
on Microeconomics 
By:  Itai Arieli; Robert J. Aumann 
Abstract:  The logic of backward induction (BI) in perfect information (PI) games has been intensely scrutinized for the past quarter century. A major development came in 2002, when P. Battigalli and M. Sinischalchi (BS) showed that an outcome of a PI game is consistent with common strong belief of utility maximization if and only if it is the BI outcome. Both BS's formulation, and their proof, are complex and deep. We show that the result continues to hold when utility maximization is replaced by a rationality condition that is even more compelling; more important, the formulation and proof become far more transparent, accessible, and selfcontained. 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:huj:dispap:dp652&r=mic 
By:  Hammond, Peter J (Department of Economics, University of Warwick); Zank, Horst (University of Manchester) 
Abstract:  For choice with deterministic consequences, the standard rationality hypothesis is ordinality — i.e., maximization of a weak preference ordering. For choice under risk (resp. uncertainty), preferences are assumed to be represented by the objectively (resp. subjectively) expected value of a von Neumann–Morgenstern utility function. For choice under risk, this implies a key independence axiom; under uncertainty, it implies some version of Savage's sure thing principle. This chapter investigates the extent to which ordinality, independence, and the sure thing principle can be derived from more fundamental axioms concerning behaviour in decision trees. Following Cubitt (1996), these principles include dynamic consistency, separability, and reduction of sequential choice, which can be derived in turn from one consequentialist hypothesis applied to continuation subtrees as well as entire decision trees. Examples of behaviour violating these principles are also reviewed, as are possible explanations of why such violations are often observed in experiments. JEL classification: expected utility ; consequentialism ; independence axiom ; consistent planning ; rationality ; dynamic consistency ; subjective probability ; sure thing principle JEL codes: D01 ; D03 ; D81 ; D91 ; C72 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:wrk:warwec:1033&r=mic 
By:  Ezra Einy (BGU); Ori Haimanko (BGU); Ram Orzach (Oakland University, Rochester, MI 48309, USA); Aner Sela (BGU) 
Abstract:  We study twoplayer commonvalue allpay auctions in which the players have exante asymmetric information represented by finite partitions of the set of possible values of winning. We consider two families of such auctions: in the first, one of the players has an information advantage (henceforth, IA) over his opponent, and in the second, no player has an IA over his opponent. We show that there exists a unique equilibrium in auctions with IA and explicitly characterize it; for auctions without IA we find a sufficient condition for the existence of equilibrium in monotonic strategies. We further show that, with or without IA, the exante distribution of equilibrium effort is the same for every player (and hence the players' expected efforts are equal), although their expected payoffs are different. In auctions with IA, the players have the same exante probability of winning, which is not the case in auctions without IA. 
Keywords:  Commonvalue allpay auctions, asymmetric information, information advantage 
JEL:  C72 D44 D82 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:bgu:wpaper:1306&r=mic 
By:  Saori Chiba (Dept. of Management, Università Ca' Foscari Venice); Kaiwen Leong (Nanyang Technological University) 
Abstract:  Consider an uninformed decision maker (DM) who communicates with a partially informed speaker (S) through cheap talk. DM can choose a project to implement or the outside option of no project. We show that if the agentsÕ exante rankings over projects do not coincide, then this conflict of interest can reduce SÕs incentive to pander and hence facilitate information transmission. Intuitively, SÕs exante bias and the incentive to pander affect SÕs information revelation in opposite directions and hence offset each other. We also explore the relationship between information transmission and managerial issues such as delegation, disclosure, and interpersonal authority. 
