|
on Microeconomics |
|
Issue of 2012‒02‒01
thirteen papers chosen by Jing-Yuan Chiou IMT Lucca Institute for Advanced Studies |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Stephen Morris (Dept. of Economics, Princeton University); Satoru Takahashi (Dept. of Economics, Princeton University) |
| Abstract: | We consider the efficient allocation of a single good with interdependent values in a quasi-linear environment. We present an approach to modelling interdependent preferences distinguishing between "payoff types" and "belief types" and report a characterization of when the efficient allocation can be partially Bayesian implemented on a finite type space. The characterization can be used to unify a number of sufficient conditions for efficient partial implementation in this classical auction setting. We report how a canonical language for discussing interdependent types -- developed in a more general setting by Bergemann, Morris and Takahashi (2011) -- applies in this setting and note by example that this canonical language will not allow us to distinguish some types in the payoff type -- belief type language. |
| Keywords: | Mechanism Design, Robust mechanism design, Efficient auctions, Interdepedent types, Partial implementation, Full implementation |
| JEL: | C79 D82 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1846&r=mic |
| By: | Mathevet, Laurent |
| Abstract: | We propose two characteristics of players' beliefs and study their role in shaping the set of rationalizable strategy profiles in games with incomplete information. The first characteristic, type-sensitivity, is related to how informative a player thinks his type is. The second characteristic, optimism, is related to how "favorable" a player expects the outcome of the game to be. The paper has two main results: the first result provides an upper bound on the size of the set of rationalizable strategy profiles, the second gives a lower bound on the change of location of this set. These bounds have explicit and relatively simple expressions that feature type-sensitivity, optimism, and properties of the payoffs. Our results generalize and clarify the well-known uniqueness result of global games (Carlsson and van Damme (1993)). They imply new uniqueness results and allow to study rationalizability in new environments. We provide applications to supermodular mechanism design (Mathevet (2010)) and non-Bayesian updating (Epstein (2006)). |
| Keywords: | Complementarities; rationalizability; beliefs; type-sensitivity; optimism; global games; equilibrium uniqueness |
| JEL: | D82 D83 C72 |
| Date: | 2012–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36032&r=mic |
| By: | Mathevet, Laurent |
| Abstract: | This paper proposes an axiomatic approach to study two-player infinitely repeated games. A solution is a correspondence that maps the set of stage games into the set of infinite sequences of action profiles. We suggest that a solution should satisfy two simple axioms: individual rationality and collective intelligence. The paper has three main results. First, we provide a classification of all repeated games into families, based on the strength of the requirement imposed by the axiom of collective intelligence. Second, we characterize our solution as well as the solution payoffs in all repeated games. We illustrate our characterizations on several games for which we compare our solution payoffs to the equilibrium payoff set of Abreu and Rubinstein (1988). At last, we develop two models of players' behavior that satisfy our axioms. The first model is a refinement of subgame-perfection, known as renegotiation proofness, and the second is an aspiration-based learning model. |
| Keywords: | Axiomatic approach; repeated games; classification of games; learning; renegotiation |
| JEL: | C71 C72 C73 |
| Date: | 2012–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36031&r=mic |
| By: | Dietrich, Franz; List, Christian |
| Abstract: | Bayesian epistemology tells us with great precision how we should move from prior to posterior beliefs in light of new evidence or information, but says little about where our prior beliefs come from. It o¤ers few resources to describe some prior beliefs as rational or well-justi ed, and others as irrational or unreasonable. A di¤erent strand of epistemology takes the central epistemological question to be not how to change ones beliefs in light of new evidence, but what reasons justify a given set of beliefs in the rst place. We o¤er an account of rational belief formation that closes some of the gap between Bayesianism and its reason-based alternative, formalizing the idea that an agent can have reasons for his or her (prior) beliefs, in addition to evidence or information in the ordinary Bayesian sense. Our analysis of reasons for belief is part of a larger programme of research on the role of reasons in rational agency (Dietrich and List 2012a,b). |
| Keywords: | Bayesian epistemology; doxastic reasons; prior and posterior beliefs; principle of insu¢ cient reason; belief formation; belief change |
| JEL: | D0 D03 C0 D8 C7 D01 |
| Date: | 2012–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36111&r=mic |
| By: | Wataru Tamura; |
| Abstract: | We study disclosure of information about the multidimensional state of the world when uninformed receivers' actions affect the sender's utility. Given a disclosure rule, the receivers form an expectation about the state following each message. Under the assumption that the senderfs expected utility is written as the expected value of a quadratic function of those conditional expectations, we identify conditions under which full and no disclosure is optimal for the sender and show that a linear transformation of the state is optimal if it is normally distributed. We apply our theory to advertising, political campaigning, and monetary policy. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0828&r=mic |
