nep-mic New Economics Papers
on Microeconomics
Issue of 2015‒12‒12
eleven papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Multilateral Bargaining in Networks: On the Prevalence of Inefficiencies By Joosung Lee
  2. Equilibrium and Matching under Price Controls By P. Jean-Jacques Herings
  3. Networks of Many Public Goods with Non-Linear Best Replies By Yann Rébillé; Lionel Richefort
  4. On the Interaction between Player Heterogeneity and Partner Heterogeneity in Two-way Flow Strict Nash Networks By Banchongsan Charoensook
  5. The Coalitional Nash Bargaining Solution with Simultaneous Payoff Demands By Ricardo Nieva
  6. Diffusion of Multiple Information: On Information Resilience and the Power of Segregation By Nicole Tabasso
  7. Proficiency, Attitude and Conventions in Minority Languages By Navarro Prada, Noemí; Escobedo Martínez, Ramón; Laruelle, Annick
  8. On the additivity of preference aggregation methods By Csató, László
  9. Constitutions and Social Networks By Ana Mauleon; Nils Roehl; Vincent Vannetelbosch
  10. Board Incentives and Board Independence in Dynamic Agency By Katolnik, Svetlana; Kukec, Sandra K.; Schöndube, Jens Robert
  11. Evolution of Standards and Innovation By AOKI Reiko; ARAI Yasuhiro

  1. By: Joosung Lee (University of Edinburgh, United Kingdom)
    Abstract: We introduce a noncooperative multilateral bargaining model for a network-restricted environment, in which players can communicate only with their neighbors. Each player strategically chooses the bargaining partners among the neighbors to buy out their communication links with upfront transfers. The main theorem characterizes a condition on network structures for efficient equilibria and shows the prevalence of strategic delays. If the underlying network is either complete or circular, then an efficient stationary subgame perfect equilibrium exists for all discount factors: all the players always try to reach an agreement as soon as practicable and hence no strategic delay occurs. In any other network, however, an efficient equilibrium is impossible for sufficiently high discount factors because some players strategically delay an agreement. We also provide an example of a Braess-like paradox, in which the more links are available, the less links are actually used. Thus, network improvements may decrease social welfare
    Keywords: Noncooperative Bargaining, Coalition Formation, Communication Restriction, Buyout, Network, Braess's Paradox
    JEL: C72 C78 D72 D74 D85
    Date: 2015–06
  2. By: P. Jean-Jacques Herings (Maastricht University, The Netherlands)
    Abstract: The paper considers a one-to-one matching with contracts model in the presence of price controls. This set-up contains two important streams in the matching literature, those with and those without monetary transfers, as special cases and allows for intermediate cases with some restrictions on the monetary transfers that are feasible. An adjustment process that ends with a stable outcome is presented, thereby proving the existence of stable outcomes. The process contains the deferred acceptance algorithm of Gale and Shapley (1962) and the approximate auction mechanism of Demange, Gale, and Sotomayor (1986) as special cases. The paper presents a notion of competitive equilibrium, called Drèze equilibrium, for this class of models, an extension of the concept as developed by Drèze (1975) for economies with divisible commodities subject to price controls. It is shown that Drèze equilibrium allocations are equivalent to allocations induced by stable outcomes. One implication is the existence of Drèze equilibria. Another implication is the equivalence of a competitive equilibrium concept and the concept of stable outcomes that is valid with and without monetary transfers as well as when monetary transfers are limited.
    Keywords: Price Controls, Matching, Stable Outcomes, Competitive Equilibrium, Drèze Equilibrium
    JEL: C71 C78 D45 D51
    Date: 2015–06
  3. By: Yann Rébillé (LEMNA, Université de Nantes); Lionel Richefort (LEMNA, Université de Nantes)
    Abstract: We model a bipartite network in which links connect agents with public goods. Agents play a voluntary contribution game in which they decide how much to contribute to each public good they are connected to. We show that the problem of finding a Nash equilibrium can be posed as a non-linear complementarity one. The existence of an equilibrium point is established for a wide class of individual preferences. We then find a simple sufficient condition, on network structure only, that guarantees the uniqueness of the equilibria, and provide an easy procedure for building networks that respects this condition.
    Keywords: Bipartite Graph, Public Good, Nash Equilibrium, Non-Linear, Complementarity Problem
    JEL: C72 D85 H41
    Date: 2015–06
  4. By: Banchongsan Charoensook (Keimyung University, Republic of Korea)
    Abstract: This paper brings together analyses of two-way flow Strict Nash networks under exclusive player heterogeneity assumption and exclusive partner heterogeneity assumption. This is achieved through examining how the interactions between these two assumptions influence important properties of Strict Nash networks. Built upon the findings of Billand et al (2011) and Galleotti et al (2006), which assume exclusive partner heterogeneity and exclusive player heterogeneity respectively, I provide a proposition that generalizes the results of these two models by stating that: (i) Strict Nash network consists of multiple non-empty components as in Galleotti et al (2006), and (ii) each non-empty component is a branching or Bi network as in Billand et al (2011). This proposition requires that a certain restriction on link formation cost (called Uniform Partner Ranking), which encloses exclusive partner heterogeneity and exclusive player heterogeneity as a specific case, is satisfied. In addition, this paper shows that value heterogeneity plays a relatively less important role in changing the shapes of Strict Nash networks.
