nep-mic New Economics Papers
on Microeconomics
Issue of 2016‒11‒06
thirty papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Dynamic nonmonetary incentives By Daniel Bird; Alexander Frug
  2. Stereotypes By Pedro Bordalo; Katherine Coffman; Nicola Gennaioli; Andrei Shleifer
  3. Patent Disclosures and Standard-Setting By Josh Lerner; Haris Tabakovic; Jean Tirole
  4. Strategic gradual learning and information transmission By Alexander Frug
  5. Towards a Democratization of Knowledge with Topological Emphasis in Economics By Rosas-Martinez, Victor H.
  6. Strategic Fragmented Markets By Babus, Ana; Parlatore, Cecilia
  7. Advance Selling, Competition, and Brand Substitutability By Oksana Loginova
  9. Equilibrium of a production economy with unbounded attainable allocations set By Senda Ounaies; Jean-Marc Bonnisseau; Souhail Chebbi
  11. A Short Note on Discrimination and Favoritism in the Labor Market By Salamanca, Nicolas; Feld, Jan
  12. Strategic Sourcing in Procurement By Lluis Bru; Daniel Cardona
  13. A Representative Committee by Approval Balloting By Subiza, Begoña; Peris, Josep E.
  14. Risk and Unraveling in Labor Markets By Bos, Olivier; Ranger, Martin
  15. Dynamic Contracting with Long-Term Consequences: Optimal CEO Compensation and Turnover By Suvi Vasama; ;
  17. Electoral competition with primaries and quality asymmetries By Orestis Troumpounis; Dimitrios Xefteris; Bernard Grofman
  18. Deciding fast and slow By D. Pennesi
  19. Price Competition in the Presence of a Web Aggregator By Oksana Loginova; Andrea Mantovani
  20. Lattices in social networks with influence By Michel Grabisch; Agnieszka Rusinowska
  21. Debt maturity and the dynamics of leverage By Dangl, Thomas; Zechner, Josef
  22. Non-comparative and comparative advertising in oligopolistic markets By Alipranti, Maria; Mitrokostas, Evangelos; Petrakis, Emmanuel
  23. Distrust in Experts and the Origins of Disagreement By Alice Hsiaw; Ing-Haw Cheng
  24. Expectation-Based Loss Aversion and Strategic Interaction By Simon Dato; Andreas Grunewald; Daniel Müller
  25. Vertical Information Restraints: Pro- and Anti-Competitive Impacts of Minimum Advertised Price Restrictions By John Asker; Heski Bar-Isaac
  26. Multidimensional Private Information, Market Structure and Insurance Markets By Hanming Fang; Zenan Wu
  27. Information acquisition, signaling and learning in duopoly By Jeitschko, Thomas D.; Liu, Ting; Wang, Tao
  28. Number of bidders and the winner's curse By Peeters, Ronald; Tenev, Anastas
  29. Determining models of influence By Michel Grabisch; Agnieszka Rusinowska
  30. Collective Choice in Dynamic Public Good Provision By T. Renee Bowen; George Georgiadis; Nicolas S. Lambert

  1. By: Daniel Bird; Alexander Frug
    Abstract: We study a principal-agent interaction where investments and rewards arrive stochastically over time, and are privately observed by the agent. Investments (costly for the agent, beneficial for the principal) can be concealed by the agent. Rewards (beneficial for the agent, costly for the principal) can be forbidden by the principal. We ask how rewards should be used and which investments incentivized. We identify the unique optimal mechanism and analyze the dynamic investment and compensation policies. When all rewards are identical, the unique optimal way to provide incentives is by a "carte-blanche" to pursue all rewards arriving in a predetermined timeframe.
    Keywords: Dynamic mechanism design, Uncertain action availability.
    JEL: D82
    Date: 2016–10
  2. By: Pedro Bordalo; Katherine Coffman; Nicola Gennaioli; Andrei Shleifer
    Abstract: We present a model of stereotypes based on Kahneman and Tversky?s representativeness heuristic. A decision maker assesses a target group by overweighting its representative types, defined as the types that occur more frequently in that group than in a baseline reference group. Stereotypes formed this way contain a ??kernel of truth??: they are rooted in true differences between groups. Because stereotypes focus on differences, they cause belief distortions, particularly when groups are similar. Stereotypes are also context dependent: beliefs about a group depend on the characteristics of the reference group. In line with our predictions, beliefs in the lab about abstract groups and beliefs in the field about political groups are context dependent and distorted in the direction of representative types. JEL Codes: D03, D83, D84, C91.