Keywords:  Cheap Talk, Delegation, Disclosure, Interpersonal Authority, Pandering 
JEL:  D82 D83 M10 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:vnm:wpdman:60&r=mic 
By:  Kalyan Chatterjee (Department of Economics, Pennsylvania State University.); Kaustav Das (Department of Economics, University of Exeter) 
Abstract:  We study a model of decentralised bilateral interactions in a small market where one of the sellers has private information about her value. There are two identical buyers and another seller, whose valuation is commonly known to be in between the two possible valuations of the informed seller. We consider two in?nite horizon games, with public and private simultaneous onesided o¤ers respectively and simultaneous responses. We show that there is a stationary perfect Bayes?equilibrium for both models such that prices in all transactions converge to the same value as the discount factor goes to 1. 
Keywords:  Bilateral Bargaining, Incomplete information, Outside options, Coase conjecture. 
JEL:  C78 D82 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:exe:wpaper:1313&r=mic 
By:  Ascensi—n Andina D’az (Department of Economic Theory, Universidad de M‡laga) 
Abstract:  We propose a model in which different types of journalists have superior information to a newspaper's editor. Journalists compete for having their report published, but when writing their reports, they are uncertain about the preferences of the editor. We analyze the effects of competition and uncertainty on the incentives of the journalists to write informative reports. We obtain that there is not a unique prediction as to the effects of competition, but the correct answer depends on how much uncertainty there is. Thus, if the editor is perceived to be honest, we show there is an equilibrium in which all the journalists write informative reports, provided that a certain level of competition is met. In contrast, if the editor is perceived to be biased, partial revelation of information exists, even in the absence of competition. Last, high levels of uncertainty inevitably results in uninformative reporting. 
Keywords:  Information transmission, media bias, competing journalists, uncertainty 
JEL:  D72 D82 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:mal:wpaper:20132&r=mic 
By:  Michel Grabisch (CES  Centre d'économie de la Sorbonne  CNRS : UMR8174  Université Paris I  PanthéonSorbonne, EEPPSE  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  PanthéonSorbonne, EEPPSE  Ecole d'Économie de Paris  Paris School of Economics  Ecole d'Économie de Paris) 
Abstract:  The paper concerns a dynamic model of influence in which agents make a yesno decision. Each agent has an initial opinion which he may change during different phases of interaction, due to mutual influence among agents. We investigate a model of influence based on aggregation functions. Each agent modifies his opinion independently of the others, by aggregating the current opinion of all agents. Our framework covers numerous existing models of opinion formation, since we allow for arbitrary aggregation functions. We provide a general analysis of convergence in the aggregation model and find all terminal classes and states. We show that possible terminal classes to which the process of influence may converge are terminal states (the consensus states and non trivial states), cyclic terminal classes, and unions of Boolean lattices (called regular terminal classes). An agent is influential for another agent if the opinion of the first one matters for the latter. A generalization of influential agent to an irreducible coalition whose opinion matters for an agent is called influential coalition. The graph (hypergraph) of influence is a graphical representation of influential agents (coalitions). Based on properties of the hypergraphs of influence we obtain conditions for the existence of the different kinds of terminal classes. An important family of aggregation functions  the family of symmetric decomposable models  is discussed. Finally, based on the results of the paper, we analyze the manager network of Krackhardt. 
Keywords:  influence; aggregation function; convergence; terminal class; influential coalition; hypergraph; social network 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:hal:cesptp:halshs00906367&r=mic 
By:  Muhammad Mahajne (BGU); Oscar Volij (BGU) 
Abstract:  We propose a weakening of the unanimity concept, which we refer to as consensus of level r, and apply it to rationalize social aggregation rules. 
Keywords:  Social choice, unanimity, consensus, preference aggregation rules 
JEL:  D71 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:bgu:wpaper:1305&r=mic 
By:  Christian Ewerhart; Federico Quartieri 
Abstract:  Szidarovszky and Okuguchi (Games and Economic Behavior, 1997) have provided useful conditions for the existence of a unique purestrategy Nash equilibrium in rentseeking games of complete information. In this paper, we generalize their results to contests with incomplete information. Two assumptions are imposed on the information structure. First, the players?' valuations of winning are assumed to be multiplicatively separable (which includes the polar cases of private values and pure common value). Second, it is assumed that a player is never certain to be the only one with a positive budget. It is also shown that, unless the budgets of all players are zero in all states, at least two players realize a positive expected net rent. 
