
on Microeconomics 
By:  David Martimort (Paris School of EconomicsEHESS); Aggey Semenov (Department of Economics, University of Ottawa, Ottawa, ON); Lars Stole (University of Chicago Booth School of Business) 
Abstract:  We present a Theory of Contracts under costly enforcement in the context of a dynamic relationship between an uninformed buyer and a seller who is privately informed on his persistent cost at the outset. Public enforcement relies on remedies for breach. Private enforcement comes from severing relationships. We first characterize aggregate enforcement constraints ensuring that trading partners do not breach contracts unduly. Whether a longterm contract is enforceable does not depend on the distribution of penalties for breach between the buyer and the seller. While under complete information, the optimal contract would remain stationary, nonstationarity might arise under asymmetric information. Enforcement constraints are timedependent and easier to satisfy as time passes. Indeed, a highcost seller may be tempted to trade high volumes at high prices at the beginning of the relationship before breaching the contract later on. Yet, such takethemoneyandrun strategy becomes less attractive as time passes and can be prevented with back loaded payments. The optimal contract thus goes through two different phases. First, quantities and prices increase at the inception of the relationship. Later on, the contract looks more stationary. Longrun screening distortions encapsulate the quality of enforcement, offering de facto a link between the quality of the legal system and contractual performances. 
Keywords:  Asymmetric information, enforcement, breach of contracts, dynamic contracts 
JEL:  D82 D86 K2 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:ott:wpaper:e1304e&r=mic 
By:  Emanuele Gerratana (SIPA, Columbia University); Levent Koçkesen (Department of Economics, Koç University) 
Abstract:  This paper characterizes equilibrium outcomes of extensive form games with incomplete information in which players can sign renegotiable contracts with thirdparties. Our aim is to understand the extent to which thirdparty contracts can be used as commitment devices when it is impossible to commit not to renegotiate them. We characterize renegotiationproof contracts and strategies for general extensive form games with incomplete information and apply our results to twostage games. If contracts are observable, then the second mover obtains her best possible payoff given that she plays a renegotiationproof strategy and the first mover best responds. If contracts are unobservable, then a “folk theorem” type result holds: Any outcome in which the second mover best responds to the first mover’s action on the equilibrium path and the first mover receives at least his “individually rational payoff”, can be supported. We also apply our results to games with monotone externalities and to a model of credibility of monetary policy and show that in both cases renegotiationproofness imposes a very simple restriction. 
Keywords:  ThirdParty Contracts, Commitment, Strategic Delegation, Renegotiation, Asymmetric Information, RenegotiationProofness, EntryDeterrence,Monetary Policy. 
JEL:  C72 D80 L13 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:koc:wpaper:1323&r=mic 
By:  Salvatore Piccolo (Università Cattolica delSacro Cuore di Milano and CSEF); Giovanni W. Puopolo (Università Bocconi and CSEF); Luis Vasconcelos (University of Essex) 
Abstract:  We study a model of financial advice where investors rely on a financial expert (the advisor) to make their asset allocation choices. There is only one source of risk and the advisor is privately informed about the volatility of the return of the risky asset. Moreover, the advisor’s preferences are misaligned with those of his uninformed clients, and this conflict of interests cannot be solved by means of statecontingent monetary transfers. In equilibrium, investors delegate the investment decision to the financial advisor. However, they impose restrictions on the advisor’s choices. These restrictions take the form of a cap or a floor on the amount invested in the risky asset. The precise form of partial delegation that emerges depends on whether financial advice is exclusive or not, and in the case of nonexclusive advice, on whether the common advisor perceives investors’ asset allocations as complements or as substitutes. We also analyze the implications of nonexclusivity in financial advice on investment behavior and investors’ expected utility. 
