nep-mic New Economics Papers
on All new papers
Issue of 2014‒09‒08
ten papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Aggregation of coherent experts opinion: a tractable extreme-outcomes consistent rule By Marcello Basili; Alain Chateauneuf
  2. The equivalence between two-person symmetric games and decision problems By Ismail M.S.
  3. Delayed Verification Mechanism for Dynamic Implementation By Olga Gorelkina
  4. Learning Tastes Through Social Interaction By Alice Hsiaw
  5. Get Rid of Unanimity: The Superiority of Majority Rule with Veto Power By Laurent Bouton; Aniol Llorente-Saguer; Fr�d�ric Malherbe
  6. Separating equilibrium in quasi-linear signaling games By Lee J.; Müller R.J.; Vermeulen A.J.
  7. Precluding Collusion in the Vickrey Auction By Olga Gorelkina
  8. Sequential lending with dynamic joint liability in micro-finance By Shyamal Chowdhury; Prabal Roy Chowdhury; Kunal Sengupta
  9. Macroeconomies as Constructively Rational Games By Sinitskaya, Ekaterina; Tesfatsion, Leigh
  10. Pro-competitive Rationing in Multi-unit Auctions By Holmberg, Pär

  1. By: Marcello Basili; Alain Chateauneuf
    Abstract: The paper defines a consensus distribution with respect to experts’ opinions by a multiple quantile utility model. The paper points out that the Steiner Point is the representative consensus probability. The new rule of experts’ opinions aggregation, that can be evaluated by the Shapley value in a simple way, is prudential and coherent.
    Keywords: Ambiguity, Aggregation, Steiner Point, Multiple Priors, Quantiles.
    Date: 2014–08–29
  2. By: Ismail M.S. (GSBE)
    Abstract: We illustrate an equivalence between the class of two-person symmetric games and the class of decision problems with a complete preference relation. Moreover, we show that a strategy is an optimal threat strategy Nash, 1953 in a two-person symmetric game if and only if it is a maximal element in its equivalent decision problem. In particular, a Nash equilibrium in a two-person symmetric zero-sum game and a pair of maximal elements in its equivalent decision problem coincide. In addition, we show that a two-person symmetric zero-sum game can be extended to its von Neumann-Morgenstern vN-M mixed extension if and only if the extended decision problem satisfies the SSB utility Fishburn, 1982 axioms. Furthermore, we demonstrate that a decision problem satisfies vN-M utility if and only if its equivalent symmetric game is a potential game. Accordingly, we provide a formula for the number of linearly independent equations in order for the independence axiom to be satisfied which grows quadratically as the number of alternatives increase.
    Keywords: Noncooperative Games;
    JEL: C72
    Date: 2014
  3. By: Olga Gorelkina (Max Planck Institute for Research on Collective Goods)
    Abstract: This paper introduces a virtually efficient mechanism in a setting with sequentially arriving agents who hold informative signals about future types. To reveal the information the principal organises betting on future type reports. An agent’s betting reward depends on how accurately the prior updated on his report predicts the type reports observed in the following period. The mechanism satisfies participation constraints and generates no deficit after any reported history.
    Keywords: Dynamic mechanisms, scoring rule, Bayesian learning, conjugate priors
    JEL: D71 D82 D84 D61
    Date: 2014–08
  4. By: Alice Hsiaw (Department of Economics and Accounting, College of the Holy Cross)
    Abstract: This paper offers an information-based model of social interaction, and analyzes optimal investment and pricing of services that facilitate interaction in a duopoly. Agents have uncertainty over their preferences but are aware that they are correlated with others’, so there exists an incentive to communicate with others in the population. When a firm’s good can be bundled with a coordination mechanism for its consumers, its value is endogenously determined due to a consumption externality. Although this mechanism increases total surplus, it is underprovided and consumer surplus decreases.
    Date: 2014–08
  5. By: Laurent Bouton (Georgetown University and NBER); Aniol Llorente-Saguer (Queen Mary University of London); Fr�d�ric Malherbe (London Business School)
    Abstract: A group of agents wants to reform the status quo if and only if this is Pareto improving. Agents have private information and may have common or private objectives, which creates a tension between information aggregation and minority protection. We analyze a simple voting system - majority rule with veto power (Veto) - that essentially resolves this tension, for it combines the advantageous properties of both majority and unanimity rules. We argue that our results shed new light on the evolution of voting rules in the EU institutions and could help to inform debates about policy reforms in cases such as juries in the US.
