nep-mic New Economics Papers
on Microeconomics
Issue of 2013‒11‒02
thirty-one papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Selling Cookies By Bergemann, Dirk; Alessandro Bonatti
  2. A Model of Non-Belief in the Law of Large Numbers By Collin Raymond; Daniel J. Benjamin; Matthew Rabin
  3. A Representation of Risk Measures By Massimiliano AMARANTE
  4. Kantian Optimization: An Approach to Cooperative Behavior By John E. Roemer
  5. General Equilibrium Model for an Asymmetric Information Economy By Ken Urai; Akihiko Yoshimachi; Kohei Shiozawa
  6. Trust and manipulation in social networks By FORSTER, Manuel; MAULEON, Ana; VANNETELBOSCH, Vincent
  7. Dynamic Strategic Information Transmission By Mikhail Golosov; Vasiliki Skreta; Aleh Tsyvinski; Andrea Wilson
  8. Optimal Sequential Delegation By Kovác, Eugen; Krähmer, Daniel
  9. Screening Experts' Distributional Preferences By Dominik Erharter
  10. Mechanism Design by an Informed Principal: The Quasi-Linear Private-Values Case By Mylovanov, Tymofiy; Tröger, Thomas
  11. Cheap Talk with Correlated Signals By A.K.S. Chand; Sergio Currarini; Giovanni Ursino
  12. For-Profit Search Platforms By Niedermayer, Andras; Shneyerov, Artyom
  13. The Dynamics of Delegated Decision Making By Kevin Roberts
  14. Promoting coordination in summary-statistic games By Dominik Erharter
  15. Imperfect Attention and Menu Evaluation By Paola Manzini; Marco Mariotti
  16. Breaking Up a Research Consortium By Niedermayer, Andras; Wu, Jianjun
  17. Precontractual Investigation and Sequential Screening By Terstiege, Stefan
  18. Acquisition and Disclosure of Information as a Hold-up Problem By Schweizer, Urs
  19. Bidding for Network Size: Platform Competition when Quality and Network Size are Complements By Renaud Foucart; Jana Friedrichsen
  20. Objective versus Subjective Performance Evaluations By Terstiege, Stefan
  21. The Satisficer’s Curse By Robert E. Marks
  22. The opportunism problem revisited: The case of retailer sales effort By Staahl Gabrielsen, Tommy; Johansen, Bjørn Olav
  23. Decreasing Downside Risk Aversion and Background Risk By David Crainich; Louis Eeckhoudt; Olivier Le Courtois
  24. A Competitive Approach to Leadership in Public Good Games By Centorrino, Samuele; Concina, Laura
  25. Optimal Auction Design Under Non-Commitment By Vasiliki Skreta
  26. Cooperation vs. Collusion: How Essentiality Shapes Co-opetition By Rey, Patrick; Tirole, Jean
  27. On the Existence of Mixed Strategy Nash equilibria By Pavlo Prokopovych; Nicholas C.Yannelis
  28. Weakly Continuous Security in Discontinuous and Nonquasiconcave Games: Existence and Characterization By Rabia Nessah
  29. Commitments, Intentions, Truth and Nash Equilibria By Schlag, Karl H.; Vida, Péter
  30. A note on the existence of Walras equilibrium in irreducible economies with satiable and non-ordered preferences By Miyazaki, Kentaro; Takekuma, Shin-Ichi
  31. Ambiguous Beliefs on Damages and Civil Liability Theories By Gérard Mondello

  1. By: Bergemann, Dirk (Cowles Foundation, Yale University); Alessandro Bonatti (Sloan School of Management, MIT)
    Abstract: We develop a model of data pricing and targeted advertising. A monopolistic data provider determines the price to access "cookies," i.e., informative signals about individual consumers' preferences. The demand for information is generated by advertisers who seek to tailor their spending to the value of each consumer. We characterize the set of consumers targeted by the advertisers and the optimal monopoly price of cookies. The ability to influence the composition of the set of targeted consumers provides incentives to lower prices. Thus, the monopoly price of data is decreasing in the reach of the database and increasing in the number of competing sellers of exclusive data. Finally, we explore the implications of nonlinear pricing of information and characterize the exclusive data sales that emerge as part of the optimal mechanism.