  3. By: Josh Lerner; Haris Tabakovic; Jean Tirole
    Abstract: A key role of standard setting organizations (SSOs) is to aggregate information on relevant intellectual property (IP) claims before deciding on a standard. This article explores the firms’ strategies in response to IP disclosure requirements—in particular, the choice between specific and generic disclosures of IP—and the optimal response by SSOs, including the royalty rate setting. We show that firms with a stronger downstream presence are more likely to opt for a generic disclosure, as are those with lower quality patents. We empirically examine patent disclosures made to seven large SSOs, and find results consistent with theoretical predictions.
    JEL: L24 O34
    Date: 2016–10
  4. By: Alexander Frug
    Abstract: Prior to advising a decision maker, the expert needs to gather information about the state of the world. This often takes time and therefore, even if the expert's learning process is unobservable, the timing of the advice is informative in itself. If learning is strategic in that the expert can choose which inspections to perform, the timing of advice may reveal not only the amount but also the type of information available to the expert. This paper studies the expert's covert and strategic process of information acquisition and its effect on the quality of advice. The main result of this paper suggests that, even in the absence of an "objective" reason to expedite information transmission, putting the biased expert under an articial (or "strategic") pressure, can increase the amount of transmitted information and be beneficial to both players.
    Keywords: Gradual Learning, Strategic Pressure, Scheduling of Experiments, Dynamic Information Transmission, Cheap Talk.
    JEL: D82 D83
    Date: 2016–09
  5. By: Rosas-Martinez, Victor H.
    Abstract: We formulate and prove a theorem which consists in how the natural endogenous antagonist interaction of agents who look for understanding a generalizable phenomenon, results in a tendency towards chaos. This takes us to the final absolution of implementing the majority rule as the only instrument that generates socially acceptable knowledge, escaping from the chaos tendency. Finally, we extend our analysis to consider the arise of multiple simultaneous antagonist postures on the explanation of a phenomenon, and through an application of the Pythagoras theorem, we prove that it takes less effort or sacrifice for an agent to learn strategically to get an explanation, than if she was the creator of the concerning knowledge, which implies different consequences of possible topological private and public tendencies.
    Keywords: Antagonist Endogenous Knowledge; Social Entropy; Chaos Theorem; Social Choice
    JEL: B50 O31 O35
    Date: 2016–10
  6. By: Babus, Ana; Parlatore, Cecilia
    Abstract: We study the determinants of asset market fragmentation. We develop a model of market formation in which investors with heterogeneous valuations for an asset trade strategically. When choosing a dealer with whom to trade, investors trade off the lower price impact and the steeper competition for the dealer's liquidity offered by a larger market. When the correlation among investor valuations is high, the increase in competition dominates the decrease in price impact and investors prefer to trade in a smaller market, which makes market fragmentation an equilibrium outcome. Fragmented market structures can Pareto dominate centralized ones and can exhibit higher trading volumes.
    Keywords: demand schedule equilibrium; interdealer trading; market fragmentation
    JEL: D43 D47 G12
    Date: 2016–10
  7. By: Oksana Loginova (University of Missouri)
    Abstract: This paper studies the impact of competition on the benefits of advance selling. I construct a two-period price-setting game with heterogeneous consumers and two firms that produce different brands. Some consumers prefer one brand, others prefer the other brand. Consumers derive common value from their preferred brand, but they differ in how strongly they dislike their less preferred brand. I consider the situation in which one firm can offer consumers the opportunity to pre-order its product in advance of the regular selling season. I calculate the benefits of advance selling when this firm faces competition from the other firm in the regular selling season and when it does not. I show that competition enhances the benefits of advance selling when in the advance selling season consumers are uncertain about which brand they will prefer. Comparative statics analysis with respect to brand substitutability reveals some interesting results. For example, I find that in the competitive setting the firm has greater incentives to advance sell when the brands are more substitutable, while the reverse holds in the monopolistic setting.
