
on Microeconomics 
By:  Iossa, Elisabetta; Martimort, David 
Abstract:  We analyze risk allocation and contractual choices when public procurement is plagued with moral hazard, private information on exogenous shocks, and threat of corruption. Complete contracts entail statecontingent clauses that compensate the contractor for shocks unrelated to his own effort. By improving insurance, those contracts reduce the agency cost of moral hazard. When the contractor has private information on revenues shocks, verifying messages on shocks realizations is costly. Incomplete contracts do not specify statecontingent clauses, thereby saving on verifiability costs. This makes incomplete contracts attractive even though they entail greater agency costs. Because of private information on contracting costs, a public official may have discretion to choose whether to procure under a complete or an incomplete contract. When the public official is corrupt, such delegation results in incomplete contracts being chosen too often. Empirical predictions on the use of incomplete contracts and policy implications on the benefits of standardized contracts are discussed. 
Keywords:  corruption; incomplete contracts; moral hazard; principalagentsupervisor model; publicprivate partnerships; risk allocation 
JEL:  D23 D82 K42 L33 
Date:  2015–11 
URL:  http://d.repec.org/n?u=RePEc:cpr:ceprdp:10925&r=mic 
By:  Jakub Kastl (Princeton University); Marco Pagnozzi (Università di Napoli Federico II and CSEF); Salvatore Piccolo (Università Cattolica del Sacro Cuore di Milano and CSEF) 
Abstract:  A monopolistic information provider sells an informative experiment to a large number of perfectly competitive firms. Within each firm, a principal contracts with an exclusive agent who is privately informed about his production cost. Principals decide whether to acquire the experiment, that is informative about the agent’s production cost. While more accurate information reduces agency costs and allows firms to increase production, it also results in a lower market price, which reduces principals’ willingness to pay for information. We show that, even if information is costless for the provider, the optimal experiment is not fully informative when demand is priceinelastic and agents are likely to be inefficient. This result hinges on the assumption that firms are competitive and exacerbates when principals can coordinate visàvis the information provider. In an imperfectly competitive information market, providers may restrict information by not selling the experiment to some of the principals. 
Keywords:  Adverse Selection, Information Acquisition, Experiments, Competitive Markets 
JEL:  D40 D82 D83 L11 
Date:  2015–11–04 
URL:  http://d.repec.org/n?u=RePEc:sef:csefwp:420&r=mic 
By:  Rahul Deb; Colin Stewart 
Abstract:  We introduce a learning framework in which a principal seeks to determine the ability of a strategic agent. The principal assigns a test consisting of a finite sequence of questions or tasks. The test is adaptive: each question that is assigned can depend on the agent's past performance. The probability of success on a question is jointly determined by the agent's privately known ability and an unobserved action that he chooses to maximize the probability of passing the test. We identify a simple monotonicity condition under which the principal always employs the most (statistically) informative question in the optimal adaptive test. Conversely, whenever the condition is violated, we show that there are cases in which the principal strictly prefers to use less informative questions. 
Keywords:  testing, learning, sequential choice of experiments 
JEL:  C70 C72 
Date:  2015–10–30 
URL:  http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa551&r=mic 
By:  Filip Matejka; Guido Tabellini 
Abstract:  This paper studies how voters optimally allocate costly attention in a model of probabilistic voting. The equilibrium solves a modified social planning problem that reflects voters' choice of attention. Voters are more attentive when their stakes are higher, when their cost of information is lower and prior uncertainty is higher. We explore the implications of this in avariety of applications. In equilibrium, extremist voters are more influential and public goods are underprovided. The analysis also yields predictions about the equilibrium pattern of information, and about policy divergence by two opportunistic candidates. Endogenous attention can lead to multiple equilibria, explaining how poor voters in developing countries can be politically empowered by welfare programs. 