    Keywords: Data providers, Information sales, Targeting, Online advertising, Media markets
    JEL: D44 D82 D83
    Date: 2013–10
  2. By: Collin Raymond; Daniel J. Benjamin; Matthew Rabin
    Abstract: People believe that, even in very large samples, proportions of binary signals might depart significantly from the population mean.� We model this "non-belief in the Law of Large Numbers" by assuming that a person believes that proportions in any given sample might be determined by a rate different than the true rate.� In prediction, a non-believer expects the distribution of signals will have fat tails, more so for larger samples.� In inference, a non-believer remains uncertain and influenced by priors even after observing an arbitrarily large sample.� We explore implications for beliefs and behavior in a variety of economic settings.
    Keywords: learning, non-Bayesian updating, behavioral economics, information economics
    JEL: B49 D03 D14 D83 G11
    Date: 2013–09–17
  3. By: Massimiliano AMARANTE
    Abstract: We provide a representation theorem for risk measures satisfying (i) monotonicity; (ii) positive homogeneity; and (iii) translation invariance. As a simple corollary to our theorem, we obtain the usual representation of coherent risk measures (i.e., risk measures that are, in addition, sub-additive; see Artzner et al.
    Keywords: risk measures, capacity, Choquet integral
    JEL: G11 C65
    Date: 2013
  4. By: John E. Roemer (Dept. of Political Science, Yale University)
    Abstract: Although evidence accrues in biology, anthropology and experimental economics that homo sapiens is a cooperative species, the reigning assumption in economic theory is that individuals optimize in an autarkic manner (as in Nash and Walrasian equilibrium). I here postulate a cooperative kind of optimizing behavior, called Kantian. It is shown that in simple economic models, when there are negative externalities (such as congestion effects from use of a commonly owned resource) or positive externalities (such as a social ethos reflected in individuals’ preferences), Kantian equilibria dominate Nash-Walras equilibria in terms of efficiency. While economists schooled in Nash equilibrium may view the Kantian behavior as utopian, there is some -- perhaps much -- evidence that it exists. If cultures evolve through group selection, the hypothesis that Kantian behavior is more prevalent than we may think is supported by the efficiency results here demonstrated.
    Keywords: Kantian equilibrium, Social ethos, Implementation
    JEL: D60 D62 D64 C70 H30
    Date: 2012–03
  5. By: Ken Urai (Graduate School of Economics, Osaka University); Akihiko Yoshimachi (Department of Commerce, Doshisha University); Kohei Shiozawa (Graduate School of Economics, Osaka University)
    Abstract: This paperfs main purpose is to introduce a new concept of the marketfs commodity-information structure (a partition of the set of real goods that are treated as one commodity for market ex- changes) on which we base our ordinary static general equilibrium arguments and settings to analyze asymmetric information problems. We concentrate on the market viability problem that is concerned with describing such situations as adverse selection under informational asymmetry among agents as an equilibrium in general equilibrium frameworks. The market equilibrium-existence conditions, non-equilibrium-existence examples, and Pareto-optimal equilibrium-properties are studied.
    Keywords: General Equilibrium Model, Asymmetric Information, Adverse Selection, Market Un- raveling, Market Viability Problem
    JEL: C62 D51 D82
    Date: 2013–10
  6. By: FORSTER, Manuel (Université catholique de Louvain, CORE, Belgium; CES, Université Paris 1 Panthéon-Sorbonne, France); MAULEON, Ana (Université catholique de Louvain, CORE, Belgium; CEREC, Université Saint-Louis, Bruxelles, Belgium); VANNETELBOSCH, Vincent (Université catholique de Louvain, CORE, Belgium; CEREC, Université Saint-Louis, Bruxelles, Belgium)
    Abstract: We investigate the role of manipulation in a model of opinion formation where agents have opinions about some common question of interest. Agents repeatedly communicate with their neighbors in the social network, can exert some effort to manipulate the trust of others, and update their opinions taking weighted averages of neighbors’ opinions. The incentives to manipulate are given by the agents’ preferences. We show that manipulation can modify the trust structure and lead to a connected society, and thus, make the society reaching a consensus. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the long-run opinions. In sufficiently homophilic societies, manipulation accelerates (slows down) convergence if it decreases (increases) homophily. Finally, we investigate the tension between information aggregation and spread of misinformation. We find that if the ability of the manipulating agent is weak and the agents underselling (overselling) their information gain (lose) overall influence, then manipulation reduces misinformation and agents converge jointly to more accurate opinions about some underlying true state.