Keywords:  Delegated Portfolio Management, Financial Advice, NonExclusivity 
JEL:  G11 G23 
Date:  2013–12–10 
URL:  http://d.repec.org/n?u=RePEc:sef:csefwp:347&r=mic 
By:  Rosenberg, Dinah; Salomon , Antoine; Vieille , Nicolas 
Abstract:  We study a class of symmetric strategic experimentation games. Each of two players faces a (exponential) twoarmed bandit problem, and must decide when to stop experimenting with the risky arm. The equilibrium amount of experimentation depends on the degree to which experimentation outcomes are observed, and on the correlation between the two individual bandit problems. When experimentation outcomes are public, the game is basically one of strategic complementarities. When experimentation decisions are public, but outcomes are private, the strategic interaction is more complex. We fully characterize the equilibrium behavior in both informational setups, leading to a clear comparison between the two. In particular, equilibrium payoffs are higher when equilibrium outcomes are public. 
Keywords:  symmetric strategic experimentation games; equilibrium; strategic experimentation 
JEL:  C00 
Date:  2013–10–24 
URL:  http://d.repec.org/n?u=RePEc:ebg:heccah:1008&r=mic 
By:  David Dillenberger (Department of Economics, University of Pennsylvania); Andrew Postlewaite (Department of Economics, University of Pennsylvania); Kareen Rozen (Department of Economics, Yale University) 
Abstract:  Maximizing subjective expected utility is the classic model of decisionmaking under uncertainty. Savage (1954) provides axioms on preference over acts that are equivalent to the existence of a subjective expected utility representation, and further establishes that such a representation is essentially unique. We show that there is a continuum of other "expected utility" representations in which the probability distributions over states used to evaluate acts depend on the set of possible outcomes of the act and suggest that these alternate representations can capture pessimism or optimism. We then extend the DM's preferences to be defined over both subjective acts and objective lotteries, allowing for sourcedependent preferences. Our result permits modeling ambiguity aversion in Ellsberg's twourn experiment using a single utility function and pessimistic probability assessments over prizes for lotteries and acts, while maintaining the axioms of Savage and von NeumannMorganstern on the appropriate domains. 
Keywords:  Subjective expected utility, optimism, pessimism, stakedependent probability 
JEL:  D80 D81 
Date:  2011–10–01 
URL:  http://d.repec.org/n?u=RePEc:pen:papers:13068&r=mic 
By:  Matthew Polisson; John K.H. Quah 
Abstract:  Consider a finite data set where each observation consists of a bundle of contingent consumption chosen from a constraint set of contingent consumption bundles. We develop a general procedure for testing the consistency of such a data set with a broad class of models of choice under risk or uncertainty. Unlike previous tests, we do not require that the agent has a concave Bernoulli utility function. 
Keywords:  expected utility, rank dependent expected utility, maxmin expected util ity, revealed preference 
JEL:  C14 C60 D11 D12 D81 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:lec:leecon:13/24&r=mic 
By:  John Quah; Hiroki Nishimura; Efe A. Ok 
Abstract:  The theoretical literature on (nonrandom) choice largely follows the route of Richter (1966) by working in abstract environments and by stipulating that we see all choices of an agent from a given feasible set.� On the other hand, empirical work on consumption choice using revealed preference analysis is done following the approach of Afriat (1967), which assumes that we observe only one (and not necessarily all) of the potential choices of an agent.� These two approaches are structurally different and they are treated in the literature in isolation from each other.� This paper introduces a framework in which both approaches can be formulated in tandem.� We prove a rationalizability theorem in this framework that simultaneously generalizes the fundamental results of Afriat and Richter, along with many of their variants. � � 
Keywords:  Revealed Preference, Rational Choice, Afriat's Theorem, Richter's Theorem 
JEL:  D11 D81 
Date:  2013–12–06 
URL:  http://d.repec.org/n?u=RePEc:oxf:wpaper:686&r=mic 
By:  Tomasz Strzalecki; Jan Werner 
Abstract:  An important implication of the expected utility model under risk aversion is that if agents have the same probability belief, then the efficient allocations under uncertainty are comonotone with the aggregate endowment, and if their beliefs are concordant, then the efficient allocations are measurable with respect to the aggregate endowment. We study these two properties of efficient allocations for models of preferences that exhibit ambiguity aversion using the concept of conditional belief, which we introduce in this paper. We provide characterizations of such conditional beliefs for the standard models of preferences used in applications. âˆ— 
URL:  http://d.repec.org/n?u=RePEc:qsh:wpaper:8325&r=mic 
By:  Tomasz Strzalecki 
Abstract:  This paper shows that in the class of variational preferences the notion of probabilistic sophistication is equivalent to expected utility as long as there exists at least one event such that the independence axiom holds for bets on that event. This extends a result of Marinacci (2002) and provides a novel interpretation of his result. 