    Keywords: advance selling, price competition, strategic consumers, valuation uncertainty, consumer heterogeneity, substitutability of brands
    JEL: C72 D42 D43 L12 L13 M31
    Date: 2016–10
  8. By: YARON AZRIELI (The Ohio State University); SEMIN KIM (Yonsei University)
    Abstract: A voting rule f is self-stable (Barber`a and Jackson [4]) if any alternative rule g does not have sufficient support in the society to replace f, where the decision between f and g is based on the rule f itself. While Barber`a and Jackson focused on anonymous rules in which all agents have the same voting power, we consider here the larger class of weighted majority rules. Our main result is a characterization of self-stability in this setup, which shows that only few rules of a very particular form satisfy this criterion. This result provides a possible explanation for the tendency of societies to use more conservative rules when it comes to changing the voting rule. We discuss self-stability in this latter case, where a different rule F may be used to decide between f and g.
    Keywords: Voting rules, weighted majority rules, self-stability.
    JEL: D72
    Date: 2016–11
  9. By: Senda Ounaies (Centre d'Economie de la Sorbonne & Department of Mathematics - University El Manar Tunis); Jean-Marc Bonnisseau (Centre d'Economie de la Sorbonne - Paris School of Economics); Souhail Chebbi (Department of Mathematics - King Saud University)
    Abstract: In this paper, we consider a production economy with an unbounded attainable set where the consumers may have non-complete non-transitive preferences. To get the existence of an equilibrium, we provide an asymptotic property on preferences for the attainable consumptions. We show that this condition holds true if the set of attainable allocations is compact or, when preferences are representable by utility functions, if the set of attainable individually rational utility levels is compact. So we extend the previous existence results with unbounded attainable sets in two ways by adding a production sector and considering general preferences
    Keywords: production economy; unbounded attainable allocations; quasi-equilibrium; non complete non transitive preferences
    JEL: C62 D11 D51
    Date: 2016–08
  10. By: SEMIN KIM (Yonsei University)
    Abstract: We consider the performance and incentive compatibility of voting rules in a Bayesian environment: agents have independent private values, there are at least three alternatives, and monetary transfers are prohibited. First, we show that in a neutral environment, meaning alternatives are symmetric ex-ante, essentially any ex-post Pareto efficient ordinal rule is incentive compatible. Importantly, however, we can improve upon ordinal rules. We show that we can design an incentive compatible cardinal rule which achieves higher utilitarian social welfare than any ordinal rule. Finally, we provide numerical findings about incentive compatible cardinal rules that maximize utilitarian social welfare.
    Keywords: Ordinal rule, Pareto efficiency, Incentive compatibility, Bayesian mechanism design.
    JEL: C72 D01 D02 D72 D82
    Date: 2016–11
  11. By: Salamanca, Nicolas (Melbourne Institute of Applied Economic and Social Research); Feld, Jan (Victoria University of Wellington)
    Abstract: We extend Becker's model of discrimination by allowing firms to have discriminatory and favoring preferences simultaneously. We draw the two-preference parallel for the marginal firm, illustrate the implications for wage differentials, and consider the implied long-run equilibrium. In the short-run, wage differentials depend on relative preferences. However, in the long-run, market forces drive out discriminatory but not favoring firms.
    Keywords: wage gap, nepotism, firm preferences, long-run equilibrium
    JEL: J70 J31
    Date: 2016–10
  12. By: Lluis Bru (Universitat de les Illes Balears); Daniel Cardona (Universitat de les Illes Balears)
    Abstract: In this paper, we study how a big buyer owing many smallish units may coordinate procurement demands in order to obtain a low price. We show that when the capacity of the big buyer is relatively large, the optimal policy consists on procuring (part of) its requirements through lots. The optimal number and sizes of these lots would depend on the number of potential suppliers as well as the total requirements of this buyer; and in general, a single lot is not optimal. Moreover, we also show that it may be optimal to demand some requirements through smallish units.