    Keywords: social networks, trust, manipulation, opinion leadership, consensus, wisdom of crowds
    JEL: D83 D85 Z13
    Date: 2013–09–23
  7. By: Mikhail Golosov; Vasiliki Skreta; Aleh Tsyvinski; Andrea Wilson
    Date: 2013
  8. By: Kovác, Eugen; Krähmer, Daniel
    Abstract: The paper extends the optimal delegation framework pioneered by Holmström (1977, 1984) to a dynamic environment where, at the outset, the agent privately knows his ability to interpret decision relevant private information received later on. We show that any mechanism can be implemented by a sequential menu of delegation sets where the agent first picks a delegation set and then chooses an action within this set. For the uniform{quadratic case, we characterize when sequential delegation is strictly better than static delegation and derive the optimal delegation menu. We provide sufficient conditions so that our results extend beyond the uniform distribution.
    Keywords: optimal delegation; sequential screening; dynamic mechanism design; non-transferable utility
    JEL: D02 D20 D82 D86
    Date: 2013–04–11
  9. By: Dominik Erharter
    Abstract: We study optimal direct mechanisms for a credence goods expert who can be altruistic or spiteful. The expert has private information about her distributional preferences and possibly also about her customer's needs. We introduce a method that allows the customer to offer separate contracts to different preference types and outline when separation is optimal. Furthermore, we demonstrate that the optimality of separating mechanisms is sensitive to minor changes of the customer's utility function. Additionally, we illustrate how our results extend to more than two preference types and discuss possible policy implications.
    Keywords: other-regarding preferences, inequality aversion, credence good, principal-agent model, adverse selection, moral hazard
    JEL: D63 D64 L13 L15 C72
    Date: 2013–10
  10. By: Mylovanov, Tymofiy; Tröger, Thomas
    Abstract: We show that, in environments with independent private values and transferable utility, a privately informed principal can implement a contract that is ex-ante optimal for her. As an application, we consider a bilateral exchange environment (Myerson and Satterthwaite, 1983) in which the principal is one of the traders. If the property rights over the good are dispersed among the traders, the principal will implement a contract in which she is almost surely better off than if there were no uncertainty about her information. The optimal contract is a combination of a participation fee, a buyout option for the principal, and a resale stage with posted prices and, hence, is a generalization of the posted price that would be optimal if the principal's valuation were commonly known. We also provide a condition under which the principal implements the same contract regardless of whether the agents know her information or not.
    Date: 2013
  11. By: A.K.S. Chand (University of Venice, Italy); Sergio Currarini (University of Leicester, University of Venice and CMCC, Italy); Giovanni Ursino (Catholic University of Milan, Italy)
    Abstract: We consider a game of information transmission, with one informed decision maker gathering information from one or more informed senders. Private information is (conditionally) correlated across players, and communication is cheap talk. For the one sender case, we show that correlation unambiguously tightens the existence conditions for a truth-telling equilibrium. We then generalize the model to an arbitrary number of senders, and we find that, in this case, the effect of correlation on the incentives to report information truthfully is non monotone, and correlation may discipline senders' equilibrium behavior, making it easier to sustain truth-telling.
    Keywords: Cheap Talk, Multiple Senders, Correlation
    JEL: C72 D82 D83
    Date: 2013–09
  12. By: Niedermayer, Andras; Shneyerov, Artyom
    Abstract: We consider optimal pricing by a profit-maximizing platform running a dynamic search and matching market. Buyers and sellers enter in cohorts over time, meet and bargain under private information. The optimal centralized mechanism, which involves posting a bid-ask spread, can be decentralized through participation fees charged by the intermediary to both sides. The sum of buyers’ and sellers’ fees equals the sum of inverse hazard rates of the marginal types and their ratio equals the ratio of buyers’ and sellers’ bargaining weights. We also show that a monopolistic intermediary in a search market may be welfare enhancing.