Keywords:  Contests, equilibrium existence and uniqueness, incomplete information, rent dissipation 
JEL:  D72 C72 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:zur:econwp:133&r=mic 
By:  Joosung Lee 
Abstract:  I introduce a noncooperative coalitional bargaining model for characteristic function form games. A player not only buys out other players' resources and rights with upfront transfers as in Gul (Econometrica, 1989), but also strategically chooses partners instead of bargaining with a randomly selected opponent. Such transactions among players are interpreted as coalition formation. The main theorem provides a general inefficiency result. If a characteristic function form game has a strict subcoalition with a strictly positive worth and a player with a strictly positive marginal contribution to the grandcoalition, then an efficient stationary subgame perfect equilibrium does not exist, as long as the discount factor is sufficiently high but strictly less than 1. Two special results are established. A grandcoalition equilibrium is impossible when players are sufficiently patient, unless the characteristic function form game is a unanimity game. For a simple game with a veto player and multiple winning coalitions, a nonminimal winning coalition is formed with positive probability. In two applications, I study players' strategic alliance behavior and the effect of the strategic behavior on inequality. First, for threeplayer simple games, the equilibrium payoff vector Lorenzdominates both the ShapleyShubik power index and the coreconstrained Nash bargaining solution. Second, for wage bargaining games, workers endogenously form a union and their equilibrium payoffs can be greater than marginal products. 
JEL:  C72 C78 D72 D74 
Date:  2013–11–20 
URL:  http://d.repec.org/n?u=RePEc:jmp:jm2013:ple701&r=mic 
By:  Vesperoni, Alberto (University of Siegen) 
Abstract:  A contest is a game where several players compete for winning prizes by expending costly efforts. We assume that the outcome of a contest is an ordered partition of the set of players (a ranking) and a contest success function assigns a probability to each possible outcome as a function of players’ efforts. We define a contest success function for contests whose outcome is a ranking of any type, i.e., with any number of players at each rank. This approach is new in contest theory since the axiomatic work has exclusively been on contests with singlewinner, whose outcome is a ranking with one player in the first rank and all other players in the second rank. The contest success function is characterized by pairswap consistency, which is an axiom of independence of irrelevant alternatives and generalizes the main axiom in Skaperdas (1996). 
Keywords:  conflict; contest; ranking; success function; axiom; probabilistic choice 
JEL:  C25 C70 D72 D74 D81 
Date:  2013–11–25 
URL:  http://d.repec.org/n?u=RePEc:ris:nepswp:2013_008&r=mic 
By:  Wioletta Dziuda; Ronen Gradwohl 
Abstract:  Two players choose whether to cooperate on a project. Each of them is endowed with some evidence, and if both possess a sufficient amount then cooperation is profitable. In order to facilitate cooperation the players reveal evidence to one another. However, some players are concerned about privacy, and so revelation of evidence that does not result in cooperation is costly. We show that in equilibrium evidence can be exchanged both incrementally and all at once, and identify conditions under which the different rates of evidence exchange are optimal. 
Keywords:  Cooperation, Privacy, Communication JEL Classification: D80 
Date:  2013–11–05 
URL:  http://d.repec.org/n?u=RePEc:nwu:cmsems:1572&r=mic 
By:  David Dillenberger (Department of Economics, Univerity of Pennsylvania); Uzi Segal (Department of Economics, Boston College and Warwick Business School) 
Abstract:  Experimental evidence suggests that individuals who face an asymmetric distribution over the likelihood of a specific event might actually prefer not to know the exact value of this probability. We address these findings by studying a decision maker who has recursive, nonexpected utility preferences over twostage lotteries. For a binary lottery that yields the better outcome with probability p, we identify noise around p with a compound lottery that induces a probability distribution over the exact value of the probability and has an average value p. We first propose and characterize a new notion of skewed distributions. We then use this result to provide conditions under which a decision maker who always rejects symmetric noise around p will always reject skewed to the left noise, but might accept skewed to the right noise. The model can be applied to the areas of investment under risk, medical decision making, and criminal law procedures, and can also be used to address the phenomenon of ambiguity seeking in the context of decision making under uncertainty. 