Keywords:  electoral competition; limited inattention; 
JEL:  D72 D83 
Date:  2015–11 
URL:  http://d.repec.org/n?u=RePEc:cer:papers:wp552&r=mic 
By:  David K Levine; Andrea Mattozzi 
Date:  2015–11–01 
URL:  http://d.repec.org/n?u=RePEc:cla:levarc:786969000000001234&r=mic 
By:  Mostapha Diss (Université de Lyon, Lyon, F69007, France ; CNRS, GATE Lyon St Etienne,F69130 Ecully, France, Université Jean Monnet, SaintEtienne, F42000, France); Ahmed Doghmi (University of Rabat, Mohammadia School of Engineering, the QSM Laboratory, Avenue Ibn Sina B.P. 765 Agdal, 10100 Rabat, Morocco); Abdelmonaim Tlidi (University of Marrakech, National School of Applied Science  Safi, Route Sidi Bouzid B.P. 63, 46000 Safi, Morocco) 
Abstract:  In this paper we examine the relation between strategyproofness and unanimity in a domain of private good economies with singlepeaked preferences. We prove that, under a mild condition, a social choice function satisfies strategyproofness if and only if it is unanimous. As implication, we show that when the property of citizen sovereignty holds, strategy proofness and Maskin monotonicity become equivalent. We also give applications to implementation literature: We provide a full characterization for dominant strategy implementation, standard Nash implementation, and partially honest Nash implementation and we prove that these theories are equivalent. 
Keywords:  Strategyproofness; Unanimity; Maskin monotonicity; Private good economies; Singlepeaked preferences 
JEL:  C72 D71 
Date:  2015 
URL:  http://d.repec.org/n?u=RePEc:gat:wpaper:1528&r=mic 
By:  Antonin Macé (AixMarseille University (AixMarseille School of Economics), CNRS & EHESS) 
Abstract:  Most studies of the voting literature take place in the arrovian framework, in which voters rank the available alternatives, and where Arrow's impossibility theorem prevails. I consider a different informational basis for social decisions, by allowing individuals to evaluate alternatives rather than to rank them. Voters express their opinion by assigning to each alternative an evaluation from a given set. I focus on additive rules, which follow the utilitarian paradigm. If the evaluations are numbers, the elected alternative is the one with the highest sum of evaluations. I generalize this notion to any set of evaluations, taking into account the possibility of qualitative ones. I provide an axiomatization for each of the two main additive rules: "Range Voting" when the set of evaluations is [0, 1] and "Evaluative Voting" when the set of evaluations is finite. 
Keywords:  Range Voting, Evaluative Voting, utilitarianism, measurement 
JEL:  D63 D70 C02 
Date:  2015–10–29 
URL:  http://d.repec.org/n?u=RePEc:aim:wpaimx:1544&r=mic 
By:  Liisa Laine (Boston University and Dand School of Business and Economics, University of Jyvaskyla); ChingTo Albert Ma (Boston University) 
Abstract:  We study a multistage, qualityprice game between a public firm and a private firm. The market consists of a set of consumers who have different quality valuations. A public firm aims to maximize social surplus, whereas the private firm maximizes profit. In the first stage, both firms simultaneously choose qualities. In the second stage, both firms simultaneously choose prices. There are multiple equilibria. In some, the public firm chooses a low quality, and the private firm chooses a high quality. In others, the opposite is true. We characterize subgame perfect equilibria for general consumer valuation distributions and quality cost functions, and provide conditions for firstbest equilibrium qualities. Various policy implications are drawn. 
Keywords:  pricequality competition, quality, public firm, private firm 
JEL:  D4 L1 L2 L3 
Date:  2015–06 
URL:  http://d.repec.org/n?u=RePEc:bos:wpaper:wp2015006&r=mic 
By:  Mao, Liang 
Abstract:  Two players, $A$ and $B$, bargain to divide a perfectly divisible pie. In a bargaining model with constant discount factors, $\delta_A$ and $\delta_B$, we extend \cite{Rubinstein82}'s alternating offers procedures to more general deterministic procedures so that any player in any period can be the proposer. We show that each bargaining game with a deterministic procedure has a unique subgame perfect equilibrium (SPE) payoff outcome, which is efficient. Conversely, each efficient division of the pie can be supported as an SPE outcome by some procedure if $\delta_A+\delta_B\geq 1$, while almost no division can ever be supported in SPE if $\delta_A+\delta_B < 1$. 