    Keywords: Procurement policy; Auctions; Buyer groups; Single-sourcing; Lots
    JEL: C72 D44 L14
    Date: 2016
  13. By: Subiza, Begoña (University of Alicante, D. Quantitative Methods and Economic Theory); Peris, Josep E. (University of Alicante, D. Quantitative Methods and Economic Theory)
    Abstract: A new voting rule for electing committees is described. Specifically, we use approval balloting and propose a new voting procedure that guarantees that if there is a committee that represents (with a given proportion of representatives) all of the existing voters, then the selected committee has to represent all of voters in at least the same proportion. This property is a way of selecting a committee that represents completely all of voters when such a committee exists. The usual voting rules in this context do not satisfy this condition.
    Keywords: Approval balloting; committee election; unanimity; justified representation; representativeness
    JEL: D71 D72
    Date: 2016–10–25
  14. By: Bos, Olivier; Ranger, Martin
    Abstract: A two period labor market is considered in which workers’ quality is revealed in the second period. A signal – revealed to either workers, firms or both at the beginning of the first period – is correlated with the final quality. Under all assumptions about the distribution of information in the first period there exists an equilibrium in which firms only make offers in the second period and workers accept no offer in the first period. Nonetheless, early contracting is also an equilibrium if certain conditions on preferences of firms and workers are met. Workers have to be risk averse or firms risk loving with respect to expectations appropriate to the relevant information structure. Thus the conditions for unraveling depend on the information available to the two sides of the market.
    Keywords: Unraveling, Risk Aversion, Asymmetric Information
    JEL: C72 D82 D83
    Date: 2016–08–31
  15. By: Suvi Vasama; ;
    Abstract: We examine optimal managerial compensation and turnover policy in a principal-agent model in which the firm output is serially correlated over time. The model captures a learning-by-doing feature: higher effort by the manager increases the quality of the match between the firm and the manager in the future. The optimal incentive scheme entails an inefficiently high turnover rate in the early stages of the employment relationship. The optimal turnover probability depends on the past performance and the likelihood of turnover decreases gradually with superior performance. With good enough past performance, the turnover policy reaches efficiency; the manager is never retained if it is inefficient to do so. The manager’s compensation depends on the firm value and the optimal performance-compensation relation increases with past performance.
    JEL: C73 D82 D86
    Date: 2016–10
  16. By: SEMIN KIM (Yonsei University)
    Abstract: We consider incentive compatible voting rules on the domain of single-peaked preferences. In the environment where the value distributions are generic in the set of independent beliefs, we show that every incentive compatible rule satisfies the tops-only property.
    Keywords: Incentive compatibility, Single-peaked preferences, Tops-only property
    JEL: C72 D01 D02 D72 D82
    Date: 2016–11
  17. By: Orestis Troumpounis; Dimitrios Xefteris; Bernard Grofman
    Abstract: In two-dimensional two-party electoral competition under plurality rule, there are typically no equilibria, even when one of the dimensions refers to valence. The good news is that the introduction of either closed or open primaries acts as a stabilizing force since equilibria exist quite generally, serves as an arena for policy debates since all candidates propose differentiated platforms, and guarantees that each party's nominee is of higher quality than its primary opponent. Moreover, primaries tend to benefit the party whose median voter is closer to the overall median. The bad news is that the winner of the general election need not be the candidate with the highest overall quality since too competitive primaries can prove harmful. Given the differences between open and closed primaries, we show that the choice of primary type is particularly important and may determine the winner of the general election.
    Keywords: Downsian model, primaries, valence
    JEL: C62 C72 D72
    Date: 2016
  18. By: D. Pennesi
    Abstract: Empirical evidence suggests that choices are affected by the amount of time available to the decision maker. Time pressure or a cooling-off period (mandatory delay of choice) changes how choices are determined. Yet, few models are able to account for the role of available time on decisions. This paper proposes a dual-self model in which a fast and a slow self bargain to decide: the longer is the decision process, the higher is the bargaining power of the slow self when deciding. A large variety of behaviors observed under time pressure or cooling-off can be explained by our model. Quantitative predictions concerning the effect of nudging through time manipulation are also provided. We characterize the model imposing testable conditions on revealed preferences combined with non-choice data.