URL:  http://d.repec.org/n?u=RePEc:qsh:wpaper:8337&r=mic 
By:  Renou , Ludovic; Tomala, Tristan 
Abstract:  This paper considers dynamic implementation problems with evolving private information (according to Markov processes). A social choice function is approximately implementable if there exists a dynamic mechanism such that the social choice function is implemented by an arbitrary large number of times with arbitrary high probability in every communication equilibrium. We show that if a social choice function is strictly efficient in the set of social choice functions that satisfy an undetectable condition, then it is approximately implementable. We revisit the classical monopolistic screening problem and show that the monopolist can extract the full surplus in almost all periods with arbitrary high probability. 
Keywords:  implementation; Markov Process; undetectability; efficiency 
JEL:  C70 
Date:  2013–07–21 
URL:  http://d.repec.org/n?u=RePEc:ebg:heccah:1015&r=mic 
By:  Friedrich Poeschel 
Abstract:  When agents do not know where to find a match, they search. However, agents could direct their search to agents who strategically choose a certain signal. Introducing cheap talk to a model of sequential search with bargaining, we find that signals will be truthful if there are mild complementarities in match production: supermodularity of the match production function is a necessary and sufficient condition. It simultaneously ensures perfect positive assortative matching, so that singlecrossing property and sorting condition coincide. As the information from signals allows agents to avoid all unnecessary search, this search model exhibits nearly unconstrained efficiency. 
JEL:  J64 D83 C78 
Date:  2013–12–07 
URL:  http://d.repec.org/n?u=RePEc:jmp:jm2013:ppo178&r=mic 
By:  Dirk Bergemann (Cowles Foundation, Yale University); Tibor Heumann (Dept. of Economics, Yale University); Stephen Morris (Dept. of Economics, Princeton University) 
Abstract:  We analyze a class of games with interdependent values and linear best responses. The payoff uncertainty is described by a multivariate normal distribution that includes the pure common and pure private value environment as special cases. We characterize the set of joint distributions over actions and states that can arise as Bayes Nash equilibrium distributions under any multivariate normally distributed signals about the payoff states. We characterize maximum aggregate volatility for a given distribution of the payoff states. We show that the maximal aggregate volatility is attained in a noisefree equilibrium in which the agents confound idiosyncratic and common components of the payoff state, and display excess response to the common component. We use a general approach to identify the critical information structures for the Bayes Nash equilibrium via the notion of Bayes correlated equilibrium, as introduced by Bergemann and Morris (2013b). 
Keywords:  Incomplete information, Bayes correlated equilibrium, Volatility, moments restrictions, Linear best responses, Quadratic payoffs 
JEL:  C72 C73 D43 D83 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:cwl:cwldpp:1928&r=mic 
By:  Gall, Thomas 
Abstract:  Does a competitive equilibrium in a matching market provide adequate incentives for investments made before the market when utility is not perfectly transferable? This paper derives a necessary and sufficient condition for equilibrium investments to maximize surplus conditional on the matching assignment in a onesided market. Surplus efficiency of equilibrium payoffs ex post alone is sufficient for surplus efficient investments only when the equal treatment property holds in equilibrium. Sufficient (but not full) utility transferability in a well defined sense ensures this will hold and that a social planner who can only change investments cannot achieve higher aggregate surplus than the market. Keywords; matching, assignment models, investments, nontransferable utility, graph theory 
Date:  2013–07–08 
URL:  http://d.repec.org/n?u=RePEc:stn:sotoec:360186&r=mic 
By:  Dino Gerardi; Lucas Maestri 
Abstract:  A seller dynamically sells a divisible good to a buyer. It is common knowledge that there are gains from trade and that the gains per unit are decreasing. Payoffs are interdependent as in Akerlof's market for lemons. The seller is informed about the good's quality. The buyer makes an offer in every period and learns about the good's quality only through the seller's behavior. We characterize the stationary equilibrium when the time between offers is small. The owner of a highquality good sells it in dribs and drabs, whereas the owner of a lowquality good constantly randomizes between selling small pieces and accepting an offer for all the remaining units. We use this characterization to analyze the limiting equilibrium outcome as the good becomes more divisible. We prove that there is slow trading: a valuable good is smoothly sold over time. In contrast, the good is never partially sold when gains per unit are increasing. 
