nep-mic New Economics Papers
on Microeconomics
Issue of 2014‒07‒05
six papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Contests with Ambiguity By David Kelsey; Tigran Melkonyan
  2. The Structure of Variational Preferences By S. Cerreia-Vioglio; F. Maccheroni; M. Marinacci; A. Rustichini
  3. "Mechanism Design with Bounded Depth of Reasoning and Small Modeling Mistakes" By Geoffroy de Clippel; Rene Saran; Roberto Serrano
  4. Scoring auctions with non-quasilinear scoring rules By Krishnendu Ghosh Dastidar
  5. A strategic approach for the discounted Shapley values By Emilio Calvo; Esther Gutiérrez-López
  6. Local and Consistent Centrality Measures in Networks By Zenou, Yves; Dequiedt, Vianney

  1. By: David Kelsey (Department of Economics, University of Exeter); Tigran Melkonyan (University of Warwick)
    Abstract: The paper examines the e¤ect of ambiguity on contests where multiple parties expend resources to win a prize. We develop a model where contenders perceive ambiguity about their opponents’ strategies and determine how perceptions of ambiguity and attitudes to ambiguity affect equilibrium choice. The paper also investigates how equilibrium under ambiguity is related to behavior where contenders have expected utility preferences. Our model can explain experimental results such as overbidding and overspreading relative to Nash predictions.
    Keywords: Ambiguity, Contests, Choquet expected utility, neo-additive preferences.
    JEL: D81
    Date: 2014
  2. By: S. Cerreia-Vioglio; F. Maccheroni; M. Marinacci; A. Rustichini
    Abstract: Maccheroni, Marinacci, and Rustichini [17], in an Anscombe-Aumann framework, axiomatically characterize preferences that are represented by the variational utility functional V (f) = min p2 Z u (f) dp + c (p) 8f 2 F; where u is a utility function on outcomes and c is an index of uncertainty aversion. In this paper, for a given variational preference, we study the class C of functions c that represent V . Inter alia, we show that this set is fully characterized by a minimal and a maximal element, c? and d?. The function c?, also identi?ed by Maccheroni, Marinacci, and Rustichini [17], fully characterizes the decision maker's attitude toward uncertainty, while the novel function d? characterizes the uncertainty perceived by the decision maker.
    Date: 2014
  3. By: Geoffroy de Clippel; Rene Saran; Roberto Serrano
    Abstract: We consider mechanism design in contexts in which agents exhibit bounded depth of reasoning (level k) instead of rational expectations. We use simple direct mechanisms, in which agents report only first-order beliefs. While level 0 agents are assumed to be truth tellers, level k agents best-respond to their belief that other agents have at most k - 1 levels of reasoning. We find that incentive compatibility is necessary for implementation in this framework, while its strict version alone is sufficient. Adding continuity to both directions, the same results are obtained for continuous implementation with respect to small modeling mistakes. We present examples to illustrate the permissiveness of our findings in contrast to earlier related results under the assumption of rational expectations
    Keywords: mechanism design; bounded rationality; level k reasoning; small modeling mistakes; incentive compatibility; continuity
    Date: 2014
  4. By: Krishnendu Ghosh Dastidar
    Abstract: In this paper we analyse scoring auctions with general non-quasilinear scoring rules. We assume that cost function of each firm is additively separable in quality and type. In sharp contrast to the recent results in the literature we show the following. (i) Equilibria in scoring auctions can be computed without any endogeneity problems and we get explicit solutions. (ii) We provide a complete characterisation of such equilibria and compare quality, price and expected scores across first-score and second-score auctions. (iii) We show that such properties and rankings depend on the curvature properties of the scoring rule and the distribution function of types.
    Date: 2014–06
  5. By: Emilio Calvo (Universidad de Valencia. ERI-CES); Esther Gutiérrez-López (Departamento de Economía Aplicada IV. Universidad del País Vasco U.P.V./E.H.U.)
    Abstract: The family of discounted Shapley values is analyzed for cooperative games in coalitional form. We consider the bargaining protocol of the alternating random proposer introduced in Hart and Mas-Colell (1996). We demostrate that the discounted Shapley values arise as the expected payoffs associated with the bargaining equilibria when a time discount factor is considered. In a second model, we replace the time cost with the probability that the game ends without agreements. This model also implements these values in transferable utility games, moreover, the model implements the α-consistent values in the nontransferable utility setting.
    Keywords: Discounted Shapley value; egalitarianism; cooperative TU-games JEL
    JEL: C71
    Date: 2014–06
  6. By: Zenou, Yves (Dept. of Economics, Stockholm University); Dequiedt, Vianney (Université d’Auvergne)
    Abstract: The centrality of an agent in a network has been shown to be crucial in explaining different behaviors and outcomes. In this paper, we propose an axiomatic approach to characterize a class of centrality measures for which the centrality of an agent is recursively related to the centralities of the agents she is connected to. This includes the Katz-Bonacich and the eigenvector centrality. The core of our argument hinges on the power of the consistency axiom, which relates the properties of the measure for a given network to its properties for a reduced problem. In our case, the reduced problem only keeps track of local and parsimonious information. Our axiomatic characterization highlights the conceptual similarities among this class of measures.
    Keywords: Consistency; centrality measures; networks; axiomatic approach
    JEL: C70 D85
    Date: 2014–05–21

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