
on Microeconomics 
By:  Claudia Cerrone (Max Planck Institute for Research on Collective Goods) 
Abstract:  This paper develops a strategic model of procrastination in which presentbiased agents prefer to do an onerous task in the company of someone else. This turns their decision of when to do the task into a procrastination game – a dynamic coordination game between presentbiased players. The model characterises the conditions under which interaction mitigates or exacerbates procrastination. Surprisingly, a procrastinator matched with a worse procrastinator may do her task earlier than she otherwise would: she wants to avoid the increased temptation that her peer's company would generate. Procrastinators can thus use bad company as a commitment device to mitigate their selfcontrol problem. Principals can reduce procrastination by matching procrastinators with each other, but the efficient matching may not be stable. 
JEL:  C72 C73 D03 D91 
Date:  2016–06 
URL:  http://d.repec.org/n?u=RePEc:mpg:wpaper:2016_10&r=mic 
By:  Tadashi Sekiguchi; Katsutoshi Wakai 
Abstract:  We study the repeated Cournot duopoly with recursive utility where the players discount gains more than losses. First, as in the standard model of discounted utility, we confirm that the optimal punishment equilibrium has a stickandcarrot structure. Next, we explore its exact form in relation to the role of the asymmetry in discounting. We find that the discount factor used to evaluate losses controls the deterrence of a given punishment, while the discount factor used to evaluate gains influences the enforceability of the penalty. An increase in one of the two discount factors increases the most collusive equilibrium profit unless full collusion is already sustainable. However, the key to collusion is the loss discount factor: regardless of the level of the gain discount factor, full cooperation can be achieved if the loss discount factor is sufficiently high. 
Keywords:  Cournot duopoly, gain/loss asymmetry, optimal penal code, repeated game, recursive utility, utility smoothing 
JEL:  C73 D20 D90 L13 
Date:  2016–07 
URL:  http://d.repec.org/n?u=RePEc:kue:epaper:e16006&r=mic 
By:  Pandit, Parthe; Kulkarni, Ankur 
Abstract:  Recently Bramoulle and Kranton presented a model for the provision of public goods over a network and showed the existence of a class of Nash equilibria called specialized equilibria wherein some agents exert maximum effort while other agents free ride. We examine the efficiency, effort and cost of specialized equilibria in comparison to other equilibria. Our main results show that the welfare of a particular specialized equilibrium approaches the maximum welfare amongst all equilibria as the concavity of the benefit function tends to unity. For forest networks a similar result also holds as the concavity approaches zero. Moreover, without any such concavity conditions, there exists for any network a specialized equilibrium that requires the maximum weighted effort amongst all equilibria. When the network is a forest, a specialized equilibrium also incurs the minimum total cost amongst all equilibria. For wellcovered forest networks we show that all welfare maximizing equilibria are specialized and all equilibria incur the same total cost. Thus we argue that specialized equilibria may be considered as a refinement of the equilibrium of the public goods game. We show several results on the structure and efficiency of equilibria that highlight the role of dependants in the network. 
Keywords:  Network games; public goods; specialized equilibria; independent sets; linear complementarity problems 
JEL:  C7 C72 
Date:  2016–07–07 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:72425&r=mic 
By:  Alex Dickson (Department of Economics, University of Strathclyde); Ian A MacKenzie (School of Economics, University of Queensland); Petros Sekeris (Department of Economics & Finance, University of Portsmouth) 
Abstract:  This article investigates contests when heterogeneous players compete to obtain a share of a prize. We prove the existence and uniqueness of the Nash equilibrium when players have general preference structures. Our results show that many of the standard conclusions obtained in the analysis of contests  such as aggregate effort increasing in the size of the prize and the dissipation ratio invariant to the size of the prize  may no longer hold under a general preference setting. We derive the key conditions on preferences, which involve the rate of change of the marginal rate of substitution between a player's share of the prize and their effort within the contest, under which these counterintuitive results may hold. Our approach is able to nest conventional contest analysis  the study of (quasi)linear preferences  as well as allowing for a much broader class of utility functions, which include both separable and nonseparable utility structures. 
