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on Microeconomics |
| By: | Frederik Herzberg (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | Cerreia-Vioglio, Ghirardato, Maccheroni, Marinacci and Siniscalchi (Economic Theory, 48:341--375, 2011) have recently proposed a very general axiomatisation of preferences in the presence of ambiguity, viz. Monotonic Bernoullian Archimedean (MBA) preference orderings. This paper investigates the problem of Arrovian aggregation of such preferences -- and proves dictatorial impossibility results for both finite and infinite populations. Applications for the special case of aggregating expected-utility preferences are given. A novel proof methodology for special aggregation problems, based on model theory (in the sense of mathematical logic), is employed. |
| Keywords: | ambiguity, Knightian uncertainty, expected utility, Monotonic Bernoullian Archimedean (MBA) preferences, Arrovian social choice, Arrow's theorem, impossibility result, ultrafilter, ultraproduct |
| JEL: | D71 D81 C02 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:488&r=mic |
| By: | Lorenzo Bastianello; Alain Chateauneuf |
| Abstract: | In this paper we study the behaviour of decision makers who show, quoting Irving Fisher, preferences for advancing the timing of future satisfaction. We gave two definitions that could represent this kind of attitude and we studied their implications in three popular models used in decision theory, proposing alternatives to the usual concept of discounting. We found interesting links with the theory that studies the impossibility of aggregating infinite streams of income (or utility) keeping both strong monotonicity and equality among all generations, and with the notion of domination of a streams of income over another one at all interest rates. |
| Keywords: | Value-at-Risk (VaR); CAViaR approach; risk spillover; Granger causality. |
| JEL: | D90 |
| Date: | 2013–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:30&r=mic |
| By: | George J. Mailath (Department of Economics, University of Pennsylvania); Andrew Postlewaite (Department of Economics, University of Pennsylvania); Larry Samuelson (Department of Economics, Yale University) |
| Abstract: | We analyze a model in which agents make investments and then match into pairs to create a surplus. The agents can make transfers to reallocate their pretransfer ownership claims on the surplus. Mailath, Postlewaite, and Samuelson (2013) showed that when investments are unobservable, equilibrium investments are generally inefficient. In this paper we work with a more structured model that is sufficiently tractable to analyze the nature of the investment inefficiencies. We provide conditions under which investment is inefficiently high or low and conditions under which changes in the pretransfer ownership claims on the surplus will be Pareto improving, as well as examine how the degree of heterogeneity on either side of the market affects investment efficiency. |
| Keywords: | Directed search, matching, premuneration value, prematch investments, search |
| JEL: | C78 D40 D41 D50 D83 |
| Date: | 2013–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:13-060&r=mic |
| By: | Ulrich Schmidt; Horst Zank |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:1324&r=mic |
| By: | Kala Krishna; Alexander Tarasov |
| Abstract: | This paper identifies a new reason for giving preferences to the disadvantaged using a model of contests. There are two forces at work: the effort effect working against giving preferences and the selection effect working for them. When education is costly and easy to obtain (as in the U.S.), the selection effect dominates. When education is heavily subsidized and limited in supply (as in India), preferences are welfare reducing. The model also shows that unequal treatment of identical agents can be welfare improving, providing insights into when the counterintuitive policy of rationing educational access to some subgroups is welfare improving. |
| JEL: | D61 I23 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19546&r=mic |
| By: | Christopher Gertz (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | I analyze a monopolistic model of quality uncertainty but with the possibility of information acquisition on the consumer side. Information is costly and its amount is chosen by the consumer. The analysis of Bayesian equilibria shows the possibility of three equilibrium classes, only one of which leaves positive utility to the consumer. The classic adverse selection results of these markets are weakened in this situation. I show that cheaper information does not necessarily benefit the consumer but can instead rule out the buyer-friendly and welfare maximizing equilibria. Moreover, making quality search arbitrarily efficient does not lead to sure selling of the high quality product. A sustainable adverse selection effect, though weaker than in the classical model, remains even in the limit. |
| Keywords: | Quality uncertainty, Price signaling, Adverse selection, Information acquisition, Two-sided incomplete information |
| JEL: | C72 D42 D82 D83 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:487&r=mic |
| By: | Marco Marini (Department of Computer, Control and Management Engineering, Università "La Sapienza" Roma); Paolo Polidori (Department of Law, University of Urbino “Carlo Bo”); Davide Ticchi (IMT Institute for Advanced Studies Lucca); Désirée Teobaldelli (Department of Law, University of Urbino “Carlo Bo”) |
| Abstract: | One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk aversion. In this paper we show that this relationship may be absent or reversed when the technology is endogenous and projects with a higher e¢ ciency are also riskier. Using a modi ed version of the Holmstrom and Milgroms (1987) framework, we obtain that lower agents risk aversion unambiguously leads to higher incentives when the technology function linking e¢ ciency and riskiness is elastic, while the risk aversion-incentive relation- ship can be positive when this function is rigid. |
| Keywords: | Principal-agent, Incentives, Risk aversion, Endogenous technolog |
| JEL: | D82 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:urb:wpaper:13_04&r=mic |
| By: | Shino Takayama (School of Economics, The University of Queensland) |
| Abstract: | This paper studies a dynamic version of the model proposed in Glosten and Milgrom (1985) with a long-lived informed trader. When the same individual can buy, and then sell, the same asset, the trader may profit from price manipulation. We make a fundamental contribution by clarifying the conditions under which a unique equilibrium exists, and in what situations this equilibrium involves price manipulation. We propose a concept that we refer to as a “tame†equilibrium, and derive a bound for the number of trading rounds under (or over) which a unique equilibrium exists (or multiple equilibria exist) for a sufficiently low probability of informed trading. We characterize and compute tame equilibria. Further, we provide a necessary and sufficient condition under which manipulation arises. We contend that we can extend our analysis to a continuous-time setting and thereby provide a reference framework in a discrete-time setting with a unique equilibrium. |