    Keywords: Dynamic random matching; two-sided private information; intermediaries
    JEL: D82 D83
    Date: 2013–07–16
  13. By: Kevin Roberts
    Abstract: This paper investigates the behaviour of bodies or organizations, operating in a stochastic environment, where there is a delegated decision maker.��A crucial decision is when to delegate to another decision maker.� The problem may be intrapersonal, as occurs when there are endogenously changing tastes, or interpersonal where delegation is intuitionally necessay or where decison making is 'as if' there is delegation.� This is possible if decision making is through voting - an existence theorem is given.� Decisions lead to shifts in control involving option losses; forward-looking recognition of this leads to the endogenous creation of hysteresis.� The fact that the behaviour of other agents leads to hysteresis makes it optimal for any single agent to introduce more hysteresis.� Organisations or bodies with many possible decision makers operate, in subsets of the state space, in one of two regimes, one where hysteresis is small and the other where hysteresis is large.
    Keywords: Dynamic Voting, collective decisions, delegation, endogenous preferences, hysteresis
    JEL: D1 D2 D7
    Date: 2013–10–15
  14. By: Dominik Erharter
    Abstract: This paper studies how external incentives can help agents to coordinate in summary-statistic games. Agents follow a myopic best-reply rule and face a trade-off between efficiency and strategic uncertainty. A principal can help agents to coordinate on the Pareto optimal equilibrium by monitoring an appropriate number of agents. The optimal monitoring policy is 'minimally-invasive' - for every strategy profile of the agents, the principal either monitors just enough agents to make high effort a best-reply or does not monitor at all. Furthermore, given the principal's payoffs are supermodular and increasing at an increasing rate, the optimal monitoring policy is monotone in the number of agents who choose high effort.
    Keywords: adaptive learning, Markov decision process, coordination failure, order-statistic game
    JEL: C73 C62 D86
    Date: 2013–10
  15. By: Paola Manzini (University of St Andrews and IZA); Marco Mariotti (University of St Andrews)
    Abstract: We model the choice behaviour of an agent who suffers from imperfect attention but is otherwise von Neumann Morgenstern rational. We define inattention axiomatically through preference over menus and endowed alternatives: an agent is inattentive if it is better to be endowed with an alternative a than to be allowed to pick a from a menu in which a is is the best alternative. This property and vNM rationality on the domain of menus and alternatives imply that the agent notices each alternative with a given menu-dependent probability (attention parameter) and maximises a menu independent utility function over the alternatives he notices. Preference for flexibility restricts the model to menu independent attention parameters as in Manzini and Mariotti (2013). Our theory explains anomalies (e.g. the attraction effect) that other prominent stochastic choice theories cannot accommodate.
    Keywords: bounded rationality, stochastic choice
    JEL: D01
    Date: 2013–10–21
  16. By: Niedermayer, Andras; Wu, Jianjun
    Abstract: Inter-firm R&D collaborations through contractual arrangements have become increasingly popular, but in many cases they are broken up without any joint discovery. We provide a rationale for the breakup date in R&D collaboration agreements. More specifically, we consider a research consortium initiated by a firm A with a firm B. B has private information about whether it is committed to the project or a free-rider. We show that under fairly general conditions, a breakup date in the contract is a (secondbest) optimal screening device for firm A to screen out free-riders. With the additional constraint of renegotiation proofness, A can only partially screen out free-riders: entry by some free-riders makes sure that A does not have an incentive to renegotiate the contract ex post. We also propose empirical strategies for identifying the three likely causes of a breakup date: adverse selection, moral hazard, and project non-viability.
    Keywords: Optimal R&D contracts; adverse selection; breakup date; R&D collaboration
    JEL: C72 D82 L20
    Date: 2013–05–14
  17. By: Terstiege, Stefan
    Abstract: Should contract design induce an agent to conduct a precontractual investigation even though, in any case, the agent will become fully informed after the signing of the contract? This paper shows that imperfect investigations might be encouraged. The result stands in contrast to previous studies, which focus on perfect investigations. The contrast exists because if precontractual investigation is perfect, the benefits of sequential screening vanish.
    Keywords: Principal agent; information acquisition; sequential screening
    JEL: D82 D83 D86
    Date: 2013–10–22
  18. By: Schweizer, Urs
    Abstract: The acquisition of information prior to sale gives rise to a hold-up situation quite naturally. Yet, while the bulk of the literature on the hold-up problem considers negotiations under symmetric information where cooperative short-cuts such as split the difference capture the outcome of bargaining, in the present setting, parties negotiate under asymmetric information where the outcome must be derived from a non-cooperative bargaining procedure. To avoid the difficult task of specifying and solving complicated games combining elements of signalling and screening, but to still compare incentives for acquiring information under voluntary versus mandatory disclosure, use of conditions such as incentive, disclosure and participation constraints only is made that are common to all non-cooperative bargaining outcomes.
