nep-mic New Economics Papers
on Microeconomics
Issue of 2014‒02‒21
ten papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Competing Mechanisms Communication under Exclusivity Clauses By Andrea Attar; Eloisa Campioni; Gwenaël Piaser
  2. Incentive compatible mechanisms in multiprincipal multiagent games By Gwenaël Piaser
  3. Signaling quality in vertical relationships By Bontems, Philippe; Mahenc, Philippe
  4. Pareto optima and equilibria when preferences are incompletely known By G. Carlier; R.-A. Dana
  5. Harsanyi's aggregation theorem with incomplete preferences By Eric Danan; Thibault Gajdos; Jean-Marc Tallon
  6. Learning a Population Distribution By Seung Han Yoo
  7. Serial Dictatorship with Infinitely Many Agents By Shino Takayama; Akira Yokotani
  8. Relative profit maximization and Bertrand equilibrium with convex cost functions By Satoh, Atsuhiro; Tanaka, Yasuhito
  9. Matching Markets with N-Dimensional Preferences By Flanders, Sam
  10. Arranged marriage, education and dowry: A Contract-theoretic perspective By Soumyanetra Munshi

  1. By: Andrea Attar; Eloisa Campioni; Gwenaël Piaser
    Abstract: In the present note, we show that a weak restriction on out of equilibrium beliefs allows to extend the Revelation Principle to exclusive agency games, even if we consider mixed strategy equilibria. Next, we argue that this result does not extend to games with several agents, even if we restrict the analysis to pure strategy equilibria.
    Keywords: Competing Mechanisms, Exclusive Contracts, Incomplete Information,Participation decision
    JEL: D82
    Date: 2014–01–06
  2. By: Gwenaël Piaser
    Abstract: It is argued that the revelation principle in multi-principal multi-agent games cannot be generalized. In other words, one cannot restrict attention to incentive compatible mechanisms, even if the concept of information is enlarged.
    Keywords: Direct Mechanisms, Incentive compatible, Multiprincipals.
    JEL: D82
    Date: 2014–01–06
  3. By: Bontems, Philippe; Mahenc, Philippe
    Abstract: This paper addresses the issue of price signaling in a model of vertical relationship between a manufacturer and a retailer who share the same information about quality, unlike consumers who do not observe it a priori. We show that delegating the price setting task to a retailer and controlling it through a vertical contract (two-part tari¤) helps drastically reduce the number of price signaling equilibria available to the retailer. The outcome of a unique price charged to consumers obtains without invoking the consumer sophistication usually required by selection criterions. The vertical contract turns to be the most e¢ cient way for the vertical chain to tie its hands on a unique ?nal price. This price may disclose or not information to consumers depending on their initial optimism about quality. We prove that there also exists circumstances where consumers prefer ex ante not to learn the true quality through price.
    Keywords: quality signalling, vertical relationship, information disclosure.
    JEL: D82 L12 L15
    Date: 2014–01
  4. By: G. Carlier; R.-A. Dana
    Abstract: An exchange economy in which agents have convex incomplete preferences defined by families of concave utility functions is consid- ered. Sufficient conditions for the set of efficient allocations and equi- libria to coincide with the set of efficient allocations and equilibria that result when each agent has a utility in her family are provided. Welfare theorems in an incomplete preferences framework therefore hold under these conditions and efficient allocations and equilibria are characterized by first order conditions.
    Keywords: incomplete preferences, efficient allocations and equilibria.
    Date: 2014–01–06
  5. By: Eric Danan (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise); Thibault Gajdos (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR7316); Jean-Marc Tallon (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We provide a generalization of Harsanyi (1955)'s aggregation theorem to the case of incomplete preferences at the individual and social level. Individuals and society have possibly incomplete expected utility preferences that are represented by sets of expected utility functions. Under Pareto indifference, social preferences are represented through a set of aggregation rules that are utilitarian in a generalized sense. Strengthening Pareto indifference to Pareto preference provides a refinement of the representation.
    Keywords: Incomplete preferences; aggregation; expected multi-utility; utilitarianism
    Date: 2014–01
  6. By: Seung Han Yoo (Department of Economics, Korea University, Seoul, Republic of Korea)
    Abstract: This paper introduces a dynamic Bayesian game with an unknown population distribution. Players do not know the true population distribution and assess it based on their private observations using Bayes' rule. First, we show the existence and characterization of an equilibrium in which each player's strategy is a function not only of the player's type but also of experience. Second, we show that each player's initial belief about the population distribution converges almost surely to a "correct" belief.
