nep-mic New Economics Papers
on Microeconomics
Issue of 2012‒11‒17
ten papers chosen by
Jing-Yuan Chiou
IMT Lucca Institute for Advanced Studies

  1. Opinion Dynamics under Conformity By Berno Buechel; Tim Hellmann; Stefan Kloessner
  2. A Foundation for Markov Equilibria in Infinite Horizon Perfect Information Games By V. Bhaskar; George J. Mailath; Stephen Morris
  3. Ambiguity and Coordination in a Global. Game Model of Financial Crises By Daniel Laskar
  4. Ordered Weighted Averaging in Social Networks By Manuel Förster; Michel Grabisch; Agnieszka Rusinowska
  5. Endogenously Proportional Bargaining Solutions By Ismail Saglam
  6. Advantaged Bidders in Franchise Auctions By Vincent van den Berg
  10. Axioms of Invariance for TU-games By Sylvain Béal; Eric Rémila; Philippe Solal

  1. By: Berno Buechel (University of Hamburg); Tim Hellmann (Institute of Mathematical Economics); Stefan Kloessner (Saarland University)
    Abstract: We present a model of opinion formation where individuals repeatedly engage in discussion and update their opinion in a social network similarly to the DeGroot model. Abstracting from the standard assumption that individuals always report their opinion truthfully, agents in our model interact strategically in the discussion such that their stated opinion can dier from their true opinion. The incentive to do so is induced by agents' preferences for conformity. Highly conforming agents will state an opinion which is close to their neighbors' while agents with low level of conformity may be honest or even overstate their opinion. We model opinion formation as a dynamic process and identify conditions for convergence to consensus. Studying the consensus in detail, we show that an agent's social in uence on the consensus opinion is increasing in network centrality and decreasing in the level of conformity. Thus, lower conformity fosters opinion leadership. Moreover, assuming that the initial opinion is a noisy signal about some true state of the world, we consider the mean squared error of the consensus as an estimator for the true state of the world. We show that a society is \wise", i.e. the mean squared error is smaller, if players who are well informed are less conform, while uninformed players conform more with their neighbors.
    Date: 2012–07
  2. By: V. Bhaskar (Department of Economics, University College, London); George J. Mailath (Department of Economics, University of Pennsylvania); Stephen Morris (Department of Economics, Princeton University)
    Abstract: We study perfect information games with an infinite horizon played by an arbitrary number of players. This class of games includes infinitely repeated perfect information games, repeated games with asynchronous moves, games with long and short run players, games with overlapping generations of players, and canonical non-cooperative models of bargaining. We consider two restrictions on equilibria. An equilibrium is purifiable if close by behavior is consistent with equilibrium when agents' payoffs at each node are perturbed additively and independently. An equilibrium has bounded recall if there exists K such that at most one player's strategy depends on what happened more than K periods earlier. We show that only Markov equilibria have bounded memory and are purifiable. Thus if a game has at most one long-run player, all purifiable equilibria are Markov.
    Keywords: Markov, bounded recall, purification
    JEL: C72 C73
    Date: 2012–10–29
  3. By: Daniel Laskar (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA)
    Abstract: We consider a two-player global game where creditors, who finance some investment project, have to decide whether to roll over their loans or not. We use a non-Bayesian approach where creditors exhibit some aversion to ambiguity. We show that an increase in ambiguity reduces the perceived coordination of players in rolling over their loans. This contibutes to increasing the probability of a financial crisis, and therefore provides an additional argument in favor of transparency in the model considered.
    Keywords: Financial crises ; Ambiguity ; Uncertainty ; Global games ; Coordination ; Transparency
    Date: 2012–11
  4. By: Manuel Förster (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, CORE - Université Catholique de Louvain); Michel Grabisch (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We study a stochastic model of influence where agents have yes-no inclinations on some issue, and opinions may change due to mutual influence among the agents. Each agent independently aggregates the opinions of the other agents and possibly herself. We study influence processes modelled by ordered weighted averaging operators. This allows to study situations where the influence process resembles a majority vote, which are not covered by the classical approach of weighted averaging aggregation. We provide an analysis of the speed of convergence and the probabilities of absoption by different terminal classes. We find a necessary and sufficient condition for convergence to consensus and characterize terminal states. Our results can also be used to understand more general situations, where ordered weighted averaging operators are only used to some extend. Furthermore, we apply our results to fuzzy linguistic quantifiers.
    Keywords: Social network; influence; convergence; speed of convergence; consensus; ordered weighted averaging operator; fuzzy linguistic quantifier.
    Date: 2012–08
