
on Microeconomics 
Issue of 2013‒04‒27
fourteen papers chosen by JingYuan Chiou IMT Lucca Institute for Advanced Studies 
By:  Johannes Horner; Larry Samuelson 
Date:  2013–04–11 
URL:  http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000671&r=mic 
By:  Andrew Caplin; Daniel Martin 
Date:  2013–04–11 
URL:  http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000649&r=mic 
By:  Edward L. Glaeser; Cass R. Sunstein 
Abstract:  Many studies find that presentation of balanced information, offering competing positions, can promote polarization and thus increase preexisting social divisions. We offer two explanations for this apparently puzzling phenomenon. The first involves what we call asymmetric Bayesianism: the same information can have diametrically opposite effects if those who receive it have opposing antecedent convictions. Recipients whose beliefs are buttressed by the message, or a relevant part, rationally believe that it is true, while recipients whose beliefs are at odds with that message, or a relevant part, rationally believe that the message is false (and may reflect desperation). The second explanation is that the same information can activate radically different memories and associated convictions, thus producing polarized responses to that information, or what we call a memory boomerang. An understanding of these explanations reveals when balanced news will produce unbalanced views. The explanations also account for the potential influence of “surprising validators.” Because such validators are credible to the relevant audience, they can reduce the likelihood of asymmetric Bayesianism, thus promoting agreement. 
JEL:  K0 
Date:  2013–04 
URL:  http://d.repec.org/n?u=RePEc:nbr:nberwo:18975&r=mic 
By:  Daron Acemoglu; Georgy Egorov; Konstantin Sonin 
Date:  2013–04–11 
URL:  http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000654&r=mic 
By:  Forges, Françoise; Vida, Péter 
Abstract:  We show that essentially every communication equilibrium of any finite Bayesian game with two players can be implemented as a strategic form correlated equilibrium of an extended game, in which before choosing actions as in the Bayesian game, the players engage in a possibly fin nitely long (but in equilibrium almost surely fi nite), direct, cheap talk. 
Keywords:  Bayesian game; preplay communication; cheap talk; communication equilibrium; correlated equilibrium; Two Player; 
JEL:  C72 D70 C73 
Date:  2013–01 
URL:  http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/8159&r=mic 
By:  Rahul Deb; Debasis Mishra 
Abstract:  We study mechanism design in a setting where agents know their types but are uncertain about the utility from any alternative. The final realized utility of each agent is observed by the principal and can be contracted upon. In such environments, the principal is not restricted to using only transfers but can employ security contracts which determine each agent's payoff as a function of their realized utility and the profile of announced types. We show that using security contracts instead of transfers expands the set of (dominant strategy) implementable social choice functions. Our main result is that in a finite type space, every social choice function that can be implemented using a security contract can also be implemented using a royalty contract. Royalty contracts are simpler and commonly used security contracts, in which agents initially pay a transfer and keep a fraction of their realized utility. We also identify a condition called acyclicity that is necessary and sufficient for implementation in these environments. 
Keywords:  dominant strategy implementation, acyclicity, security contracts, royalty contracts, cycle monotonicity 
JEL:  D44 D71 D82 D86 
Date:  2013–04–22 
URL:  http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa484&r=mic 
By:  Ehud Kalai; Eran Shmaya 
Abstract:  Due to their many applications, large Bayesian games have been a subject of growing interest in game theory and related fields. But to a large extent, models (1) have been restricted to oneshot interaction, (2) are based on an assumption that player types are independent and (3) assume that the number of players is known. The current paper develops a general theory of Bayesian repeated large games that avoids some of these difficulties. To make the analysis more robust, it develops a concept of compressed equilibrium which is applicable to a general class of Bayesian repeated large anonymous games. JEL Classification Numbers: C72, C72 
Keywords:  Nash Anonymous games, Nash equilibrium, Repeated games, Large games, Bayesian equilibrium, Price taking, Rational expectations 
Date:  2013–04–01 
URL:  http://d.repec.org/n?u=RePEc:nwu:cmsems:1562&r=mic 
By:  Christian Robert (SAF  Laboratoire de Sciences Actuarielle et Financière  Université Claude Bernard  Lyon I : EA2429); PierreEmmanuel Thérond (SAF  Laboratoire de Sciences Actuarielle et Financière  Université Claude Bernard  Lyon I : EA2429) 
Abstract:  We consider the class of concave distortion risk measures to study how choice is influenced by the decisionmaker's attitude to risk and provide comparative static results. We also assume ambiguity about the probability distribution of the risk and consider a framework à la Klibanoff, Marinacci and Mukerji (2005) to study the value of information that resolves ambiguity. We show that this value increases with greater ambiguity, with greater ambiguity aversion, and in some cases with greater risk aversion. Finally we examine whether a more riskaverse and a more ambiguityaverse individual will invest in more effort to shift his initial risk distribution to a better target distribution. 
