nep-mic New Economics Papers
on Microeconomics
Issue of 2015‒09‒26
sixteen papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Optimal Design for Social Learning By Yeon Koo Che; Johannes Horner
  2. Persuasive signalling By Arianna Degan; Ming Li
  3. Preferences under ignorance By Gossner, Olivier; Kuzmics, Christoph
  4. Rubinstein Bargaining with Other-Regarding Preferences By Martin A. Leroch
  5. Information Spillovers in Asset Markets with Correlated Values By Vladimir Asriyan
  6. First Price Auctions with General Information Structures: Implications for Bidding and Revenue By Dirk Bergemann; Benjamin A. Brooks; Stephen Morris
  7. Second order beliefs models of choice under imprecise risk: Nonadditive second order beliefs versus nonlinear second order utility By Raphaël Giraud
  8. The Role of Social Networks in Cultural Assimilation By Verdier, Thierry; Zenou, Yves
  9. Ambiguity, Optimism, and Pessimism in Adverse Selection Models By Raphaël Giraud; Lionel Thomas
  10. On pure-strategy Nash equilibria in price-quantity games By Bos A.M.; Vermeulen A.J.
  11. Specifying Nodes as Sets of Choices By Peter A. Streufert
  12. Dynamic Revenue Maximization: A Continuous Time Approach By Dirk Bergemann; Philipp Strack
  13. Informational Robustness and Solution Concepts By Dirk Bergemann; Stephen Morris
  14. Relational Contracts with Subjective Peer Evaluations By Joyee Deb; Jin Li; Arijit Mukherjee
  15. Information and Market Power By Dirk Bergemann; Tibor Heumann; Stephen Morris
  16. Peer-to-Peer Markets By Liran Einav; Chiara Farronato; Jonathan Levin

  1. By: Yeon Koo Che; Johannes Horner
    Date: 2015–09–21
  2. By: Arianna Degan (Université du Québec à Montréal and CIRPEE); Ming Li (Concordia University and CIREQ)
    Abstract: We present a model of persuasive signalling, where a privately-informed sender selects from a class of signals with different precision to persuade a receiver to take one of two actions, where higher precision is more costly. The sender’s information could be either favourable or unfavourable. The receiver observes both the sender’s choice of signal and a random realization of the signal. We show that all plausible equilibria must involve some pooling and any informative signal must be associated with an optimistic posterior. When the receiver is ex ante pessimistic or indifferent, the only plausible equilibrium is semi-separating, with levels of precision independent of the prior. Finally, we investigate the sender’s optimal persuasion policy–choice of signal before (commitment) or after (discretion) he learns his type. We show that the sender is indifferent between commitment and discretion when the prior is optimistic, prefers discretion to commitment when the prior is sufficiently pessimistic, and could either prefer discretion or commitment when the prior is neutral.
    Keywords: signalling, persuasion, divine equilibrium, optimal information provision.
    JEL: D72 D82
    Date: 2015–08
  3. By: Gossner, Olivier (Center for Mathematical Economics, Bielefeld University); Kuzmics, Christoph (Center for Mathematical Economics, Bielefeld University)
    Abstract: A decision maker (DM) makes choices from dierent sets of alternatives. The DM is initially fully ignorant of the payo associated to each alternative, and learns these payos only after a large number of choices have been made. We show that, in the presence of an outside option once payos are learned, the optimal choice rule from sets of alternatives is one that is as if the DM had strict preferences over all alternatives. Under this model, the DM has preferences for preferences while being ignorant of what preferences are \right".
    Keywords: strict preference, weak axiom of revealed preferences, rationality, consistency
    Date: 2015–09–18
  4. By: Martin A. Leroch (Institute of Political Science, Unit Politics and Economy, Johannes Gutenberg-Universitaet Mainz, Germany)
    Abstract: While classic bargaining theory abstracts from other-regarding motives, bargaining processes often take place among parties who care about each other's payo. In this paper, I analyze how other- regarding preferences aect the outcome, duration, and use of means to harm the other in reference to a Rubinstein bargain- ing game. It is found that agents regarding each other's payo negatively will reach less equal outcomes, take longer to reach this outcome and are more likely to harm each other if they have means available to do so.
    Date: 2015–09–15
  5. By: Vladimir Asriyan (CREi, UPF, and Barcelona GSE)
    Abstract: We study the effect of information spillovers and transparency in a dynamic setting with adverse selection and correlated asset values. A trade (or lack thereof) by one seller can provide information about the quality of other assets in the market. In equilibrium, the information content of this trading behavior is endogenously determined. We show that this endogeneity of information leads to multiple equilibria when the correlation between asset values is sufficiently high. That is, if buyers expect "bad" assets to trade quickly, then a seller with a bad asset has reason to be concerned about negative information being revealed, which induces her to trade quickly. Conversely, if buyers do not expect bad assets to trade quickly, then the seller has less to be concerned about and is more willing to wait. We study the implications of the theory for policies that target market transparency (e.g., TRACE). We show that total welfare is higher when markets are fully transparent than when the market is fully opaque. However, both welfare and trading activity can decrease in the degree of market transparency.