  5. By: Ismail Saglam (TOBB University of Economics and Technology, Department of Economics)
    Abstract: This paper introduces a class of endogenously proportional bargaining solutions. These solutions are independent of the class of Directional solutions, which Chun and Thomson (1990a) proposed to generalize (exogenously) proportional solutions of Kalai (1977). Endogenously proportional solutions relative to individual i are characterized by weak Pareto optimality and continuity together with two new axioms that depend on the pairwise total payoff asymmetry of the bargaining problem with respect to each pair involving individual i. Each of these solutions satisfies the basic symmetry axiom and also a stronger axiom called total payoff symmetry.
    Keywords: Cooperative bargaining; proportional solutions; symmetry
    JEL: C71 C78
    Date: 2012–11
  6. By: Vincent van den Berg (VU University Amsterdam)
    Abstract: Consider a government that auctions a franchise for, e.g., an airport, telecommunication network, or utility. Consider an 'incumbent bidder' that owns a complement or substitute. With an auction on the transfer (i.e. payment) to the government, the incumbent is advantaged.If the government regulates the market with an auction on the price asked to consumers, it depends who is advantaged. With complements, the incumbent is advantaged: it can set a lower price on the new franchise, as this increases the profit of the other. With substitutes, the incumbent is disadvantaged. In many settings, the advantage bidder always wins.
    Keywords: Franchising; auctions; advantaged bidders; incumbent; private supply; regulatory auctions
    JEL: D43 L13 L51 R41 R42
    Date: 2012–11–02
  7. By: Marilda Sotomayor
    Abstract: A dynamic game where agents "behave cooperatively" is postulated: At each stage, current nontrading agents can trade and the payoffs from transactions done are maintained in the subsequent stages. The game ends when no interaction is able to benefit the agents involved (case in which a core outcome is reached) or when any new interaction requires that some of the agents involved do not "behave cooperatively" (case in which the core is empty). The gains in terms of insights, obtained with this approach, allow us to identify a new condition, which is proved to be necessary and sufficient for the non-emptiness of the core. The proof of this result is elementary, in the sense that it avoids specialized mathematical tools, and only uses simple combinatorial arguments.
    Keywords: core, simple outcome, Pareto optimal simple outcome
    JEL: C78 D78
    Date: 2012–11–05
  8. By: Marilda Sotomayor
    Abstract: In the one-sided Assignment game any two agents can form a partnership. If this is done, the partners undertake some joint activity, which produces a gain that is split between them. We approach this model by focusing on simple outcomes - feasible and individually rational outcomes where only unmatched agents can block. We prove that this blocking can be done in such a way that the payoffs from the trades done are not changed as players reach the core. The core is non-empty iff every simple and unstable outcome can be extended to a simple outcome by a sequence of adjustments in which, at each step, payoffs are preserved for agents already matched and increased only for those newly matching. Hence, starting from the simple outcome where everybody stands alone, we can gradually increase cooperation by making Pareto improvements (and still staying within simple outcomes), until we reach the core, or until the payoff cannot be simple anymore. That is, increase in payoffs is only available through non-optimal cooperation of some agents. In addition, the total sum of these payoffs is the same at any core outcome. The gains in insight with this approach allows a necessary and sufficient condition for the non-emptiness of the core to be identified. Several properties of the core outcomes of economic interest are proved.
    Keywords: matching, assignment game, core, Pareto optimal simple outcome
    JEL: C78 D78
    Date: 2012–11–05
  9. By: Marilda Sotomayor
    Abstract: We prove two Folk Theorems which, together with the Non-Manipulability Theorem (Demange (1982) and Leonard (1983)), have stimulated the development of the theory on incentives for the one-to-one two-sided matching models with money as a continuous variable.
    Keywords: matching, Stable payoff, competitive equilibrium payoff, optimal stable payoff
    JEL: C78 D78
    Date: 2012–11–05
  10. By: Sylvain Béal (CRESE, Université de Franche-Comté); Eric Rémila (Gate Lyon Saint-Etienne, Université de Saint-etienne); Philippe Solal (Gate Lyon Saint-Etienne, Université de Saint-etienne)
    Abstract: We introduce new axioms for the class of all TU-games with a fixed but arbitrary player set, which require either invariance of an allocation rule or invariance of the payoff assigned by an allocation rule to a specified subset of players in two related TU-games. Comparisons with other axioms are provided. These new axioms are used to characterize the Shapley value, the equal division rule, the equal surplus division rule and the Banzhaf value. The classical axioms of efficiency, anonymity, symmetry and additivity are not used.
    Keywords: uniform addition invariance, uniform transfer invariance, Shapley value, equal division rule, equal surplus division rule, Banzhaf value
    JEL: C71
    Date: 2012–09

This nep-mic issue is ©2012 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.