    Keywords: mistake; information acquisition; disclosing information
    JEL: K12 K13
    Date: 2013–10–10
  19. By: Renaud Foucart; Jana Friedrichsen
    Abstract: We study two platforms competing for members by investing in network quality.� Quality is complementary to the network size: the marginal utility generated by an additional member increases with the network's quality.� Platforms are imperfect substitutes: a share of the potential members are biased toward each of the platforms and some are indifferent ex ante.� We assume that, in case of multiple equilibria, consumers use the investment in quality as a coordination device.� We find that, in equilibrium, platforms randomize over two disconnected intervals of investment levels, corresponding to competing for either the entire population or the mass of ex-ante different members.� While the "prize" of winning the competition for members is identical for both platforms, the value of the outside option "not investing" depends on a platform's share of ex-ante biased members.� The platform with the smallest share of ex-ante biased members bids more aggressively to compensate for its lower outside option and achieves a monopoly network with higher probability than its competitor.
    Keywords: Internet, Platforms, Investment, Network Effects
    JEL: D43 D44 M13
    Date: 2013–10–07
  20. By: Terstiege, Stefan
    Abstract: Why does incentive pay often depend on subjective rather than objective performance evaluations? After all, subjective evaluations entail a credibility issue. While the most plausible explanation for this practice is lack of adequate objective measures, I argue that subjective evaluations might sometimes also be used to withhold information from the worker. I furthermore argue that withholding information is particularly important under circumstances where the credibility issue is small. The statements are derived from a two-stage principal-agent model in which the stochastic relationship between effort and performance is unknown.
    Keywords: Performance evaluation; principal-agent; moral hazard
    JEL: D83 D86 M12 M52
    Date: 2013–08–01
  21. By: Robert E. Marks (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: Following the Winner’s Curse and the Optimizer’s Curse, this paper introduces the Satisficer’s Curse. The Winner’s Curse requires competition between agents in an auction for, usually, a common-value item; the Optimizer’s Curse is a systematic overvaluation when the decision maker is choosing the highest-valued prospect of a set of uncertain future outcomes. The Satisficer’s Curse is a systematic overvaluation that occurs when any uncertain prospect is chosen because its estimate exceeds a positive threshold. It is the most general version of the three curses, all of which can be seen as statistical artefacts.
    Keywords: decision analysis, investment, probability, ex-post disappointment, winner's curse
    JEL: D81 C44 G11
    Date: 2013–10
  22. By: Staahl Gabrielsen, Tommy (University of Bergen); Johansen, Bjørn Olav (University of Bergen)
    Abstract: We study a setting where the opportunism or commitment problem identifed by Hart and Tirole (1990) may arise. An upstream monopolist may sell its product to two differentiated downstream retailers. Contract unobservability induces the manufacturer and each retailer to free-ride on margins earned by rival retailers, resulting in low transfer prices and low overall profit. O'Brien and Shaffer (1992) proposed a solution to this problem involving squeezing retail margins by using maximum RPM and high transfer prices. We show that when retail demand depends in any degree of retail sales effort, this equilibrium breaks down, and the opportunism problem reappears with full force. We show that no type of own-sale contracts or combination of own-sale restraints will solve the problem if sales effort matter. Moreover we show that certain horizontal commitments, as for example industrywide minimum RPM, may restore the fully integrated outcome, but only in special cases.
    Keywords: Opportunism; RPM; sales effort
    JEL: L12 L14 L42
    Date: 2013–10–18
  23. By: David Crainich (CNRS-LEM and IESEG School of Management); Louis Eeckhoudt (IESEG School of Management (LEM-CNRS) and and CORE (Université Catholique de Louvain)); Olivier Le Courtois (EM Lyon Business School)
    Abstract: To analyze the impact of background risks, decreasing absolute risk aversion (DARA) must be combined with other restrictions on the shape of the utility function in order to make preferences risk vulnerable. In this note, we indicate that risk vulnerability can also be associated with the sole assumption of decreasing downside risk aversion (DDRA). That is, no matter how absolute risk aversion changes with wealth, DDDRA in the Arrow-Pratt sense and DDRA in the Ross sense are shown to be respectively necessary and sufficient for a background risk to raise the aversion to other independent risks.
