we introduce two new learning models: impulse-matching learning and action-sampling learning. These two models together with the models of self-tuning EWA and reinforcement learning are applied to 12 different 2 x 2 games and their results are compared with the results from experimental data. We test whether the models are capable of replicating the aggregate distribution of behavior, as well as correctly predicting individuals' round-by-round behavior. Our results are two-fold: while the simulations with impulse-matching and action-sampling learning successfully replicate the experimental data on the aggregate level, individual behavior is best described by self-tuning EWA. Nevertheless, impulse-matching learning has the second highest score for the individual data. In addition, only self-tuning EWA and impulse-matching learning lead to better round-by-round predictions than the aggregate frequencies, which means they adjust their predictions correctly over time. |
| Keywords: | learning, 2 x 2 games, Experimental data |
| JEL: | C92 C72 C91 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2011_26&r=mic |
| By: | Edward Anderson (The University of Sydney Business School) |
| Abstract: | Supply function equilibria are used in the analysis of divisible good auctions with a large number of identical objects to be sold or bought. An important example occurs in wholesale electricity markets. Despite the substantial literature on supply function equilibria the existence of a pure strategy Nash equilibria for a uniform price auction in asymmetric cases has not been established in a general setting. In this paper we prove the existence of a supply function equilibrium for a duopoly with asymmetric firms having convex costs, with decreasing concave demand subject to an additive demand shock, provided the second derivative of the demand function is small enough. The proof is constructive and also gives insight into the structure of the equilibrium solutions. |
| Keywords: | Wholesale electricity markets; divisible good auctions; supply functions; existence of equilibria. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:syb:wpbsba:04/2011&r=mic |
| By: | E.J. Anderson (The University of Sydney Business School) |
| Abstract: | It is common for rewards to be given on the basis of a rank ordering, so that relative performance amongst a cohort is the criterion. In this paper we formulate an equilibrium model in which an agent makes successive decisions on whether or not to gamble and is rewarded on the basis of a rank ordering of final wealth. This is a model of the behaviour of mutual fund managers who are paid depending on funds under management which in turn are largely determined by annual or quarterly rank orderings. In this model fund managers can elect either to pick stocks or to use a market tracking strategy. In equilibrium the final distribution of rewards will have a negative skew. We explore how this distribution depends on the number of players, the probability of success when gambling, the structure of the rewards, and on information regarding the other player?s performance. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:syb:wpbsba:06/2011&r=mic |
| By: | Archie C. Chapman (The University of Sydney Business School); David S. Leslie (The University of Bristol); Alex Rogers (The University of Southampton); Nicholas R. Jennings (The University of Southampton) |
| Abstract: | In this paper, we address the problem of convergence to Nash equilibria in games with rewards that are initially unknown and which must be estimated over time from noisy observations. These games arise in many real-world applications, whenever rewards for actions cannot be prespecified and must be learned on-line. Standard results in game theory, however, do not consider such settings. Specifically, using results from stochastic approximation and differential inclusions, we prove the convergence of variants of fictitious play and adaptive play to Nash equilibria in potential games and weakly acyclic games, respectively. These variants all use a multi-agent version of Q-learning to estimate the reward functions and a novel form of the e-greedy decision rule to select an action. Furthermore, we derive e-greedy decision rules that exploit the sparse interaction structure encoded in two compact graphical representations of games, known as graphical and hypergraphical normal form, to improve the convergence rate of the learning algorithms. The structure captured in these representations naturally occurs in many distributed optimisation and control applications. Finally, we demonstrate the efficacy of the algorithms in a simulated ad hoc wireless sensor network management problem. |
| Keywords: | Game theory, distributed optimisation, learning in games. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:syb:wpbsba:05/2011&r=mic |
| By: | Sarah Jacobson (Williams College); Jason Delaney (University of Arkansas at Little Rock) |
| Abstract: | People have been shown to engage in favor-trading when it is efficiency-enhancing to do so. Will they also trade favors when it reduces efficiency, as in a series of wasteful public projects that each benefits an individual? We introduce the “Stakeholder Public Bad” game to study this question. In each round, contributions to a common fund increase the earnings of one person (the “Stakeholder”) but reduce the earnings of the rest of the group so much that overall efficiency is reduced. The Stakeholder position rotates through members of the group and the promise of the high reward associated with this position may enable subjects to behave reciprocally. We hypothesize that some people will help a current Stakeholder by contributing in hopes of being rewarded later with a reciprocal gift. In a lab experiment, we find evidence of such favor trading. We also find that Stakeholders in this situation seem perfectly willing to sacrifice the good of the group to reap their own personal rewards, and this is true even when their contribution decisions are public. While the revelation of information about others’ actions and roles has previously been shown to enable efficiency-increasing reciprocity, we show that it also enables efficiency-decreasing reciprocal acts. Subjects who are more risk-averse behave in a way that is more myopically self-interested as compared to less risk-averse people when information conditions preclude favor trading, and subjects who identify with the Democratic Party show more restraint when they are Stakeholder than those who do not. |
