nep-mic New Economics Papers
on Microeconomics
Issue of 2015‒08‒13
fifteen papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. The symmetric equilibria of symmetric voter participation games with complete information By Nöldeke, Georg; Peña, Jorge
  2. A mechanism to pick the deserving winner By Moskalenko, Anna
  3. Differential Games with (A)symmetric Players and Heterogeneous Strategies By Benteng Zou
  4. Target-based solutions for Nash bargaining By Lorenzo Bastianello; Marco LiCalzi
  5. Inclusive versus Exclusive Markets: Search Frictions and Competing Mechanisms By Xiaoming Cai; Pieter Gautier; Ronald Wolthoff
  6. On the Uniqueness of Dynamic Groves Mechanisms By Kiho Yoon
  7. Rational Inattention Dynamics: Inertia and Delay in Decision-Making By Filip Matejka; Colin Stewart; Jakub Steiner
  8. Continuous Euclidean Embeddings of Incomplete Preferences By Stan Palasek
  9. Mate Choice Mechanism for Solving a Quasi-Dilemma By Tatsuyoshi SAIJO; Junyi SHEN
  10. Contracts as a barrier to entry when buyers are non-pivotal By Özlem Bedre-Defolie; Gary Biglaiser
  11. A Comprehensive Approach to Revealed Preference Theory By John Quah; Hiroki Nishimura; Efe A. Ok
  12. Some Notes and Comments on the Efficient use of Information in Repeated Games with Poisson Signals By Osório, António (António Miguel)
  13. Crowdfunding, demand uncertainty, and moral hazard - a mechanism design approach By Roland Strausz; ; ;
  14. On the (in)compatibility of rationality, monotonicity and consistency for cooperative games By Calleja, Pere; Llerena Garrés, Francesc
  15. Transaction Costs and Institutions: Investments in Exchange By Charles Nolan; Alex Trew

  1. By: Nöldeke, Georg; Peña, Jorge
    Abstract: We characterize the symmetric Nash equilibria of the symmetric voter participation game with complete information introduced by Palfrey and Rosenthal (1983). Our results confirm their conjecture on the existence, multiplicity, and comparative statics of such equilibria and yield more precise information on how changes in team size affect the location of equilibria.
    Keywords: costly voting; mixed strategy equilibrium; participation games; polynomials in Bernstein form
    JEL: C72 D72
    Date: 2015–07
  2. By: Moskalenko, Anna
    Abstract: A group of individuals is choosing an individual (the winner) among themselves, when the identity of the deserving winner is a common knowledge among individuals. A simple mechanism of voting by veto is proposed as an alternative to the mechanism studied by Amorós (2011). Like Amorós’(2011), the suggested mechanism implements the socially desirable outcome (the deserving winner is chosen) in subgame perfect equilibria. Keywords: Implementation, mechanism design, subgame perfect equilibrium, individuals choosing among themselves, voting by veto. JEL classification: C72, D71, D78
    Keywords: Jocs no-cooperatius (Matemàtica), Elecció social, 33 - Economia,
    Date: 2015
  3. By: Benteng Zou (CREA, Université de Luxembourg)
    Abstract: One family of heterogeneous strategies in differential games with (a)symmetric players is developed in which one player adopts an anticipating open-loop strategy and the other adopts a standard Markovian strategy. Via conjecturing principle, the anticipating open-loop strategic player plans her strategy based on the possible updating the rival player may take. These asymmetric strategies frame nondegenerate Markovian Nash Equilibrium, which could be subgame perfect for autonomous system with infinite time horizon. Except the stationary path, this kind of strategy makes the study of short-run trajectory possible, which usually are not subgame perfect. However, the short-run non-perfection provides very important policy suggestions. Differential game, Heterogeneous strategy, subgame perfect Markovian Nash Equilibrium, anticipating open-loop strategy
    JEL: C73 C72
    Date: 2015
  4. By: Lorenzo Bastianello (EDE-EM, Universite Paris 1-Pantheon-Sorbonne); Marco LiCalzi (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: We revisit the Nash model for two-person bargaining. A mediator knows agents' ordinal preferences over feasible proposals, but has incomplete information about their acceptance thresholds. We provide a behavioural characterisation under which the mediator recommends a proposal that maximises the probability that bargainers strike an agreement. Some major solutions are recovered as special cases; in particular, we offer a straightforward interpretation for the product operator underlying the Nash solution.