Keywords:  noncooperative bargaining, subgame perfect equilibrium, bargaining procedure 
JEL:  C72 C78 
Date:  2015–09–07 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:67859&r=mic 
By:  Stéphane Zuber (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS, EEPPSE  Ecole d'Économie de Paris  Paris School of Economics) 
Abstract:  This paper studies the extension of Harsanyi's theorem (Harsanyi, 1995) in a framework involving uncertainty. It seeks to extend the aggregation result to a wide class of Monotonic Bernoullian and Archimedean preferences (CerreiaVioglio et al., 2011) that subsumes many models of choice under uncertainty proposed in the literature. An impossibility result is obtained, unless we are in the specific framework where all individuals and the decisionmaker are subjective expected utility maximizers sharing the same beliefs. This implies that nonexpected utility preferences cannot be aggregated consistently. 
Keywords:  Subjective expected utility,Harsanyi's theorem,Pareto principle,Monotonic Bernoullian and Archimedean preferences 
Date:  2015–09 
URL:  http://d.repec.org/n?u=RePEc:hal:cesptp:halshs01224145&r=mic 
By:  Lionel de BOISDEFFRE 
Abstract:  In CornetDe Boisdeffre (J Math Econ 38: 393410, 2002), we extended the classical equilibrium and arbitrage concepts of symmetric information to an asymmetric information model dropping Radner's (Econometrica 47: 655678, 1979) rational expectations' assumption. In CornetDe Boisdeffre (Econ Theory 38: 287293, 2009), we showed how agents could infer enough information, in this model, to preclude arbitrage from financial markets. In De Boisdeffre (Econ Theory 31: 255269, 2007), we extended to that model Cass' (CARESS WP 8409, 1984) classical existence theorem for nominal assets, by showing the existence of equilibrium was characterized by a general noarbitrage condition. We now display the same characteristic property for numeraire assets and, thus, extend GeanakoplosPolemarchakis' (Essays in Honnor of K.J. Arrow, Starr & Starett ed., Cambridge UP Vol. 3, 6596, 1986) classical theorem to the asymmetric information setting. Contrasting with Radner's, these results show that symmetric and asymmetric information economies can be embedded into a common model, where they share similar properties. 
Keywords:  general equilibrium ; asymmetric information ; arbitrage ; existence 
JEL:  D52 
Date:  2015–11 
URL:  http://d.repec.org/n?u=RePEc:tac:wpaper:20152016_5&r=mic 
By:  Boaz Zik 
Abstract:  We consider the problem of implementation in models of independent private values in which the valuation an agent attributes to a particular alternative is a function from a multidimensional Euclidean space to the real line. We first consider implementation by standard mechanisms, that include a decision rule and a profile of personal transfers. We present impossibility results on the implementation of decision rules that assign different outcomes to profiles of signals that result in the same profile of valuations. We then consider implementation by extended mechanisms that include, in addition to a decision rule and a profile of personal transfers, a profile of functions that affect the arguments of the valuation functions. We show that decision rules that assign different outcomes to profiles of signals that result in the same profile of valuations can be implemented by such mechanisms. 