    Keywords: Unanimity rule, Veto power, Information aggregation, Pareto criterion, Constructive abstention
    JEL: D70
    Date: 2014–08
  6. By: Lee J.; Müller R.J.; Vermeulen A.J. (GSBE)
    Abstract: Using a network approach we provide a characterization of a separating equilibrium for standard signaling games where the senders payoff function is quasi-linear. Given a strategy of the sender, we construct a network where the node set and the length between two nodes are the set of the senders type and the difference of signaling costs, respectively. Construction of a separating equilibrium is then equivalent to constructing the length between two nodes in the network under the condition that the response of the receiver is a node potential.We show that, when the set of the senders type is finite, the collection of separating signaling functions forms a lower bounded lattice. We describe an algorithm to compute separating equilibrium strategies. When the set of the senders type is a real interval, shortest path lengths are antisymmetric and a node potential is unique up to a constant. A strategy of the sender in a separating equilibrium is characterized by some differential equation with a unique solution.Our results can be readily applied to a broad range of economic situations, such as the standard job market signaling model of Spence a model not captured by earlier papers and principal-agent models with production.
    Keywords: Noncooperative Games; Asymmetric and Private Information; Mechanism Design;
    JEL: C72 D82
    Date: 2014
  7. By: Olga Gorelkina (Max Planck Institute for Research on Collective Goods)
    Abstract: This paper studies collusion in one-shot auctions, where a buyer can bribe his competitors into lowering their bids. We modify the single-unit Vickrey auction to incite deviations from the designated-winner scenario and thus undermine collusion. The construction of mechanism does not require the knowledge of colluders’ identities or distributions of valuations, in which sense it is entirely detail-free.
    Keywords: Bidder collusion, detail-free auctions, Vickrey auction
    JEL: D82 C72 D44
    Date: 2014–08
  8. By: Shyamal Chowdhury; Prabal Roy Chowdhury; Kunal Sengupta
    Abstract: This paper develops a theory of sequential lending in groups in micro-finance that centers on the notion of dynamic incentives, in particular the simple idea that default incentives should be relatively uniformly distributed across time. In a framework that allows project returns to accrue over time (rather than at a single point), as well as strategic default, we show that sequential lending can help resolve problems arising out of coordinated default, thus improving project efficiency vis-a-vis individual lending. Inter alia, we also provide a justification for the use of frequent repayment schemes, as well as demonstrate that, depending on how it is manifested, social capital has implications for project efficiency and borrower default. We then examine the optimal choices for the MFI, demonstrating that the MFI opts for higher project sizes under group lending with limited collusion, and also provide a plausible explanation of the transition from group to individual lending.
    Keywords: collusion; coordinated default; dynamic incentives; group-lending; micro- finance; sequential financing; social capital; social sanctions
    Date: 2014–08
  9. By: Sinitskaya, Ekaterina; Tesfatsion, Leigh
    Abstract: Real-world decision-makers are forced to be locally constructive, in the sense that their actions are constrained by the interaction networks, limited information, and computational capabilities at their disposal.� This study poses the following question:� Suppose utility-seeking consumers and profit-seeking firms in an otherwise standard dynamic macroeconomic model are required to be locally constructive decision-makers, unaided by the external imposition of global coordination conditions.� What combinations of locally constructive decision rules result in good macroeconomic performance relative to a social planner benchmark model, and what are the game-theoretic properties of these decision-rule combinations?� We begin our investigation of this question by specifying locally constructive decision rules for the consumers and firms that range from simple reinforcement learning to sophisticated adaptive dynamic programming algorithms.� We then use computational experiments to explore macroeconomic performance under alternative decision-rule combinations.� A key finding is that simpler rules can outperform more sophisticated rules, but that forward-looking behavior coupled with a relatively long memory permitting past observations to inform current decision-making is critical for good performance.
    Keywords: Learning; Macroeconomics; agent-based; game; stochastic optimization
    JEL: B4 C6 C7 E2
    Date: 2014–08–22
  10. By: Holmberg, Pär (Research Institute of Industrial Economics (IFN))
    Abstract: In multi-unit auctions, such as auctions of commodities and securities, and financial exchanges, it is necessary to specify rationing rules to break ties between multiple marginal bids. The standard approach in the literature and in practice is to ration marginal bids proportionally. This paper shows how bidding can be made more competitive if the rationing rule instead gives increasing priority to bidders with a small volume of marginal bids at clearing prices closer to the reservation price. In comparison to standard rationing, such a rule can have almost the same effect on the competitiveness of bids as a doubling of the number of bidders.
    Keywords: C72; D44; D45
    JEL: C72 D44 D45
    Date: 2014–08–22

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