Keywords:  Asymmetric noise, skewed distributions, recursive nonexpected utility, ambiguity seeking, compound lotteries. 
JEL:  D81 
Date:  2013–11–25 
URL:  http://d.repec.org/n?u=RePEc:pen:papers:13066&r=mic 
By:  Kiryl Khalmetski 
Abstract:  I develop a model of strategic communication between an uninformed receiver and a partially informed sender who is averse to lying. The sender's cost of lying is endogenous, depending on the receiver's beliefs induced by the sender's message, rather than on its exogenous formulation. One of my main findings is that this leads to the endogenous emergence of evasive communication, i.e., pretending to be uninformed, even when communication is completely unrestricted. Furthermore, the beliefdependent cost of lying gives rise to specific predictions regarding the welfare implications of several conventional policies. In particular, prohibition of lying (i.e., of explicit falsification) may lead to a decrease in the receiver's welfare. In addition, dealing with an exante less informed sender can be beneficial to the receiver. The results are attributed exclusively to beliefdependent preferences and cannot be explained by an outcomebased model. 
JEL:  D82 D83 D84 C72 
Date:  2013–11–20 
URL:  http://d.repec.org/n?u=RePEc:jmp:jm2013:pkh266&r=mic 
By:  Rothenhäusler, Dominik; Schweizer, Nikolaus; Szech, Nora 
Abstract:  We study how institutional design in influences moral transgression. People are heterogeneous in their feelings of guilt and can share guilt with others. Institutions determine the number of supporters necessary for immoral outcomes to occur. With more supporters required, every supporter can share guilt more easily. This facilitates becoming a supporter. Conversely, an institution requiring more supporters must rely on people who have higher individual moral standards. We analyze individual thresholds for agreeing to a transgression, depending on the available options for sharing guilt by institutional design. On the aggregate level, we study how institutions affect the likelihood of immoral outcomes.  
Keywords:  Moral Decision Making,Shared Guilt,Group Absolution,Diffused Responsibility,Institutional Design,Committee Decisions,Moral Transgression 
JEL:  D01 D03 D23 D63 D82 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:zbw:kitwps:47&r=mic 
By:  GiménezGómez, JoséManuel; Vilella Bach, Misericòrdia 
Abstract:  In this paper we prove that the MasColell bargaining set coincides with the core for threeplayer balanced and superadditive cooperative games. This is no longer true without the superadditivity condition or for games with more than threeplayers. Furthermore, under the same assumptions, the coincidence between the MasCollel and the individual rational bargaining set (Vohra (1991)) is revealed. Keywords: Cooperative game, MasColell bargaining set, balancedness, individual rational bargaining set. JEL classi fication: C71, D63, D71. 
Keywords:  Jocs cooperatius, Economia del benestar, Elecció social, 33  Economia, 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:urv:wpaper:2072/220221&r=mic 
By:  Mridu Prabal Goswami (BGU) 
Abstract:  This paper defines the singlecrossing property for twoagent, twogood exchange economies for classical (i.e., continuous, strictly monotonic, and strictly convex) individual preferences. Within this framework and on a rich singlecrossing domain, the paper characterizes the family of continuous, strategyproof and individually rational social choice functions whose range belongs to the interior of the set of feasible allocations. This family is shown to be the class of generalized trading rules. This result highlights the importance of the concavification argument in the characterization of fixedprice trading rules provided by Barber? and Jackson (1995), an argument that does not hold under singlecrossing. The paper also shows how several features of abstract singlecrossing domains, such as the existence of an ordering over the set of preference relations, can be derived endogenously in economic environments by exploiting the additional structure of classical preferences. 
