nep-mic New Economics Papers
on Microeconomics
Issue of 2014‒03‒22
six papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Information disclosure in optimal auctions By Juan-José Ganuza; José Penalva
  2. Naiveté and sophistication in dynamic inconsistency By Peeters R.J.A.P.; Méder Z.Z.; Flesch J.
  3. Second-best incentive compatible allocation rules for multiple-type indivisible objects By Anno, Hidekazu; Kurino, Morimitsu
  4. Reputation in Repeated Moral Hazard Games By Atakan, Alp Enver; Ekmekci, Mehmet
  5. Strategic Stability in Poisson Games By Francesco De Sinopoli; Claudia Meroni; Carlos Pimienta
  6. The strategic value of partial vertical integration By Fiocco, Raffaele

  1. By: Juan-José Ganuza; José Penalva
    Abstract: A celebrated result in auction theory is that the optimal reserve price in the standard private value setting does not depend on the number of bidders. We modify the framework by considering that the seller controls the accuracy with which bidders learn their valuations, and show that in such a case, the greater the number of bidders the more restrictive the reserve price. We also show that the auctioneer provides more information when using an optimal auction mechanism than when the object is always sold.
    Keywords: Auctions, Private values, Information disclosure
    JEL: C72 D44 D82 D83
    Date: 2014–03
  2. By: Peeters R.J.A.P.; Méder Z.Z.; Flesch J. (GSBE)
    Abstract: This paper introduces a general framework for dealing with dynamic inconsistency in the context of Markov decision problems. It carefully decouples and examines concepts that are often entwined in the literature it distinguishes between the decision maker and its various temporal agents, and between the beliefs and intentions of the agents. Classical examples of naivet and sophistication are modeled and contrasted based on this new language. We show that naive and sophisticated decision makers can form optimal strategies at each possible history, and provide welfare comparisons for a class of decision problems including procrastination, impulsiveness, underinvestment, binges and indulgence. The creation of a unified formalism to deal with dynamic inconsistency allows for the introduction of a hybrid decision maker, who is naive sometimes, sophisticated at others. Such a hybrid decision maker can be used to model situations where type determination is endogenous. Interestingly, the analysis of hybrid types indicates that self-deception can be optimal.
    Keywords: Game Theory and Bargaining Theory: General; Consumer Economics: Theory; Intertemporal Consumer Choice; Life Cycle Models and Saving;
    JEL: C70 D11 D91
    Date: 2014
  3. By: Anno, Hidekazu; Kurino, Morimitsu
    Abstract: We consider the problem of allocating several types of indivisible goods when preferences are separable and monetary transfers are not allowed. Our finding is that the coordinatewise application of strategy-proof and non-wasteful rules yields a strategy-proof rule with the following efficiency property: no strategy-proof rule Pareto-dominates the rule. Such rules are abundant as they include the coordinate-wise use of the two well-known priority-based rules of the top trading cycles (TTC) and the deferred acceptance (DA). Moreover, our result supports the current practice in Market Design that separately treats each type of market for its design. --
    Keywords: strategy-proofness,second-best incentive compatibility,top trading cycles rules,deferred acceptance rules
    JEL: C78 D71
    Date: 2014
  4. By: Atakan, Alp Enver; Ekmekci, Mehmet
    Abstract: We study an infinitely repeated game where two players with equal discount factors play a simultaneous-move stage game. Player one monitors the stage- game actions of player two imperfectly, while player two monitors the pure stage- game actions of player one perfectly. Player one’s type is private information and he may be a “commitment type,” drawn from a countable set of commitment types, who is locked into playing a particular strategy. Under a full-support assumption on the monitoring structure, we prove a reputation result for repeated moral hazard games: if there is positive probability that player one is a particular type whose commitment payoff is equal to player one’s highest payoff, consistent with the players’ individual rationality, then a patient player one secures this type’s commitment payoff in any Bayes-Nash equilibrium of the repeated game.
    Keywords: Repeated Games, Reputation, Equal Discount Factor, Long-run Players, Imperfect Monitoring, Complicated Types, Finite Automaton
    JEL: C7 C72 C73 D0
    Date: 2014–01–01
  5. By: Francesco De Sinopoli (Department of Economics, University of Verona); Claudia Meroni (Department of Economics, University of Milano-Bicocca); Carlos Pimienta (School of Economics, Australian School of Business, the University of New South Wales)
    Abstract: In Poisson games, an extension of perfect equilibrium based on perturbations of the strategy space does not guarantee that players use admissible actions. This observation suggests that such a class of perturbations is not the correct one. We characterize the right space of perturbations to define perfect equilibrium in Poisson games. Furthermore, we use such a space to define the corresponding strategically stable sets of equilibria. We show that they satisfy existence, admissibility, and robustness against iterated deletion of dominated strategies and inferior replies.
    Keywords: Poisson games, voting, perfect equilibrium, strategic stability, stable sets
    JEL: C63 C70 C72
    Date: 2014–01
  6. By: Fiocco, Raffaele
    Abstract: We investigate the incentive for partial vertical integration, namely, partial ownership agreements between manufacturers and retailers, when the retailers are privately informed about their production costs and engage in differentiated good price competition. Partial vertical integration entails an “information vertical effectâ€: the partial misalignment of pro.t objectives within a partially integrated manufacturer-retailer hierarchy involves costs from asymmetric information that reduce the hierarchy’s profitability. This translates into an opposite “competition horizontal effectâ€: the partially integrated hierarchy commits to a higher retail price than under full integration, which strategically relaxes competition. The equilibrium degree of vertical integration trades o¤ the benefits of softer competition against the informational costs.
    Keywords: asymmetric information; partial vertical integration; product differentiation; vertical mergers; vertical restraints
    JEL: D82 L13 L42
    Date: 2014–03–09

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