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on Microeconomics |
| By: | Dirk Bergemann; Stephen Morris |
| Date: | 2013–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000730&r=mic |
| By: | Robert Evans; Sonje Reiche |
| Abstract: | We characterize decision rules which are implementable in mechanism design settings when, after the play of a mechanism, the uninformed party can propose a new mechanism to the informed party. The necessary and sufficient conditions are, essentially, that the rule be implementable with commitment, that for each type the decision is at least as high as if there were no mechanism, and that the slope of the decision function is not too high. The direct mechanism which implements such a rule with commitment will also implement it in any equilibrium without commitment, so the standard mechanism is robust to renegotiation. |
| Keywords: | Renegotiation, Mechanism Design |
| Date: | 2013–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1331&r=mic |
| By: | Robert Shimer (University of Chicago); Veronica Guerrieri (University of Chicago) |
| Abstract: | This paper explores price formation in environments with multidimensional private information. Asset sellers are informed both about their need to raise cash and about the quality of the asset they are selling. Asset buyers have rational expectations about the distribution of assets for sale at different prices. Any equilibrium with trade involves partial pooling: identical assets sell for different prices, depending on the seller's need to raise cash; while conversely different assets sell for the same price. Sellers who set a higher price are less likely to succeed at selling. We find a simple condition under which a continuum of such equilibria exist. This condition admits the possibility that some assets are intrinsically worthless, in which case there is also an equilibrium with no trade. In general, the set of equilibria depends on the joint distribution of seller and asset characteristics, and not just the support of that distribution. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed013:210&r=mic |
| By: | Zhiwei Liu; Nicholas C. Yannelis |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:1318&r=mic |
| By: | MAULEON, Ana (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium); VANNETELBOSCH, Vincent (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium) |
| Abstract: | We consider Rubinstein's two-person alternating-offer bargaining model with two-sided incomplete information. We investigate the effects of one party having relative concerns on the bargaining outcome and the delay in reaching an agreement. We find that facing an opponent having stronger relative concerns only hurts the bargainer when she is stronger than her opponent. In addition, we show that an increase of one party's relative concerns will decrease the maximum delay in reaching an agreement. |
| Keywords: | relative concerns, alternating-offer bargaining, private information, maximal delays |
| JEL: | C70 D60 J50 |
| Date: | 2013–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2013034&r=mic |
| By: | Dirk Bergemann; Benjamin A. Brooks; Stephen Morris |
| Date: | 2013–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000776&r=mic |
| By: | Xianwen Shi; Aloysius Siow |
| Abstract: | In frictional matching markets with heterogeneous buyers and sellers, sellers incur discrete showing costs to show goods to buyers who incur discrete inspection costs to assess the suitability of the goods on offer. We study how brokers can help reduce these costs by managing the level and mix of goods in their inventory. Intermediaries emerge and improve social welfare when there is sufficient heterogeneity in the types of goods and preferences. Learning and inventory management enable search intermediaries to internalize information externalities generated in unintermediated private search. |
| Keywords: | Search; Intermediation; Brokers; Housing Markets |
| JEL: | D83 D82 |
| Date: | 2013–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-496&r=mic |
| By: | Sudipta Sarangi; Pascal Billand; Christophe Bravard; Jacques Durieu |
| Abstract: | In this paper we characterize efficient networks for network formation games with global spillovers, that satisfy convexity and sub-modularity properties. This allows us to complete the work of Goyal and Joshi (2006) and Westbrock on collaborative oligopoly networks. In particular, we establish that efficient networks are nested split graphs in this class of games. |
| URL: | http://d.repec.org/n?u=RePEc:lsu:lsuwpp:2013-06&r=mic |
| By: | Bales, Adam; Cohen, Daniel; Handfield, Toby |
| Abstract: | Orthodox decision theory gives no advice to agents who hold two goods to be incommensurate in value because such agents will have incomplete preferences. According to standard treatments, rationality requires complete preferences, so such agents are irrational. Experience shows, however, that incomplete preferences are ubiquitous in ordinary life. In this paper, we aim to do two things: (1) show that there is a good case for revising decision theory so as to allow it to apply non-vacuously to agents with incomplete preferences, and (2) to identify one substantive criterion that any such non-standard decision theory must obey. Our criterion, Competitiveness, is a weaker version of a dominance principle. Despite its modesty, Competitiveness is incompatible with prospectism, a recently developed decision theory for agents with incomplete preferences. We spend the final part of the paper showing why Competitiveness should be retained, and prospectism rejected. |
| Keywords: | Decision theory, incommensurate value, practical reason, incomplete preferences, dominance |
| JEL: | D01 D03 D81 D89 |
| Date: | 2013–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49954&r=mic |
| By: | Bhamra, Harjoat Singh; Uppal, Raman |
| Abstract: | In this paper, we study asset prices in a dynamic, continuous-time, general-equilibrium endowment economy where agents have “catching up with the Joneses” utility functions and differ with respect to their beliefs (because of differences in priors) and their preference parameters for time discount, risk aversion, and sensitivity to habit. A key contribution of our paper is to demonstrate how one can obtain a closed-form solution to the consumption-sharing rule for agents who have both heterogeneous priors and heterogeneous preferences without restricting the risk aversion of the two agents to special values. We solve in closed form also for the the state-price density, the riskless interest rate and market price of risk; the stock price, equity risk premium, and volatility of stock returns; the term structure of interest rates; and the conditions necessary to obtain a stationary equilibrium in which both agents survive in the long run. The methodology we develop is sufficiently general that, as long as markets are complete, it can be used to obtain the sharing rule and state prices for models set in discrete or continuous time and for arbitrary endowment and belief updating processes. |
| Keywords: | Asset Pricing; General Equilibrium |
| JEL: | G11 G12 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9459&r=mic |
| By: | Vigeral, Guillaume; Sorin, Sylvain |
| Abstract: | We give new proofs of existence of the limit of the discounted values for two person zero-sum games in the following frameworks: incomplete information, absorbing, recursive. The idea of these new proofs is to use some comparison criteria. |
| Keywords: | variational inequalities; comparison principle; asymptotic value; incomplete information; repeated games; stochastic games; |
| JEL: | C73 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/8023&r=mic |
| By: | Ana Fostel; John Geanakoplos |
| Date: | 2013–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000750&r=mic |
| By: | Dietrichson, Jens (Department of Economics, Lund University) |
| Abstract: | Why are coordination problems common when public sector organizations share responsibilities, and what can be done to mitigate such problems? This paper uses a multi-task principal-agent model to examine two related reasons: the incentives to coordinate resource allocation and the difficulties of measuring performance. The analysis shows that when targets are set individually for each organization, the resulting incentives normally induce inefficient resource allocations. If the principal impose shared targets, this may improve the incentives to coordinate but the success of this instrument depends in general on the imprecision and distortion of performance measures, as well as agent motivation. Besides decreasing available resources, imprecise performance measures also affect agents' possibility to learn the function that determines value. Simulations with a least squares learning rule show that the one-shot model is a good approximation when the imprecision of performance measures is low to moderate and one parameter is initially unknown. However, substantial and lengthy deviations from equilibrium values are frequent when three parameters have to be learned. |
| Keywords: | Public sector organizations; Coordination incentives; Performance measurement; Shared targets; Learning |
| JEL: | D23 D73 D83 H11 H83 |
| Date: | 2013–08–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2013_026&r=mic |