Keywords:  contest, general preferences, aggregative game 
JEL:  C72 D72 
Date:  2016–06 
URL:  http://d.repec.org/n?u=RePEc:str:wpaper:1608&r=mic 
By:  Roland Pongou (Department of Economics, University of Ottawa); Roberto Serrano (Department of Economics, Brown University) 
Abstract:  We study the longrun stability of trade networks in a twosided economy. Each agent desires relationships with the other side, but having multiple partners is costly. This costbenefit tradeoff results in each agent having a singlepeaked utility over the number of partnersthe volume of trade, the peak being greater for agents on one side than those on the other. We propose a stochastic matching process in which selfinterested agents form and sever links over time. Links can be added or deleted, sometimes simultaneously by a single agent. While the unperturbed process yields each pairwise stable network as an absorbing state, stochastic stability in two perturbed processes provides a significant refinement, leading respectively to egalitarian and antiegalitarian pairwise stable networks. These distinct network configurations have implications for the concentration on each side of the market of a random information shock, which may affect structurally identical economies differently. The analysis captures stylized facts, related to herd behavior, market fragmentation, concentration and contagion asymmetry, in several twosided economies. It also rationalizes longrun population imbalance between the two sides of certain buyerseller markets. 
Keywords:  Twosided economies, trade networks, pairwise stability, stochastic stability, herd behavior, fragmentation, concentration, contagion asymmetry 
JEL:  C73 D01 D03 D85 F16 J00 
Date:  2016 
URL:  http://d.repec.org/n?u=RePEc:ott:wpaper:1602e&r=mic 
By:  Margaret Meyer (Nuffield College and Dept. of Economics, Oxford University); Inés Moreno de Barreda (Dept of Economics, Oxford University); Julia Nafziger (Dept. of Economics and Business, Aarhus University) 
Abstract:  This paper studies information transmission in a twosender, multidimensional cheap talk setting where there are exogenous restrictions on the feasible set of policies for the receiver. Such restrictions, which are present in most applications, can, by limiting the punishments available to the receiver, prevent the existence of fully revealing equilibria (FRE). We focus on FRE that are i) robust to small mistakes by the senders, in that small differences between the senders’ messages result in only small punishments by the receiver, and ii) independent of the magnitudes of the senders’ bias vectors. For convex policy spaces in an arbitrary number of dimensions, we prove that if there exists a FRE satisfying property ii), then there exists one satisfying both i) and ii). Thus the requirement of robustness is, under these assumptions, not restrictive. For convex policy spaces in two dimensions, we provide a simple geometric condition, the Local Deterrence Condition, on the directions of the senders’ biases relative to the frontier of the policy space, that is necessary and sufficient for the existence of a FRE satisfying i) and ii). We also provide a specific policy rule, the Min Rule, for the receiver that supports a FRE satisfying i) and ii) whenever one exists. The Min Rule is the anonymous rule that punishes incompatible reports in the least severe way, subject to maintaining the senders’ incentives for truthtelling, no matter how large their biases. We characterize necessary and sufficient conditions for collusionproofness of a FRE supported by the receiver using the Min Rule and show that if such a FRE is not collusionproof, then no other FRE satisfying ii) can be collusionproof. We extend our existence results to convex policy spaces in more than two dimensions and to nonconvex twodimensional spaces. Finally, our necessary and sufficient condition, as well as our specific policy rule, can be easily adapted if the receiver is uncertain about the directions of the biases and/or if the biases vary with the state of the world. 
Date:  2016–06–22 
URL:  http://d.repec.org/n?u=RePEc:nuf:econwp:1602&r=mic 
By:  Yves SPRUMONT 
Abstract:  We model social choices as acts mapping states of the world to (social) outcomes. A (social choice) rule assigns an act to every profile of subjective expected utility preferences over acts. A rule is strategyproof if no agent ever has an incentive to misrepresent her beliefs about the world or her valuation of the outcomes; it is expost efficient if the act selected at any given preference profile picks a Paretoefficient outcome in every state of the world. We show that every twoagent expost efficient and strategyproof rule is a top selection : the chosen act picks the most preferred outcome of some (possibly different) agent in every state of the world. The states in which an agentís top outcome is selected cannot vary with the reported valuations of the outcomes but may change with the reported beliefs. We give a complete characterization of the expost efficient and strategyproof rules in the twoagent, twostate case, and we identify a rich class of such rules in the twoagent case. 