    Keywords: cooperative bargaining, target-based preferences, Nash solution, egalitarian and utilitarian solutions, mediation, copulas.
    JEL: C78 D82 D74
    Date: 2015–06
  5. By: Xiaoming Cai; Pieter Gautier; Ronald Wolthoff
    Abstract: In a market in which sellers compete for heterogeneous buyers by posting mechanisms, we analyze how the properties of the meeting technology affect the allocation of buyers to sellers. We show that exclusive markets (i.e. a separate submarket for each type of buyer) are the efficient outcome if and only if meetings are bilateral. In contrast, an inclusive market (i.e. a single market in which all buyer types pool) is optimal if and only if the meeting technology satisfies a novel condition, which we call "love for variety." Both outcomes can be decentralized by sellers posting auctions combined with a fee that is paid by (or to) all buyers with whom the seller meets. Finally, we compare love for variety to two other properties of meeting technologies, invariance and non-rivalry, and explain the differences.
    Keywords: search frictions, matching function, meeting technology, competing mechanisms, heterogeneity
    JEL: C78 D44 D83
    Date: 2015–08–04
  6. By: Kiho Yoon (Department of Economics, Korea University, Seoul, Republic of Korea)
    Abstract: This paper defines the class of dynamic Groves mechanisms, and shows that (i) a dynamic Groves mechanism is outcome efficient and periodic ex-post incentive compatible, and (ii) any dynamic direct mechanism which is outcome efficient and periodic ex-post incentive compatible is a dynamic Groves mechanism when the domain of valuations is sufficiently rich.
    Keywords: Groves mechanism, dynamic mechanism design, ex-post incentive compatibility, outcome efficiency
    JEL: C73 D82
    Date: 2015
  7. By: Filip Matejka (CERGE-EI); Colin Stewart (University of Toronto); Jakub Steiner (Cerge-ei)
    Abstract: We solve a general class of dynamic rational-inattention problems in which an agent repeatedly acquires costly information about an evolving state and selects actions. The solution resembles the choice rule in a dynamic logit model, but it is biased towards an optimal default rule that does not depend on the realized state. We apply the general solution to the study of (i) the sunk-cost fallacy; (ii) inertia in actions leading to lagged adjustments to shocks; and (iii) the tradeoff between accuracy and delay in decision-making.
    Date: 2015
  8. By: Stan Palasek
    Abstract: Debreu's classic theorem asserts that when an agent's weak preference ordering is reflexive, transitive, and closed in a suitable topology, it can be represented by a continuous utility function. Of interest in some economic settings is to weaken these conditions by replacing transitivity with negative transitivity. Such preferences have been successfully modeled using multi-utility representations, ie. an order embedding into $\mathbb{R}^n$ rather than simply $\mathbb{R}$. Here we show that the topological conditions for a continuous single utility representation are sufficient to guarantee a continuous multi-utility representation, closing a conjecture of Nishimura & Ok (2015). The impossibility of a multi-utility representation consistent with Pareto improvement is also demonstrated.
    Date: 2015–08
  9. By: Tatsuyoshi SAIJO (Research Center for Social Design Engineering, Kochi University of Technology); Junyi SHEN (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)
    Abstract: Saijo, Okano, and Yamakawa (2014) showed that the mate choice mechanism for a symmetric prisoner's dilemma (PD) game implements cooperation in backward elimination of weakly dominated strategies (BEWDS), and it attained almost full cooperation in their experiment. First, this study shows that the mechanism works well in the class of quasi-dilemma (QD) games such as asymmetric PD games and coordination games. Second, the class of BEWDS- implementable games is exactly the same as the class of QD games. Third, the mechanism cannot implement cooperation in a subgame perfect equilibrium. Finally, we confirm that the mate choice mechanism works well experimentally for an asymmetric PD game.
  10. By: Özlem Bedre-Defolie (ESMT European School of Management and Technology); Gary Biglaiser (University of North Carolina)
    Abstract: We analyze whether the use of breakup fees by an incumbent might induce an inefficient allocation of consumers and possibly foreclose efficient entry where buyers are non-pivotal (infinitesimal) and have to pay switching costs if they switch from the incumbent to an entrant. When the entrants are competitive, in the unique equilibrium the incumbent induces the efficient outcome, so there is no inefficient foreclosure. When there is a single entrant, the incumbent cannot deter the entry if it is not allowed to use a breakup fee. In the equilibrium of this case there might be too much or too little entry depending on the entrant's cost advantage versus the highest level of switching costs. When the incumbent can use a breakup fee in its long-term contract, in the unique equilibrium the incumbent forecloses the entrant by a sufficiently high breakup fee. This result does not depend on the level of switching costs or the entrant's efficiency advantage. We extend the result to a situation where consumers do not face switching costs, but they get a lower match value from the entrant's product than the incumbent's. In this case the results differ only when there is a single entrant. There are no inter temporal effects without breakup fees and if the incumbent is allowed to use breakup fees, it forecloses the entrant if and only if the entrant's cost advantage is sufficiently low compared to the highest switching cost. All results are robust to allowing the incumbent to offer a spot price.