| By: | M. Kopel; L. Lambertini |
| Abstract: | We show that Miller and Pazgal.s (2001) model of strategic delegation, in which managerial incentives are based upon relative performance, is affected by a non-existence problem which has impact on the price equilibrium. The undercutting incentives generating this result are indeed similar to those affecting the stability of price cartels. |
| JEL: | C73 L13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp807&r=mic |
| By: | M. Kopel; L. Lambertini |
| Abstract: | We identify a mistake in the specification of the demand system used in the strategic delegation model based on market shares by Jansen et al. (2007), whereby the price remains above marginal cost when goods are homogeneous. After amending this aspect, we perform a profit comparison with the alternative delegation scheme à la Fershtman and Judd (1987). |
| JEL: | L13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp806&r=mic |
| By: | Jon X. Eguia; Antonio Nicolò |
| Abstract: | We study the relation between the electorate's information about candidates' policy platforms during an election, and the subsequent provision of inefficient local public goods (pork) by the winning candidate. More information does not lead to better outcomes. We show that the efficient outcome in which no candidate proposes to provide any inefficient good is sustained in equilibrium only if voters are not well informed. If the electorate is well informed, electoral competition leads candidates to provide inefficient pork in all equilibria. We show that this result is robust even if candidates care about efficiency. |
| Keywords: | Elections, information, inefficiency, pork, campaigns |
| JEL: | H40 D61 D72 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:234&r=mic |
| By: | Guillaume Carlier (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine); Rose-Anne Dana (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine) |
| Abstract: | An exchange economy in which agents have convex incomplete preferences defined by families of concave utility functions is considered. Sufficient conditions for the set of efficient allocations and equilibria to coincide with the set of efficient allocations and equilibria that result when each agent has a utility in her family are provided. Welfare theorems in an incomplete preferences framework therefore hold under these conditions and efficient allocations and equilibria are characterized by first order conditions. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00661903&r=mic |
| By: | Thomas W.L. Norman |
| Abstract: | In von Neumann and Morgenstern’s sample model of poker, equilibrium has the first player bet with high and low hands, and check with intermediate hands. The second player then calls if his hand is sufficiently high. Betting by the low hands is interpreted as bluffing, and is a pure strategy. Here we show that this equilibrium is nongeneric, in the sense that it ceases to exist if the first player is allowed to choose among many possible bets, rather than just one. Moreover, Newman’s solution for this case - which also has pure-strategy bluffing - is shown not to be a sequential equilibrium. However, a modified solution - where low hands bluff using mixed strategies - is a sequential equilbrium. |
| Keywords: | Poker, Game theory, Mixed strategies, Perfect Bayesian equilibrum, Sequential equilibrium |
| JEL: | C73 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:590&r=mic |
| By: | Duersch, Peter (University of Heidelberg); Oechssler, Jorg (University of Heidelberg); Schipper, Burkhard C. (University of CA, Davis) |
| Abstract: | We show that in symmetric two-player exact potential games, the simple decision rule "imitate-if-better" cannot be beaten by any strategy in a repeated game by more than the maximal payoff difference of the one-period game. Our results apply to many interesting games including examples like 2x2 games, Cournot duopoly, price competition, public goods games, common pool resource games, and minimum effort coordination games. |
| JEL: | C72 C73 D43 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-12&r=mic |
| By: | József Sákovics (University of Edinburgh) |
| Abstract: | I prove that as long as we allow the marginal utility for money lamda to vary between purchases (similarly to the budget) then the quasi-linear and the ordinal budget-constrained models rationalize the same data. However, we know that lamda is approximately constant. I provide a simple constructive proof for the necessary and sufficient condition for the constant lambda rationalization, which I argue should replace the Generalized Axiom of Revealed Preference in empirical studies of consumer behavior. |
| Date: | 2012–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:212&r=mic |
| By: | Sebastian Kranz (Dept. of Economics, University of Bonn, Institute for Energy Economics, University of Cologne) |
| Abstract: | This paper studies discounted stochastic games perfect or imperfect public monitoring and the opportunity to conduct voluntary monetary transfers. We show that for all discount factors every public perfect equilibrium payoff can be implemented with a simple class of equilibria that have a stationary structure on the equilibrium path and optimal penal codes with a stick and carrot structure. We develop algorithms that exactly compute or approximate the set of equilibrium payoffs and find simple equilibria that implement these payoffs. |
| Keywords: | Stochastic games, Monetary transfers, Computation, Imperfect public monitoring, Public perfect equilibria |
| JEL: | C73 C61 C63 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1847&r=mic |