Keywords:  social choice, classical preference, singlecrossing, concavification. 
JEL:  D00 D51 D71 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:bgu:wpaper:1311&r=mic 
By:  Sergio Currarini (University of Leicester, Universita' di Venezia and EuroMediterranean Center on Climate Change); Marco A. Marini (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza") 
Abstract:  In this paper we review a number of coalitional solution concepts for the analysis of cartel and merger stability in oligopoly. We show that, although so far the industrial organization and the cooperative gametheoretic literature have proceeded somehow independently on this topic, the two approaches are highly interconnected. We first consider the basic problem of the stability of the whole industry association of firms under oligopoly and, for this purpose, we introduce the concept of core in oligopoly games. We show that different assumptions on the behaviour as well as on the timing of the coalitions of firms yield very different results on the set of allocations which are corestable. We then consider the stability of associations of firms organized in coalition structures different from the grand coalition. To this end, various coalition formation games recently introduced by the so called endogenous coalition formation literature are critically reviewed. Again, different assumptions concerning the timing and the behaviour of firms are shown to yield a wide range of different results. We conclude by reviewing some recent extensions of the coalitional analysis to oligopolistic markets with heterogeneous firms and incomplete information. 
Keywords:  Cooperative Games, Coalitions, Mergers, Cartels, Core, Games with Ex ternalities, Endogenous Coalition Formation 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:aeg:report:201315&r=mic 
By:  Nejat Anbarci; Pedro GomisPorqueras; Marcus Pivato 
Abstract:  In formal markets, to attract buyers, sellers must publicly advertise their prices and locations. But in informal markets, sellers must remain anonymous from government authorities. Since agents' payoffs depend on the ratio of buyers and sellers in each of these markets, all agents try to position themselves in the market which can yield them the highest possible payoff. This strategic interaction in turn critically affects the time evolution of these two markets. In our benchmark model, in which only sellers can switch between these markets, there exists a unique stable dynamic equilibrium where formal and informal markets coexist. Sellers switch from the formal to the informal market whenever costs of trading in the informal market decrease, and vice versa. In a richer environment, where both sellers and buyers can switch between markets, and the sellers' and buyers' costs of trading in the formal market net of those in the informal market have opposite signs, there exists a unique stable dynamic equilibrium where formal and informal markets coexist. 
Keywords:  Price posting, bargaining, matching, formal sector, informal sector 
JEL:  C7 D49 
Date:  2013–11–20 
URL:  http://d.repec.org/n?u=RePEc:dkn:econwp:eco_2013_6&r=mic 
By:  Athanassoglou, Stergios 
Abstract:  Social wellbeing is intrinsically multidimensional. Welfare indices attempting to reduce this complexity to a unique measure abound in many areas of economics and public policy. Ranking alternatives based on such measures depends, sometimes critically, on how the different dimensions of welfare are weighted. In this paper, a theoretical framework is presented that yields a set of consensus rankings in the presence of such weight imprecision. The main idea is to consider a vector of weights as an imaginary voter submitting preferences over alternatives in the form of an ordered list. With this voting construct in mind, a rule for aggregating the preferences of many plausible choices of weights, suitably weighted by the importance attached to them, is proposed. An axiomatic characterization of the rule is provided, and its computational implementation is developed. An analytic solution is derived for an interesting special case of the model corresponding to generalized weighted means and the $\epsilon$contamination framework of Bayesian statistics. The model is applied to the Academic Ranking of World Universities index of Shanghai University, a popular composite index measuring academic excellence. 
Keywords:  multidimensional welfare, social choice, voting, Kemeny's rule, graph theory, $\epsilon$contamination 
JEL:  C61 D71 D72 I31 
Date:  2013–11–21 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:51642&r=mic 