Keywords:  Ambiguity ; dual theory ; risk measures ;distorsion ; optimal effort 
Date:  2013–02–07 
URL:  http://d.repec.org/n?u=RePEc:hal:wpaper:hal00813199&r=mic 
By:  Sebastian Kranz 
Date:  2013–04–11 
URL:  http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000676&r=mic 
By:  Johannes Horner; Andrzej Skrzypacz 
Date:  2013–04–11 
URL:  http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000680&r=mic 
By:  Stefano vannucci 
Abstract:  The ßeffectivity function of a strategic game form G describes the decision power of coalitions under G as contingent on the ability of each coalition to predict the behaviour of the complementary coalition. An e¤ectivity function E is ßplayable if there exists a strategic game form G such that E is the ßeffectivity function of G. It is shown that whenever the player set and the outcome set are fi?nite an effectivity function E is ßplayable if and only if E is both outcomemonotonic and polarsuperadditive. Moreover, the underlying strategic game form only needs ?small?strategy spaces, whose size is linear in the size of the monotonic cobasis of E. As a byproduct of that result, a few new characterizations of tight finite e¤ectivity functions are also obtained. 
JEL:  C62 C70 D72 
Date:  2012–12 
URL:  http://d.repec.org/n?u=RePEc:usi:wpaper:669&r=mic 
By:  Subiza, Begoña (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica); Peris, Josep (Universidad de Alicante, Departamento de Métodos Cuantitativos y Teoría Económica) 
Abstract:  It is well known that the core of an exchange market with indivisible goods (always non empty) may contain Pareto ineficient allocations and is not, in general, a stable set. The strict core solves this shortcoming, but in some situations it may be empty. We de fine a new solution that solves the emptiness problem of the strict core when indifferences are allowed in the individuals'preferences. This solution always selects Pareto eficient allocations and satisfi es a suitable stability property. Moreover, it is included in the strict core,whenever this one is nonempty. Finally, we provide a minmax interpretation for this new solution. 
Keywords:  Indivisible goods; Exchange market; Strict core; Indifferences; MSset; mstability 
JEL:  C71 C78 D71 D78 
Date:  2013–04–23 
URL:  http://d.repec.org/n?u=RePEc:ris:qmetal:2012_018&r=mic 
By:  Jaume GarcíaSegarra (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain); Miguel GinésVilar (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain) 
Abstract:  The aim of this paper is to generalize the results of Peter and Tijs [10] and [9]. We propose a characterization that holds both for nagent problems and for a larger class of problems. The axioms used in our characterization are weaker because they are implied by the characterization in the aforementioned references. We analyze a phenomenon known as stagnation effect, which takes place when a bargaining solution remains unchanged facing all possible expansions of the bargaining set not affecting the utopia point. Our main result relies on a very weak axiom, stagnation proofness. Whenever a bargaining solution satisfies this axiom, such solution does not suffer from the stagnation effect. 
Keywords:  Bargaining, axiomatization, nagent problem, monotone paths 
JEL:  C78 D74 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:jau:wpaper:2013/04&r=mic 
By:  Christopher J. Tyson (Queen Mary, University of London) 
Abstract:  A discrete symmetry of a preference relation is a mapping from the domain of choice to itself under which preference comparisons are invariant; a continuous symmetry is a oneparameter family of such transformations that includes the identity; and a symmetry field is a vector field whose trajectories generate a continuous symmetry. Any continuous symmetry of a preference relation implies that its representations satisfy a system of PDEs. Conversely the system implies the continuous symmetry if the latter is generated by a field. Moreover, solving the PDEs yields the functional form for utility equivalent to the symmetry. This framework is shown to encompass a variety of representation theorems related to univariate separability, multivariate separability, and homogeneity, including the cases of CobbDouglas and CES utility. 
Keywords:  Continuous symmetry, Separability, Smooth preferences, Utility representation 
JEL:  C60 D01 D81 
Date:  2013–04 
URL:  http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp702&r=mic 