JEL:  C78 D82 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:cca:wpaper:312&r=mic 
By:  Daniel Diermeier; Georgy Egorov; Konstantin Sonin 
Abstract:  It is often argued that additional checks and balances provide economic agents with better protection from expropriation of their wealth or productive capital. We demonstrate that in a dynamic political economy model this intuition may be flawed. Surprisingly, increasing the number of veto players or the majority requirement for redistribution may reduce property right protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property rights protection. One are formal constraints that allow individuals or groups to block any redistribution which is not in their favor. The other occurs in equilibrium where agents without such powers protect each other from redistribution. Players without formal blocking power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions. Yet, such incentives can be undermined by adding formal constraints. The flipside of this effect is that individual investment efforts might require coordination. The model also predicts that the distribution of wealth in societies with weaker formal institutions (smaller supermajority requirements) among players without veto power will tend to be more homogenous. 
JEL:  D72 D74 P48 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:nbr:nberwo:19734&r=mic 
By:  Alexei Parakhonyak (National Research University Higher School of Economics, Moscow, Russia.); Nick Vikander (University of Copenhagen, Department of Economics.) 
Abstract:  This paper examines the optimal sequencing of sales in the presence of network externalities. A firm sells a good to a group of consumers whose payoff from buying is increasing in total quantity sold. The firm selects the order to serve consumers so as to maximize expected sales. It can serve all consumers simultaneously, serve them all sequentially, or employ any intermediate scheme. We show that the optimal sales scheme is purely sequential, where each consumer observes all previous sales before choosing whether to buy himself. A sequential scheme maximizes the amount of information available to consumers, allowing success to breed success. Failure can also breed failure, but this is made less likely by consumers’ desire to influence one another’s behavior. We show that when consumers differ in the weight they place on the network externality, the firm would like to serve consumers with lower weights first. Our results suggests that a firm launching a new product should first target independentminded consumers who can serve as opinion leaders for those who follow. 
Keywords:  Product launch, Network externality, Sequencing of sales 
JEL:  M31 D42 D82 L12 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:hig:wpaper:41/ec/2013&r=mic 
By:  Pradeep Dubey (Department of Economics, Stony Brook University); Rahul Garg (Opera Solutions, INDIA); Bernard De Meyer (PSEUnivesite Paris 1, Paris, FRANCE) 
Abstract:  There are many situations in which a customer's proclivity to buy the product of any rm depends heavily on who else is buying the same product. We model these situations as noncooperative games in which rms market their products to customers located in a \social network". Nash Equilibrium (NE) in pure strategies exist in general. In the quasilinear version of the model, NE turn out to be unique and can be precisely characterized. If there are no a priori biases between customers and rms, then there is a cuto level above which high cost rms are blockaded at an NE, while the rest compete uniformly throughout the network. Otherwise rms could end up as regional monopolies. We also explore the relation between the connectivity of a customer and the money rms spend on him. This relation becomes particularly transparent when externalities are dominant: NE can be characterized in terms of the invariant measures on the recurrent classes of the Markov chain underlying the social network. When we allow for cost functions of rms to be convex, instead of just linear, NE need no longer be unique as we show via an example. But uniqueness is restored if there is enough competition between rms or if their valuations of clients are anonymous. Finally we develop a general model of nonlinear externalities and show that existence of NE remains intact. 