| Keywords: | logrolling, social preferences, reciprocity, externalities, public bad, public good |
| JEL: | C91 D01 D62 D64 D72 H41 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2012-02&r=mic |
| By: | Takahiro Watanabe (Department of Business Administration, Tokyo Metropolitan University) |
| Abstract: | A game in which an incumbent and an entrant decide the timings of entries into a new market is investigated. The profit flows involve two uncertain factors: (1) the basic level of the demand of the market observed only by the incumbent and (2) the fluctuation of the profit flow described by a geometric Brownian motion that is common to both firms. The optimal timing for the incumbent, who privately knows the high demand, is earlier than that for the low-demand incumbent. This earlier entrance, however, reveals the information of the high demand to the entrant, so that the entrant observing the timing of the incumbent would accelerate the its own timing of the investment that reduces the monopolistic profit of the incumbent. Therefore, the high-demand incumbent may delay the timing of the investment in order to hide the information strategically. The equilibria of this signaling game are characterized, and the conditions for the manipulative revelation are investigated. The values of both firms are compared with the case of complete information. |
| Keywords: | Real Option, Investment Timing, Signaling, Asymmetric Information, Game Theory |
| JEL: | G31 D81 C73 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:809&r=mic |
| By: | Achille Basile (Università di Napoli Federico II and CSEF); Maria Gabriella Graziano (Università di Napoli Federico II and CSEF); Maria Laura Pesce (Università di Napoli Federico II) |
| Abstract: | The paper proposes a notion of fairness which overcomes the conflict arising between efficiency and the absence of envy in economies with uncertainty and asymmetrically informed agents. We do it in general economies which include, as particular cases, the main differential information economies studied in the literature. The analysis is further extended by allowing the presence of large traders, which may cause the lack of perfect competition. |
| Keywords: | Mixed markets, fairness, envy, efficiency, asymmetric information |
| JEL: | C71 D51 D82 |
| Date: | 2012–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:303&r=mic |
| By: | Francoise Forges; Roberto Serrano |
| Abstract: | This is a brief survey describing some of the recent progress and open problems in the area of cooperative games with incomplete information. We discuss exchange economies, cooperative Bayesian games with orthogonal coalitions, and issues of cooperation in non-cooperative Bayesian games. |
| Keywords: | # |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2011-15&r=mic |
| By: | Konrad, Kai A.; Kovenock, Dan |
| Abstract: | We study an all-pay contest with multiple identical prizes (lifeboat seats). Prizes are partitioned into subsets of prizes (lifeboats). Players play a two-stage game. First, each player chooses an element of the partition (a lifeboat). Then each player competes for a prize in the subset chosen (a seat). We characterize and compare the subgame perfect equilibria in which all players employ pure strategies or all players play identical mixed strategies in the first stage. We find that the partitioning of prizes allows for coordination failure among players when they play nondegenerate mixed strategies and this can shelter rents and reduce rent dissipation compared to some of the less efficient pure strategy equilibria. -- |
| Keywords: | All-pay contest,multiple prizes,rent dissipation,lifeboat |
| JEL: | D72 D74 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbfff:spii2011106&r=mic |
| By: | Ahmed Doghmi, National Institute of Statistics and Applied Economics, Madinat Al Irfane, Rabat Institutes, 13000 Rabat, Morocco; Abderrahmane ZIAD, University of Caen Basse-Normandie, CREM (UMR CNRS) |
| Abstract: | An agent is said to be partially honest if he or she weakly prefers an outcome at a strategy profile with his truthful strategy than an outcome at a strategy profile with his false strategy, then this player must prefer strictly the \true" strategy profille to the \false" strategy profile. In this paper we consider an exchange economy with single peaked preferences. With many agents (n ≥3), if there exists at least one partially honest agent, we prove that any solution of the problem of fair division satisfying unanimity is Nash implementable. |
| Keywords: | Nash implementation; Partial honesty; Single-peaked preferences |
| JEL: | C72 D71 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201201&r=mic |
| By: | Satoru Fujishige; Zaifu Yang |
| Abstract: | We consider a market model in which all commodities are inherently indivisible and thus are traded in integer quantities. We ask whether a finite set of price-quantity observations satisfying the Generalized Axiom of Revealed Preference (GARP) is consistent with utility maximization. Although familiar conditions such as non-satiation become meaningless in the current discrete model, by refining the standard notion of demand set we show that Afriat's celebrated theorem still holds true. Exploring network structure and a new and easy-to-use variant of GARP, we propose an elementary, simple, intuitive, combinatorial, and constructive proof for the result. |
| Keywords: | Afriat's theorem, GARP, indivisibilities, revealed preference. |
| JEL: | D11 C60 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:12/02&r=mic |