Keywords:  social choice under uncertainty, strategyproofness, subjective expected utility 
JEL:  D71 
Date:  2016 
URL:  http://d.repec.org/n?u=RePEc:mtl:montec:072016&r=mic 
By:  Georgios Gerasimou 
Abstract:  We show that strictly monotonic and riskneutral Bewley preferences on the set of purely uncertain monetary acts over a finite state space are associated with a degenerate indifference relation. This conclusion is valid irrespective of whether strict or weak preferences are taken as primitive. In the latter case, it follows from this result that such a decision maker is indifferent between distinct acts only if her preferences are complete. 
Keywords:  Bewley preferences; incomplete preferences; risk neutrality; degenerate indifference 
JEL:  D01 D03 D11 
Date:  2016–06–23 
URL:  http://d.repec.org/n?u=RePEc:san:wpecon:1609&r=mic 
By:  Francesco Lancia; Alessia Russo 
Abstract:  This paper studies how an organization might promote cooperation between its members when individual contributions to the organization's output are imper fectly observable. It considers an overlappinggeneration game in which members with con icting interests expend e ort in pursuing outside tasks that are perfectly observable and privately bene cial in addition to the e ort devoted to increasing the organization's output. We show that both the organization's expected output and members' wellbeing increase when the reward and punishment mechanism links the two types of e ort. In the resulting equilibrium, privately bene cial ef forts are at an inecient level in order to signal members' willingness to cooperate. After extending the game to multiple generations, we apply it to the optimal tasks assignment along career paths in an organization. 
JEL:  C73 F62 M54 
Date:  2016–06 
URL:  http://d.repec.org/n?u=RePEc:vie:viennp:1605&r=mic 
By:  Huy N. Chau; Mikl\'os R\'asonyi 
Abstract:  We prove the existence of optimal strategies for agents with cumulative prospect theory preferences who trade in a continuoustime illiquid market, transcending known results which pertained only to riskaverse utility maximizers. The arguments exploit an extension of Skorohod's representation theorem for tight sequences of probability measures. This method is applicable in a number of similar optimization problems. 
Date:  2016–06 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1606.07311&r=mic 
By:  Armstrong, Mark 
Abstract:  The paper discusses situations in which consumers search through their options in a deliberate order, in contrast to more familiar models with random search. Topics include: network effects (consumers may be better off following the same search order as other consumers); the use of price and nonprice advertising to direct search; the impact of consumers starting a new search with their previous supplier; the incentive sellers have to merge or colocate with other sellers; and the incentive a seller can have to raise its own search cost. I also show how ordered search can be reformulated as a simpler discrete choice problem without search frictions. 
Keywords:  Consumer search, sequential search, ordered search, directed search, discrete choice, oligopoly, advertising, obfuscation. 
JEL:  D21 D43 D83 L11 L15 M37 
Date:  2016–06–24 
URL:  http://d.repec.org/n?u=RePEc:pra:mprapa:72194&r=mic 
By:  Stéphane Gonzalez (Université de Lyon, Lyon F 69007, France; CNRS, GATE LSE, Ecully, F 69130, France; Université J. Monnet, SaintEtienne, F 42000, France); Aymeric Lardon (University of Nice SophiaAntipolis, CNRS, GREDEG UMR 7321, F06560 Valbonne, France) 
Abstract:  We introduce axiomatically a new solution concept for cooperative games with transferable utility inspired by the core. While core solution concepts have investigated the sustainability of cooperation among players, our solution concept, called contraction core, focuses on the deterrence of cooperation. The main interest of the contraction core is to provide a monetary measure of the robustness of cooperation into the grand coalition. We motivate this concept by providing optimal fine imposed by competition authorities for the dismantling of cartels in oligopolistic markets. We characterize the contraction core on the set of balanced cooperative games with transferable utility by four axioms: the two classic axioms of nonemptiness and individual rationality, a superadditivity principle and a new axiom of consistency. 
Keywords:  TUgame, contraction core, optimal fine, Cournot oligopoly, axiomatization 
JEL:  C71 D43 
Date:  2016 
URL:  http://d.repec.org/n?u=RePEc:gat:wpaper:1621&r=mic 