Date:  2013–07 
URL:  http://d.repec.org/n?u=RePEc:nys:sunysb:1301&r=mic 
By:  Rindone, Fabio; Greco, Salvatore; Di Gaetano, Luigi 
Abstract:  The aim of this paper is to introduce prospect theory in a game theoretic framework. We address the complexity of the weighting function by restricting the object of our analysis to a 2player 2strategy game, in order to derive some core results. We find that dominant and indifferent strategies are preserved under prospect theory. However, in absence of dominant strategies, equilibrium may not exist depending on parameters. We also discuss a different approach presented by Metzger and Rieger (2009) and give some interesting interpretations of the two approaches. 
Keywords:  Game theory, Prospect theory, Nash equilibrium, Behavioural economics. 
JEL:  C7 C70 D03 
Date:  2013–06–06 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:52131&r=mic 
By:  Vöpel, Henning 
Abstract:  Empirical evidence suggests that top players often play together in one team. Based on the Oring theory (Kremer 1993) a Zidane clustering theorem is derived. It is argued that the best midfielder is most efficiently allocated when combined with an ace striker, and vice versa. This implies that better teams can payer higher wages, because players are more valuable for better teams than for weaker teams. In equilibrium all teams are of homogenous quality, otherwise a reallocation would occur on the players market. Obviously, such a clustering effect negatively affects the competitive balance. It is shown that the clustering effect must be compensated by decreasing marginal revenue for sporting success in order to restore the competitive balance. This is certainly not the case in the UEFA Champions League where the prize money is exponentially increasing thus contributing significantly to the inherent monopolization in professional sports leagues.  
Keywords:  clustering,competitive balance 
JEL:  D24 D43 L22 L51 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:zbw:hwwirp:141&r=mic 
By:  Normann Lorenz 
Abstract:  This paper analyzes the distortions of health insurers’ benefit packages due to adverse selection when there is imperfect competition. Within a discrete choice setting with two risk types, the following main results are derived: For intermediate levels of competition, the benefit packages of both risk types are distorted in the separating equilibrium. As the level of competition decreases, the distortion decreases for the low risk type, but increases for the high risk type; in addition, the number of insurers offering the benefit package for the low risk type increases. If the level of competition is low enough, a pooling equilibrium emerges, which generally differs from the Wilsonequilibrium. It is shown that these results have important implications for risk adjustment: For intermediate levels of competition, risk adjustment can be ineffective or even decrease welfare if it is not reasonably precise. 
Keywords:  Adverse selection, discrete choice, risk adjustment 
JEL:  I18 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:trr:wpaper:201305&r=mic 
By:  Jocelyn Donze; Trude Gunnes (Statistics Norway) 
Abstract:  This article studies how a firm fosters formal and informal interaction among its employees to create a collective identity and positively influence their effort. We develop an agency model, in which employees have both a personal and a social ideal for effort. The firm does not observe the personal ideals, which gives rise to an adverse selection problem, but can make its workforce more sensitive to the social ideal by allocating part of working hours to social interaction. We show that there are two reasons why the firm invests in social capital. First, it reinforces the effectiveness of monetary incentives. Second, by creating a shared identity in the workforce, the firm is able to reduce the adverse selection problem. We also show that the firm allocates more time to bonding activities when employees have low personal ideals for effort or when they are more heterogeneous as regards these ideals. 