    Date: 2015–07–20
  11. By: John Quah; Hiroki Nishimura; Efe A. Ok
    Abstract: Richter's theorem and Afriat's theorem are two fundamental results underlying modern revealed preference analysis. In this paper, we provide a version of Richter's theorem that characterizes the rationalizability of a choice data set with a continuous utility function (rather than simply a complete preorder as in the original result) and extend Afriat's theorem so it becomes applicable in choice environments other than the classical setting of consumer demand. Furthermore, while standard treatments give very different proofs for these two results, we introduce a framework within which both results can be formulated and established in tandem. We also demonstrate how our generalized versions of these theorems can be used in empirical studies. In particular, we apply our results to devise tests for rationalizability in the context of choice data over lotteries, contingent consumption, intertemporal consumption, and positions in policy space. Some new results on the revealed preference theory of consumer demand (for instance, on the possibility of deriving utility functions from estimated Engel curves) are also reported.
    Keywords: Revealed Preference, Rational Choice, Afriat's Theorem, Richter's Theorem, Engel Curves.
    JEL: D11 D81
    Date: 2015–07–15
  12. By: Osório, António (António Miguel)
    Abstract: In the present paper we characterize the optimal use of Poisson signals to establish incentives in the "bad" and "good" news models of Abreu et al. [1]. In the former, for small time intervals the signals' quality is high and we observe a "selective" use of information; otherwise there is a "mass" use. In the latter, for small time intervals the signals' quality is low and we observe a "fine" use of information; otherwise there is a "non-selective" use. JEL: C73, D82, D86. KEYWORDS: Repeated Games, Frequent Monitoring, Public Monitoring, Infor- mation Characteristics.
    Keywords: Teoria de jocs, Informació, Teoria de la, Contractes -- Aspectes econòmics, 33 - Economia,
    Date: 2015
  13. By: Roland Strausz; ; ;
    Abstract: Crowdfunding challenges the traditional separation between nance and marketing. It creates economic value by reducing demand uncertainty, which enables a better screening of positive NPV projects. Entrepreneurial moral hazard threatens this eect. Using mechanism design, mechanisms are characterized that induce ecient screening, while preventing moral hazard. \All-ornothing" reward-crowdfunding platforms re ect salient features of these mechanisms. Eciency is sustainable only if expected gross returns exceed twice expected investment costs. Constrained ecient mechanisms exhibit underinvestment. With limited consumer reach, crowdfunders become actual investors. Crowdfunding complements rather than substitutes traditional entrepreneurial nancing, because each nancing mode displays a dierent strength.
    Keywords: Crowdfunding, nance, marketing, demand uncertainty, moral hazard
    JEL: D82 G32 L11 M31
    Date: 2015–07
  14. By: Calleja, Pere; Llerena Garrés, Francesc
    Abstract: On the domain of cooperative transferable utility games, we investigate if there are single valued solutions that reconcile rationality, consistency and monotonicity (with respect to the worth of the grand coalition) properties. This paper collects some impossibility results on the combination of core selection with either complement or projected consistency, and core selection, max consistency and monotonicity. By contrast, possibility results show up when combining individual rationality, projected consistency and monotonicity.
    Keywords: Jocs cooperatius, 33 - Economia,
    Date: 2015
  15. By: Charles Nolan; Alex Trew
    Abstract: This paper proposes a simple model for understanding transaction costs – their composition, size and policy implications. We distinguish between investments in institutions that facilitate exchange and the cost of conducting exchange itself. Institutional quality and market size are determined by the decisions of risk averse agents and conditions are discussed under which the efficient allocation may be decentralized. We highlight a number of differences with models where transaction costs are exogenous, including the implications for taxation and measurement issues
    Keywords: Exchange costs, transaction costs, general equilibrium, institutions.
    JEL: D02 D51 H20 L14
    Date: 2015–03

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