| Date: | 2013–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:492&r=mic |
| By: | Muto, Nozomu; Yasuhiro, Shirata |
| Abstract: | We study a new monotonicity problem in combinatorial auctions called goods revenue monotonicity, which requires that the auctioneer earn no more revenue by dropping goods from the endowments. Although no mechanism satisfies goods revenue monotonicity together with strategy-proofness, efficiency, and participation even in the domain of substitute valuations, we find a restricted domain called per-capita goodsbidder submodular domain in which there exists a goods revenue monotone mechanism satisfying the above three conditions. The restriction is likely to be met when bidders’ valuations are similar. Finally, we provide a relation to the monopoly theory, and argue that per-capita goods-bidder submodularily is independent of the standard elasticity argument. |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:econdp:2013-13&r=mic |
| By: | Octavian Strimbu; Patrick Gonzalez |
| Abstract: | Does a better monitoring (transparency) of officials lowers the incidence of corruption ? Using a common agency game with imperfect information, we show that the answer depends on the measure of corruption that one uses. More transparency lowers the prevalence of corruption but it may raise the average bribe as it motivates the corruptor to bid more aggressively for the agent’s favour. We show that transparency affects the prevalence of corruption at the margin through a competitive effect and an efficiency effect. |
| Keywords: | Corruption, Transparency, Common Agency |
| JEL: | D73 D80 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:creacr:2013-5&r=mic |
| By: | d'Albis, Hippolyte; Etner, Johanna |
| Abstract: | In this article, we consider illiquid life annuity contracts and show that they may be preferred to Yaari (1965)’s liquid contracts. In an overlapping-generation economy, liquid life annuities are demanded only if the equilibrium is dynamically inefficient. Alternatively, an equilibrium displaying a positive demand for illiquid life annuities is efficient. In this latter case, the welfare at steady-state is larger if illiquid life annuity contracts are available. |
| Keywords: | Lifes Annuities; Overlapping generation models |
| JEL: | D11 |
| Date: | 2013–07–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50751&r=mic |
| By: | Jay Pil Choi (School of Economics, University of New South Wales, Sydney; Department of Economics, Michigan State University); Doh-Shin Jeon (Toulouse School of Economics and CEPR); Byung-Cheol Kim (School of Economics, Georgia Institute of Technology) |
| Abstract: | We study how net neutrality regulations affect high-bandwidth content providers’ investment incentives in quality of services (QoS). We find that the effects crucially depend on network capacity levels. With a limited network capacity, the prioritized delivery services are complements to content providers' investments and can facilitate entry of high-bandwidth content. By contrast, if the network capacity is large enough, the prioritized delivery and QoS investment are substitutes. In either case, the social welfare effects of the prioritized service is ambiguous. In the limited capacity case, the beneficial effects of entry by high-band width content should be weighed against the cost of increasing congestion for other existing content. In the high capacity case, the negative impact of reduced investment incentives can be counterbalanced by the benefit of improved traffic management. Our findings have important implications for the contrasting neutrality regulations across the Atlantic: US FCC treats mobile networks more leniently than fixed networks, while the EU treats them equally. |
| Keywords: | Net neutrality, asymmetric regulation, quality of service, investment incentives, queuing, congestion, mobile/fixed Networks |
| JEL: | L1 L5 O3 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1324&r=mic |
| By: | Marco Marini (Department of Computer, Control and Management Engineering, Università "La Sapienza" Roma); Paolo Polidori (Department of Law, University of Urbino “Carlo Bo”); Alberto Zevi (University of Rome "La Sapienza".); Désirée Teobaldelli (Department of Law, University of Urbino “Carlo Bo”) |
| Abstract: | The aim of this paper is to study the welfare e¤ects of consumer cooperatives in mixed oligopoly markets. We show that under decreasing returns to scale and su¢ ciently high market competition these rms can contribute more to social welfare when acting on behalf of all consumers rather than only one representative consumer. This is because, by coordinating the preferences of consumers, these rms reduce their excessive market output, helping the market to come closer to the rst-best. In all other cases we show that such consumerscoordination is not required to improve welfare. |
| Keywords: | Consumer-owned Firms, Mixed Oligopoly, Collusion, Welfare |
| JEL: | C70 C71 D23 D43 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:urb:wpaper:13_03&r=mic |
| By: | Enriqueta Aragonès; Dimitrios Xefteris |
| Abstract: | We analyze a unidimensional model of two-candidate electoral competition where voters have imperfect information about the candidates' policy proposals, that is, voters cannot observe the exact policy proposals of the candidates but only which candidate offers the most leftist/rightist platform. We assume that candidates are purely office motivated and that one candidate enjoys a valence advantage over the other. We characterize the unique Sequential Equilibrium in very-weakly undominated strategies of the game. In this equilibrium the behavior of the two candidates tends to maximum extremism, due to the voters' lack of information. But it may converge or diverge depending on the size of the advantage. For small values of the advantage candidates converge to the extreme policy most preferred by the median and for large values of the advantage candidates strategies diverge: each candidate specializes in a different extreme policy. These results are robust to the introduction of a proportion of well informed voters. In this case the degree of extremism decreases when the voters become more informed. |
| Keywords: | Downsian model, imperfect information, advantaged candidate, maximum differentiation |
| JEL: | D72 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:725&r=mic |