Keywords:  Agency theory; Social interaction; Social norms; norm regulation 
JEL:  D2 D8 J3 M5 
Date:  2013–10 
URL:  http://d.repec.org/n?u=RePEc:ssb:dispap:760&r=mic 
By:  Giovanni Ursino (Università Cattolica del Sacro Cuore); Salvatore Piccolo (Università Cattolica delSacro Cuore di Milano and CSEF); Piero Tedeschi (Università Cattolica del Sacro Cuore) 
Abstract:  We study a Bertrand game where two sellers supplying products of different and unverifiable qualities can outwit potential clients through (costly) deceptive advertising. We characterize a class of pooling equilibria where sellers post the same price regardless of their quality and low quality ones deceive buyers. Although in these equilibria low quality goods are purchased with positive probability, the buyer’s (expected) utility can surprisingly be higher than in a fully separating equilibrium, which suggests that (absent price regulation) a per se rule banning deceptive practices may harm consumers. We also argue that sellers invest more in deceptive advertising the better their reputation visàvis potential clients – i.e., firms that are better trusted by customers, have greater incentives to invest in deceptive advertising. Finally, we characterize the optimal monitoring effort exerted by a regulatory agency who seeks to identify and punish deceptive practices. We show that consumer surplus maximization requires a higher monitoring e¤ort than social welfare maximization. 
Keywords:  Misleading Advertising, Deception, Bayesian Consumers, Asymmetric Information 
JEL:  L13 L15 L4 
Date:  2013–12–10 
URL:  http://d.repec.org/n?u=RePEc:sef:csefwp:348&r=mic 
By:  Wiroy Shin 
Abstract:  This paper studies an environment of simultaneous, separate, firstprice auctions for complementary goods. Agents observe private values of each good before making bids, and the complementarity between goods is explicitly incorporated in their utility. For simplicity, a model is presented with two firstprice auctions and two bidders. We show that a monotone purestrategy Bayesian Nash Equilibrium exists in the environment. 
Date:  2013–12 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1312.2641&r=mic 
By:  JeanDaniel Guigou; Bruno Lovat; Marc Boissaux (LSF) 
Abstract:  We study a rentseeking proprtionalprize contest between two heterogeneously riskaverse players and given prize amounts are normally distributed rather than known ex ante. We establish existence and unicity of a Nash equilibrium linked to this contest, and study the equilibrium e_orts implied. We then obtain a similar equilibrium result for a winnertakesall lottery contest within the same risky rent context, and compare optimal e_orts as well as expected utilities between the two contest types. 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:crf:wpaper:139&r=mic 
By:  Bertola, Giuseppe; Koeniger, Winfried 
Abstract:  We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effortdetermined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional formrestrictions ensure that individual objective functions are optimized by an effort and insurance combination that is unique and satisfies first and secondorder conditions. Modeling insurance incompleteness in terms of costly production of private insurance services, we characterize the constrained inefficiency arising in general equilibrium from competitive pricing of nonexclusive financial contracts.  
Keywords:  Hidden action,Principal agent,Firstorder approach,Constrained efficiency 
JEL:  E21 D81 D82 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:zbw:cfswop:201325&r=mic 
By:  Ramón Jesús Flores Díaz; Elisenda Molina; Juan Tejada 
Abstract:  Following the original interpretation of the Shapley value (Shapley, 1953a) as a priori evaluation of the prospects of a player in a multiperson iteraction situation, we propose a group value, which we call the Shapley group value, as a priori evaluation of the prospects of a group of players in a coalitional game when acting as a unit. We study its properties and we give an axiomatic characterization. We motivate our proposal by means of some relevant applications of the Shapley group value, when it is used as an objective function by a decision maker who is trying to identify an optimal group of agents in a framework in which agents interact and the attained benefit can be modeled by means of a transferable utility game. As an illustrative example we analyze the problem of identifying the set of key agents in a terrorist network. 
Keywords:  Game Theory , TU games , Shapley value , Group values 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:cte:wsrepe:ws133430&r=mic 
By:  Cardaliaguet, Pierre; Rainer, Catherine; Rosenberg, Dinah; Vieille , Nicolas 
Abstract:  We study a twoplayer, zerosum, stochastic game with incomplete information on one side in which the players are allowed to play more and more frequently. The informed player observes the realization of a Markov chain on which the payoffs depend, while the noninformed player only observes his opponent's actions. We show the existence of a limit value as the time span between two consecutive stages vanishes; this value is characterized through an auxiliary optimization problem and as the solution of an HamiltonJacobi equation. 