    Date: 2015
  6. By: Dirk Bergemann; Benjamin A. Brooks; Stephen Morris
    Date: 2015–09–21
  7. By: Raphaël Giraud (LED - Laboratoire d'Economie Dionysien - Université Paris VIII - Vincennes Saint-Denis)
    Abstract: This paper discusses models of choice under imprecise objective probabilistic information featuring beliefs about beliefs, i.e., second order beliefs. A new model, called second order dual expected utility, featuring nonadditive second order beliefs , is introduced, axiomatized, and systematically contrasted with the leading alternative model of this kind, i.e., the second order subjective expected utility model (Klibanoff et al. 2005, Nau 2006, Seo 2009) for which, for the sake of comparison , we provide a new axiomatization, dispensing with the complex constructs used in extant axiomatizations. Ambiguity attitude and attitude toward information in general are discussed and characterized.
    Keywords: Imprecise probabilistic information,second order beliefs,nonaddi-tive probabilities,ambiguity aversion,Ellsberg paradox,Choquet integral JEL classification D81
    Date: 2014–09–01
  8. By: Verdier, Thierry (Paris School of Economics); Zenou, Yves (Stockholm University)
    Abstract: We develop a model where, in the first stage, minority individuals have to decide whether or not they want to assimilate to the majority culture while, in the second stage, all individuals (both from the majority and the minority group) embedded in a network have to decide how much effort they exert in some activity (say education). We show that the more central minority agents are in the social network, the more they assimilate to the majority culture. We also show that denser networks tend to favor assimilation so that, for example, it is easier to assimilate in a complete network than in a star-shaped network. Finally, we show that the subgame-perfect equilibrium is not optimal because there is not enough activity and assimilation. We then endogeneize the network and show under which condition a complete or a star network is an equilibrium with assimilation.
    Keywords: assimilation, majority individuals, ethnic minorities, network centrality, network formation
    JEL: D85 J15 Z13
    Date: 2015–09
  9. By: Raphaël Giraud (LED - Laboratoire d'Economie Dionysien - Université Paris VIII - Vincennes Saint-Denis); Lionel Thomas (CRESE - Centre de REcherches sur les Stratégies Economiques - Université de Franche-Comté)
    Abstract: We investigate the effect of ambiguity and ambiguity attitude on the shape and properties of the optimal contract in an adverse selection model with a continuum of types, using the parametric model of ambiguity and ambiguity aversion called the NEO-additive model (Chateauneuf, Eichberger, and Grant, 2007). We show that it necessarily features efficiency and a jump at the top and pooling at the bottom of the distribution. Conditional on the degree of ambiguity, the pooling section may or may not be supplemented by a separating section. As a result, ambiguity adversely affects the principal’s ability to solve the adverse selection problem and therefore the least efficient types benefit from ambiguity with respect to risk. Conversely, ambiguity is detrimental to the most efficient types. This is confirmed in the comparative statics section.
    Keywords: ambiguity,Adverse selection, ambiguity aversion, NEO-additive model, non-expected utility models, behavioral economics.
    Date: 2015–09–14
  10. By: Bos A.M.; Vermeulen A.J. (GSBE)
    Abstract: This paper examines the existence and characteristics of pure-strategy Nash equilibria in oligopoly models in which firms set both prices and quantities. Existence is proved for a broad and natural class of price-quantity games. With differentiated products, the equilibrium outcome is similar to that of a price-only model. With undifferentiated products and limited spillover demand, there are rationing equilibria in which combined production falls short of market demand. Moreover, there might again be an equilibrium reflecting the outcome of a price game. Competition in price and quantity may thus yield Bertrand outcomes under a variety of market conditions.
    Keywords: Microeconomic Policy: Formulation; Implementation; Evaluation; Market Structure, Firm Strategy, and Market Performance: General;
    JEL: D04 L10
    Date: 2015
  11. By: Peter A. Streufert (University of Western Ontario)
    Abstract: Osborne and Rubinstein (1994) specify each node in a game tree as a sequence of actions. It is well-known that such actions can be replaced by choices (i.e. agent-specific actions) without loss of generality. I find that this sequential formulation is redundant in the sense that nodes can be equivalently specified as sets of choices. The only cost of doing so is to rule out absent-mindedness. My analysis encompasses both ordered and unordered information sets and both finite and infinite horizons. (This specification of nodes as sets of choices differs from the literature's specification of nodes as sets of outcomes.)
    Date: 2015
  12. By: Dirk Bergemann; Philipp Strack
    Date: 2015–09–21
  13. By: Dirk Bergemann; Stephen Morris
    Date: 2015–09–21
  14. By: Joyee Deb; Jin Li; Arijit Mukherjee
    Date: 2015–09–21
  15. By: Dirk Bergemann; Tibor Heumann; Stephen Morris
    Date: 2015–09–21
  16. By: Liran Einav (Stanford University and NBER); Chiara Farronato (Harvard Business School); Jonathan Levin (Stanford University and NBER)
    Abstract: Peer-to-peer markets such as eBay, Uber, and Airbnb allow small suppliers to compete with traditional providers of goods or services. We view the primary function of these markets as making it easy for buyers to find sellers and engage in convenient, trustworthy transactions. We discuss elements of market design that make this possible, including search and matching algorithms, pricing, and reputation systems. We then develop a simple model of how these markets enable entry by small or flexible suppliers, and the resulting impact on existing firms. Finally, we consider the regulation of peer-to-peer markets, and the economic arguments for different approaches to licensing and certification, data and employment regulation.

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