    Keywords: Downside Risk Aversion, Background Risk, Risk Vulnerability
    JEL: D81
    Date: 2013–10
  24. By: Centorrino, Samuele; Concina, Laura
    Date: 2013–02
  25. By: Vasiliki Skreta
    Date: 2013
  26. By: Rey, Patrick; Tirole, Jean
    Abstract: The paper makes two related contributions. First, and in contrast with the rich body of literature on collusion with (mainly perfect) substitutes, it derives general results on the sustainability of tacit coordination for a class of nested demand functions that allows for the full range between perfect substitutes and perfect complements. Second, it studies the desirability of joint marketing alliances, an alternative to mergers. It shows that a combination of two informationfree regulatory requirements, mandated unbundling by the joint marketing entity and unfettered independent marketing by the firms, makes joint-marketing alliances always socially desirable, whether tacit coordination is feasible or not.
    Keywords: tacit collusion, cooperation, substitutes and complements, essentiality, joint marketing agreements, patent pools, independent licensing, unbundling, co-opetition.
    JEL: D43 L24 L41 O34
    Date: 2013–10–23
  27. By: Pavlo Prokopovych (Kyiv School of Economics and Kyiv Economics Institute); Nicholas C.Yannelis (Department of Economics, Tippie College of Business, University of Iowa)
    Abstract: The focus of this paper is on developing geometric sufficient conditions for the existence of a mixed strategy Nash equilibrium for both diagonally transfer continuous and better-reply secure games. First, we show that employing the concept of diagonal transfer continuity in place of better-reply security might be advantageous when the existence of a mixed strategy Nash equilibrium is concerned. Then, we study equilibrium existence in better-reply secure games possessing a payoff secure mixed extension. With the aid of an example we show that such games need not have mixed strategy Nash equilibria. We provide some easily verifiable conditions for the mixed extension of a two-person game that is reciprocally upper semicontinuous and uniformly payoff secure to be better-reply secure.
    Keywords: Discontinuous game; Diagonally transfer continuous game; Better-reply secure game; Mixed strategy equilibrium; Transfer lower semicontinuity
    JEL: C65 C72
    Date: 2013–10
  28. By: Rabia Nessah (IESEG School of Management (LEM-CNRS))
    Keywords: Discontinuous games, nonquasiconcave games, pure strategy Nash equilibrium, weakly continuous security, pseudo upper semicontinuity, generalized payoff security, weakly reciprocal upper semicontinuity
    JEL: C72
    Date: 2013–06
  29. By: Schlag, Karl H.; Vida, Péter
    Abstract: Games with multiple Nash equilibria are believed to be easier to play if players can communicate. We present a simple model of communication in games and investigate the importance of when communication takes place. Sending a message before play captures talk about intentions, after play captures talk about past commitments. We focus on equilibria where messages are believed whenever possible. Applying our results to Aumann’s Stag Hunt game we find that communication is useless if talk is about commitments, while the efficient outcome is selected if talk is about intentions. This confirms intuition and empirical findings in the literature.
    Keywords: Pre-play communication; cheap talk; coordination.
    JEL: C72 D83
    Date: 2013–10–29
  30. By: Miyazaki, Kentaro; Takekuma, Shin-Ichi
    Abstract: Irreducible exchange economies in which consumers’ preferences are satiable and non-ordered are considered. A general existence theorem of dividend quasi-equilibrium is proved and by the theorem the existence of Walras equilibrium is proved under weaker assumptions of non-satiation.
    Keywords: dividend equilibrium, Walras equilibrium, irreducibility, satiation
    JEL: C62 D11 D41 D51
    Date: 2013–10
  31. By: Gérard Mondello (University of Nice Sophia Antipolis, CREDECO, GREDEG, UMR 7321,CNRS)
    Abstract: This paper analyzes the meaning of comparing the economic performance of strict liability and negligence rule in a unilateral standard accident model under Knightian uncertainty. It focuses on the cost expectation of major harm on which the injurers form beliefs. It shows first that, when the Court agrees with the regulator, whatever the liability regime, the first best level of care is never reached but under both regimes the tortfeasors define the same level of care. Second, when, judge and regulator disagree, it is impossible to discriminate among liability standards because the issue depends on the injurer’s optimism degree.
    Keywords: Strict Liability, Negligence Rule, Ambiguity Theory, Uncertainty, Accident Model
    JEL: K0 K32 Q01 Q58
    Date: 2013–09

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