Date:  2015–09 
URL:  http://d.repec.org/n?u=RePEc:huj:dispap:dp689&r=mic 
By:  Orestis Troumpounis; Pau Balart; Subhasish Chowdhury 
Abstract:  We provide a theoretical link between the two most prominent ways of modeling<br/>individual and collective contests as proposed by Tullock (1980) and Nitzan (1991) respectively. By introducing Nitzan's sharing rule as a way of modeling individual contests we obtain a contest success function nesting a standard Tullock contest and a fair lottery. We first provide an equivalence result between the proposed contest and Tulllock's contest for the twoplayer setup. We then employ this nested contest as a way of introducing noise in multiplayer contests when in the Tullock contest a closed form solution for the equilibrium in pure strategies does not exist. We conclude by comparing the proposed contest with the existing ones in the literature. 
Keywords:  Individual contest, Collective contest, Equivalence 
JEL:  C72 D72 D74 
Date:  2015 
URL:  http://d.repec.org/n?u=RePEc:lan:wpaper:98653895&r=mic 
By:  Christophe Courbage (The Geneva Association); Béatrice ReyFournier (GATE Lyon SaintÉtienne  Groupe d'analyse et de théorie économique  ENS Lyon  École normale supérieure  Lyon  UL2  Université Lumière  Lyon 2  UCBL  Université Claude Bernard Lyon 1  Université Jean Monnet  SaintEtienne  PRES Université de Lyon  CNRS) 
Abstract:  This paper investigates the notion of changes in ambiguity over loss probabilities in the smooth ambiguity model developed by Klibanoff, Marinacci and Mukerji (2005). Changes in ambiguity over loss probabilities are expressed through the specific concept of stochastic dominance of order n defined by Ekern (1980). We characterize conditions on the function capturing attitudes towards ambiguity under which an individual always considers one situation to be more ambiguous than another in a model of two states of nature. We propose an intuitive interpretation of the properties of this function in terms of preferences for harms disaggregation over probabilities, also labelled ambiguity apportionment. 
Keywords:  Smooth ambiguity aversion, more ambiguity, ambiguity apportionment, stochastic dominance 
Date:  2015 
URL:  http://d.repec.org/n?u=RePEc:hal:wpaper:halshs01223230&r=mic 
By:  Aloisio Araujo (IMPA  Instituto Nacional de Matemática Pura e Aplicada  Instituto Nacional de matematica pura e aplicada, FGVEPGE  Universidad de Brazil); JeanMarc Bonnisseau (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS, EEPPSE  Ecole d'Économie de Paris  Paris School of Economics); Alain Chateauneuf (CES  Centre d'économie de la Sorbonne  UP1  Université PanthéonSorbonne  CNRS, EEPPSE  Ecole d'Économie de Paris  Paris School of Economics); Rodrigo Novinski (Faculdades Ibmec  Faculdades Ibmec) 
Abstract:  We prove that under mild conditions individually rational Pareto optima will exist even in presence of nonconvex preferences. We consider decision makers dealing with a countable flow of payoffs or choosing among financial assets whose outcomes depend on the realization of a countable set of states of the world. Our conditions for the existence of Pareto optima can be interpreted as a requirement of impatience in the first context and of some pessimism or not unrealistic optimism in the second context. A nonexistence example is provided when, in the second context, some decision maker is too optimistic. We furthermore show that at an individually rational Pareto optimum at most one strictly optimistic decision maker will avoid ruin at each state or date. Considering a risky context this entails that even is risk averters will share risk in a comonotonic way as usual, at most one classical strong risk lover will avoid ruin at each state or date. Finally some examples illustrate circumstances when a risk averter could take advantage of sharing risk with a risk lover rather than with a risk averter. 
Abstract:  Nous montrons que sous des conditions peu contraignantes des optima de Pareto individuellement rationnels existent même en présence de préférences nonconvexes. Nous considérons des décideurs munis de flux dénombrables de paiements ou choisissant parmi des actifs financiers dont les gains dépendent de la réalisation d'un ensemble dénombrable d'états du monde. Nos conditions pour l'existence d'optima de Pareto peuvent s'interpréter comme une exigence d'impatience dans le premier contexte et d'un certain pessimisme ou d'un optimisme non irréaliste dans le second contexte. Un exemple de nonexistence est proposé lorsque dans le second contexte l'un des décideurs est trop optimiste. De plus, nous montrons qu'à un optimum de Pareto individuellement rationnel au plus un décideur strictement optimiste évitera la ruine à chaque date ou dans chaque état. Finalement, quelques exemples illustrent dans quelles circonstances un adversaire du risque aurait avantage à partager ses risques avec un joueur plutôt qu'avec un adversaire du risque. 