    Keywords: Network Formation, Strict Nash Network, Two-way Flow Network, Branching Network, Agent Heterogeneity
    JEL: C72 D85
    Date: 2015–05
  5. By: Ricardo Nieva (Universidad de Lima, Lima, Peru)
    Abstract: We consider a standard coalitional bargaining game where once a coalition forms it exits as in Okada (2011), however, instead of alternating offers, we have simultaneous payoff demands. We focus in the producer game he studies. Each player is chosen with equal probability. If that is the case, she can choose any coalition she belongs to. However, a coalition can form if an only if payoff demands are feasible as in the Nash (1953) demand game. After smoothing the game (as in Van Damme (1991)), when the noise vanishes, when the discount factor is close to 1, and as in Okada´s (2011), the coalitional Nash bargaining solution is the unique stationary subgameperfect equilibrium.
    Keywords: Coalitional Bargaining, Nash Program, Simultaneous Payoff, Demands, Uncertainty
    JEL: C71 C72 C78
    Date: 2015–07
  6. By: Nicole Tabasso (University of Surrey, United Kingdom)
    Abstract: We introduce two pieces of information, denoted memes, into a diffusion process in which memes are transmitted when individuals meet and forgotten at an exogenous rate. At most one meme can be transmitted at a meeting, which introduces opportunity costs in the process. Individuals differ according to which meme they find more interesting, and that is the one they transmit if they face a choice. We find that both memes survive under the same parameter values, and that relative interest is the main determinant in the number of people informed of a meme in the long run. We apply our framework to analyze the impact of segregation and find that segregation leads to polarization. Segregation also reduces the overall number of people informed in the long run. Our final set of results shows that agents are more likely to prefer segregation if their information preferences are more extreme, if they have few social contacts, or if they prefer a meme that is preferred by only a small fraction of the population
    Keywords: Social Networks, Information Transmission, Multiple States, Segregation
    JEL: D83 D85
    Date: 2015–06
  7. By: Navarro Prada, Noemí; Escobedo Martínez, Ramón; Laruelle, Annick
    Abstract: In this paper we study a simple mathematical model of a bilingual community in which all agents are f luent in the majority language but only a fraction of the population has some degree of pro ficiency in the minority language. We investigate how different distributions of pro ficiency, combined with the speaker´attitudes towards or against the minority language, may infl uence its use in pair conversations.
    Keywords: minority, language, competition, linguistic, convention
    JEL: D74 Z13 D63
    Date: 2015–10
  8. By: Csató, László
    Abstract: The paper reviews some axioms of additivity concerning ranking methods used for generalized tournaments with possible missing values and multiple comparisons. It is shown that one of the most natural properties, called consistency, has strong links to independence of irrelevant comparisons, an axiom judged unfavourable when players have different opponents. Therefore some directions of weakening consistency are suggested, and several ranking methods, the score, generalized row sum and least squares as well as fair bets and its two variants (one of them entirely new) are analysed whether they satisfy the properties discussed. It turns out that least squares and generalized row sum with an appropriate parameter choice preserve the relative ranking of two objects if the ranking problems added have the same comparison structure.
    Keywords: preference aggregation, tournament ranking, paired comparison, additivity, axiomatic approach
    JEL: D71
    Date: 2015–11–30
  9. By: Ana Mauleon (CEREC, Saint-Louis University ?Brussels and CORE, University of Louvain, Belgium); Nils Roehl (University of Paderborn and Bielefeld University, Germany); Vincent Vannetelbosch (CORE, University of Louvain and CEREC, Saint-Louis University ?Brussels, Belgium)
    Abstract: The objective of the paper is to analyze the formation of social networks where individuals are allowed to engage in several groups at the same time. These group structures are interpreted here as social networks. Each group is supposed to have specific rules or constitutions governing which members may join or leave it. Given these constitutions, we consider a social network to be stable if no group is modified any more. We provide requirements on constitutions and players’ preferences under which stable social networks are induced for sure. Furthermore, by embedding many-to-many matchings into our setting, we apply our model to job markets with labor unions. To some extent the unions may provide job guarantees and, therefore, have influence on the stability of the job market.
    Keywords: Social Networks, Constitutions, Stability, Many-to-Many Matchings
    JEL: C72 C78 D85
    Date: 2015–06
  10. By: Katolnik, Svetlana; Kukec, Sandra K.; Schöndube, Jens Robert
    Abstract: Efficiency of the board structure is usually perceived as linked to a higher degree of monitoring. If monitoring improves performance measurement signals, on which a manager is compensated, it can be considered desirable from the manager's point of view. As a result, having a low degree of board independence (many insiders on the board) may incentivize the board to improve its monitoring technology. However, from a dynamic perspective board monitoring is not always desirable, since it can destroy the ex ante efficient trade-off between risk and incentives under the presence of renegotiation possibility. This provides predictions for an optimal board composition seen from a dynamic perspective.
    Keywords: Corporate governance, Board composition, Inside directors, Board incentives
    JEL: D81 G34 M41
    Date: 2015–12
  11. By: AOKI Reiko; ARAI Yasuhiro
    Abstract: We examine how a standard evolves when both a standard consortium or firm (incumbent) and an outside firm (potential entrant) innovate to improve the technology. The incumbent improves to deter entry, and the entrant can invest to counter the incumbent's attempt. We show that only when the technology is mature and inertia is sufficiently low will there be entry leading to the coexistence of both standards. When the technology is in its infancy, the incumbent deters entry by technology improvement (upgrade) for any level of inertia. The entrant is never able to drive the incumbent out of the market (replacement). Our results suggest that competition policy to control inertia is not a substitute for policies to promote technological innovation, and that coordination of the two policies is essential.
    Date: 2015–12

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