Keywords:  stochastic; zero sum; Markov chain; HamiltonJacobi equation; incomplete information 
JEL:  C00 
Date:  2013–10–24 
URL:  http://d.repec.org/n?u=RePEc:ebg:heccah:1007&r=mic 
By:  Matias Nunez (THEMA  Théorie économique, modélisation et applications  CNRS : UMR8184  Université de Cergy Pontoise) 
Abstract:  We show that Approval voting need not trigger sincere behavior in equilibrium of Poisson voting games and hence might lead a strategic voter to skip a candidate preferred to his worst preferred approved candidate. We identify two main rationales for these violations of sincerity. First, if a candidate has no votes, a voter might skip him. Notwithstanding, we provide sufficient conditions on the voters' preference intensities to remove this sort of insincerity. On the contrary, if the candidate gets a positive share of the votes, a voter might skip him solely on the basis of his ordinal preferences. This second type of insincerity is a consequence of the correlation of the candidates' scores. The incentives for sincerity of rank scoring rules are also discussed. 
Keywords:  Sincerity Approval voting Poisson games 
Date:  2013–09 
URL:  http://d.repec.org/n?u=RePEc:hal:journl:hal00917101&r=mic 
By:  Angel HernandoVeciana; Fabio Michelucci 
Abstract:  We show that open ascending auctions are prone to inecient rushes, i.e. all bidders quitting at the same price, in market environments such as privatizations, takeover contests, and procurement auctions. Rushes arise when an incumbent with better information about a common value component of the asset for sale quits, and his exit reveals negative information. Rushes can be avoided, and expected social surplus maximized, by reducing the disclosure of information with the use of a multistage auction. Thus, our results point out to an important limitation of market mechanisms that provide immediate information disclosure to all agents in a market. 
Keywords:  efficiency; auctions; mechanism design; two stage mechanisms; 
JEL:  D44 D82 
Date:  2013–08 
URL:  http://d.repec.org/n?u=RePEc:cer:papers:wp489&r=mic 
By:  Philip Jung (Bonn University); Moritz Kuhn (University of Bonn) 
Abstract:  We prove existence, monotonicity and differentiability of firm profits and provide firstorder conditions that characterize the properties of the optimal contract. We demonstrate how the shape of the contract depends on the persistence and variance of the productivity process, on worker and firm risk, and on nonpecuniary utility components. 
Date:  2013 
URL:  http://d.repec.org/n?u=RePEc:red:sed013:556&r=mic 
By:  Robert Becker (Department of Economics, Indiana University  Indiana University); Stefano Bosi (EPEE  Centre d'Etudes des Politiques Economiques  Université d'EvryVal d'Essonne); Cuong Le Van (Ipag Business School  Ipag Business School, VCREME  VanXuan Center of Research in Economics, Management and Environment  VanXuan Center of Research in Economics, Management and Environment); Thomas Seegmuller (AMSE  AixMarseille School of Economics  AixMarseille Univ.  Centre national de la recherche scientifique (CNRS)  École des Hautes Études en Sciences Sociales [EHESS]  Ecole Centrale Marseille (ECM)) 
Abstract:  We study the existence of equilibrium and rational bubbles in a Ramsey model with heterogeneous agents, borrowing constraints and endogenous labor. Applying a nonstandard fixedpoint theorem by Gale and MasColell's (1975), we prove the existence of equilibrium in a timetruncated bounded economy. A common argument shows this solution to be an equilibrium for any unbounded economy with the same fundamentals. Taking the limit of a sequence of truncated economies, we eventually obtain the existence of equilibrium in the Ramsey model. In the second part of the paper, we address the issue of rational bubbles and we prove that they never occur in a productive economy à la Ramsey. 
Keywords:  existence of equilibrium; bubbles; Ramsey model; heterogeneous agents; borrowing constraint; endogenous labor 
Date:  2013–11 
URL:  http://d.repec.org/n?u=RePEc:hal:wpaper:halshs00793530&r=mic 