Keywords:  Pareto optimum,optimistic,Risk sharing,optimiste,optimum de Pareto,Partage de risque 
Date:  2015–09 
URL:  http://d.repec.org/n?u=RePEc:hal:cesptp:halshs01224491&r=mic 
By:  Andrew Glover (University of Texas at Austin); Dean Corbae (University of Wisconsin) 
Abstract:  We study a dynamic model of unsecured credit markets with adverse selection and an endogenous signal of a borrower's riskiness (modeled as a credit score). Credit contracts are statically constrained efficient in our environment, which is achieved by limiting the debt of lowrisk borrowers while subsidizing the interest rate for the highrisk borrowers. A higher credit score (i.e. higher prior that the borrower is low risk) relaxes the constraint on lowrisk borrowers and increases the subsidization for highrisk, which means that utility for both types increases with their credit scores. We calibrate the model to salient features of the unsecured credit market and consider the welfare consequences of different information regimes. 
Date:  2015 
URL:  http://d.repec.org/n?u=RePEc:red:sed015:1265&r=mic 
By:  Simona Grassi (Universite de Lausanne); ChingTo Albert Ma (Boston University) 
Abstract:  Each of two experts may provide a service to a client. Experts' cost comparative advantage depends on an unknown state, but an expert may exert effort to get a private signal about it. In a market, an expert may refer the client to the other for a fee. In equilibrium, only one expert exerts eÂ§ort and refers, and the equilibrium allocation is ineÂ¢ cient. Referral efficiency can be restored when experts form an organization, in which a referring expert must bear the referred expert's cost. However, the referred expert shirks from work effort because of the lack of cost responsibility. 
Keywords:  information acquisition, referral, organization, adverse selection, costreduction incentive 
JEL:  D00 D02 D80 D83 
Date:  2015–10 
URL:  http://d.repec.org/n?u=RePEc:bos:wpaper:wp2015008&r=mic 
By:  Thibaut Mastrolia; Dylan Possama\"i 
Abstract:  In this paper, we extend the Holmstr\"{o}m and Milgrom problem [30] by adding uncertainty about the volatility of the output for both the agent and the principal. We study more precisely the impact of the "Nature" playing against the Agent and the Principal by choosing the worst possible volatility of the output. We solve the firstbest and the secondbest problems associated with this framework and we show that optimal contracts are in a class of contracts similar to [9, 10], linear with respect to the output and its quadratic variation. We compare our results with the classical problem in [30]. 
Date:  2015–10 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1511.03616&r=mic 
By:  Ting Liu (Stony Brook University); ChingTo Albert Ma (Boston University); Henry Y. Mak (Indiana UniversityPurdue University Indianapolis) 
Abstract:  A Principal would like lowbenefit projects to be serviced by a lowcostlowproductivity expert and high benefit projects, by a highcosthighproductivity expert. Experts derive intrinsic or extrinsic motivational benefits from providing services, but must earn minimum profits. The Principal lacks information about project benefits and experts' motivations, which are both known to experts. Experts form a Partnership, which sets up a gatekeepingreferral protocol and a corresponding sharing rule. We show that the Principal can implement the first best by a single contract with the Partnership. The contract is quasilinear, consisting of a lump sum, and a partial reimbursement of experts' incurred costs. 
Keywords:  Motivated Experts, Principal, Multiagent, Partnership, Referral 
JEL:  D00 D02 D80 D83 
Date:  2015–06 
URL:  http://d.repec.org/n?u=RePEc:bos:wpaper:wp2015007&r=mic 