    Keywords: Bayesian games, Dynamic games, Bayesian learning
    JEL: C72 C73 D83
    Date: 2014
  7. By: Shino Takayama (School of Economics, The University of Queensland); Akira Yokotani (School of Economics, The University of Queensland)
    Abstract: This paper studies social choice correspondences assigning a set of choices to each pair consisting of a nonempty subset of the set of alternatives and a weak preference profile, which is called an extended social choice correspondence (ESCC). The ESCC satisfies unanimity if, when there is a weakly Pareto dominant alternative, the ESCC selects this alternative. Stability requires that the ESCC is immune to manipulation through withdrawal of some alternatives. Independence implies that the ESCC selects the same outcome from a subset of the set of alternatives for two preference profiles that are the same on this set. We characterize the ESCC satisfying the three axioms, when the set of alternatives is finite but includes more than three alternatives, and the set of voters can have any cardinality. Our main theorem establishes that the ESCC satisfying the three axioms is a serial dictatorship ala Eraslan and McLennan (2004). Our second theorem shows that a serial dictatorship includes ‘invisible serial dictators’ ala Kirman and Sondermann (1972).
    Date: 2014–02–17
  8. By: Satoh, Atsuhiro; Tanaka, Yasuhito
    Abstract: The authors study pure strategy Bertrand equilibria in a duopoly in which two firms produce a homogeneous good with convex cost functions, and they seek to maximize the weighted sum of their absolute and relative profits. They show that there exists a range of the equilibrium price in duopolistic equilibria. This range of the equilibrium price is narrower and lower than the range of the equilibrium price in duopolistic equilibria under pure absolute profit maximization, and the larger the weight on the relative profit, the narrower and lower the range of the equilibrium price. In this sense relative profit maximization is more aggressive than absolute profit maximization. --
    Keywords: Bertrand equilibrium,convex cost function,relative profit maximization
    JEL: D43 L13
    Date: 2014
  9. By: Flanders, Sam
    Abstract: Abstract. This paper analyzes matching markets where agent types are n-vectors of characteristics--i.e. points in R^n --and agents prefer matches that are closer to them according to a distance metric on this set (horizontal preferences). First, given a few assumptions, I show that in the Gale-Shapley stable matching in this environment, agents match to a linear function of their own type. I show that restrictions on preferences are not as onerous as they may seem, as a rich variety of preference structures can be mapped into the horizontal framework. With these results in hand, I develop a highly stylized model of an online dating platform that helps consumers find and contact potential matches, where consumers have preferences over many characteristics (e.g. height, income, age, etc.) and have the option to pay to join the platform or look for a match off the platform. I characterize the firm's optimal pricing strategy and the concomitant market outcomes for consumers. Finally, I address an unanswered question in the matching literature--can multidimensional preferences be aggregated (e.g. into a univariate measure of quality) without changing the salient features of the model? I find that, in the dating platform model I introduced, consumer preferences can be aggregated without any change to firm strategy or market outcomes, providing some justification for the univariate-type matching models prevalent in the theoretical matching literature.
    Keywords: Matching, Online Dating, Marriage, Family Economics, Mathematical Economics
    JEL: C78 D01 D10 L86
    Date: 2014–02
  10. By: Soumyanetra Munshi (Indira Gandhi Institute of Development Research)
    Abstract: This paper propounds a contract-theoretic model where dowry acts as a screening device to differentiate grooms of varying qualities. In 'arranged' marriage settings that are characterized by incomplete information in the sense that the true quality of the groom remains unobservable to the bride, and in the presence of observable traits like education that are easier for the better quality groom to achieve, education-dowry contracts can potentially serve as a screening instrument. Moreover increasing dowry levels can be explained through increased educational attainments brought about by modernization and government policies. The paper also discusses historical and narrative evidences in support of its main hypotheses.
    Keywords: 'Arranged' marriage, 'arranged' marriage and dowry, dowry inflation, dowry and education, dowry as a screening device, dowry as a signal of the quality of the groom
    JEL: J12 J16 D10
    Date: 2014–01

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