    JEL: D01 D03 D11 D81
    Date: 2016–10
  19. By: Oksana Loginova (Department of Economics, University of Missouri); Andrea Mantovani (Department of Economics, University of Bologna)
    Abstract: In this paper we examine the impact of a web aggregator on firms and consumers in a horizontally differentiated market. When a firm pays a fee to be listed on the aggregator's website, its location and price become observable to e-users (consumers who visit the website). We consider two settings, depending on the possibility for online firms to offer discounts to e-users. In equilibrium, not all firms will go online - some will choose to remain offline. Online firms attract more customers due to reduced mismatch costs, but face a tougher price competition. When the proportion of e-users is relatively low, price discrimination may hurt the firms. Therefore, less of them can afford to go online. The opposite holds when e-users predominate; price discrimination yields a higher number of online restaurants than uniform pricing. Finally, we evaluate the aggregator's optimal policy regarding the fee and whether to impose uniform pricing or to allow price discrimination. We discover that, unless the proportion of e-users is relatively low, the aggregator induces only a few restaurants to go online.
    Keywords: online reviews aggregators, price discrimination, competition
    JEL: C72 D43 D61 L11 L13 M31
    Date: 2015–03–12
  20. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: We present an application of lattice theory to the framework of influence in social networks. The contribution of the paper is not to derive new results, but to synthesize our existing results on lattices and influence. We consider a two-action model of influence in a social network in which agents have to make their yes-no decision on a certain issue. Every agent is preliminarily inclined to say either 'yes' or 'no', but due to influence by others, the agent's decision may be different from his original inclination. We discuss the relation between two central concepts of this model: influence function and follower function. The structure of the set of all influence functions that lead to a given follower function appears to be a distributive lattice. We also consider a dynamic model of influence based on aggregation functions and present a general analysis of convergence in the model. Possible terminal classes to which the process of influence may converge are terminal states (the consensus states and non trivial states), cyclic terminal classes and unions of Boolean lattices.
    Keywords: convergence,terminal class,aggregation function,Influence function,follower function,distributive lattice
    Date: 2015–03
  21. By: Dangl, Thomas; Zechner, Josef
    Abstract: This paper shows that long debt maturities eliminate equityholders' incentives to reduce leverage when the firm performs poorly. By contrast, short debt maturities commit equityholders to such leverage reductions. However, shorter debt maturities also lead to higher transactions costs when maturing bonds must be refinanced. We show that this tradeoff between higher expected transactions costs against the commitment to reduce leverage when the firm is doing poorly motivates an optimal maturity structure of corporate debt. Since firms with high costs of financial distress benefit most from committing to leverage reductions, they have a stronger motive to issue short-term debt.
    Keywords: debt maturity,optimal capital structure choice
    JEL: G3 G32
    Date: 2016
  22. By: Alipranti, Maria; Mitrokostas, Evangelos; Petrakis, Emmanuel
    Abstract: We study firms' advertising strategies in an oligopolistic market in which both non-comparative and comparative advertising are present. We show that in equilibrium firms mix over the two types of advertising, with the intensity of comparative advertising exceeding that of non-comparative advertising; moreover, that the intensity of comparative increases relatively to non-comparative advertising as market competition intensifies. Interestingly, the use of comparative advertising may lead to higher consumers' surplus and welfare in a mixed advertising market than in the absence of advertising or when either comparative or non-comparative advertising is not present.
    Keywords: Comparative Advertising,Non-comparative advertising,Oligopoly,Product Differentiation
    JEL: L13 M37
    Date: 2016
  23. By: Alice Hsiaw (Brandeis University); Ing-Haw Cheng (Brandeis University)
    Abstract: Individuals often must learn about a state of the world when both the state and the credibility of information sources (experts) are uncertain. We argue that learning in these "rank-deficient" environments may be subject to a bias that leads agents to over-infer expert quality. Agents who encounter information or experts in different order disagree about substance because they endogenously disagree about the credibility of each others' experts, as first impressions about experts have long-lived influences on beliefs about the state. This arises even though agents share common priors, information, and biases, providing a theory for the origins of disagreement. Our theory helps explain why disagreement about substance and expert credibility often go hand-in-hand and is hard to resolve in a wide-range of issues where agents share common information, including economics, climate change, and medicine.
    Date: 2016–10
  24. By: Simon Dato; Andreas Grunewald; Daniel Müller
    Abstract: This paper provides a comprehensive analysis regarding strategic interaction under expectation-based loss-aversion. First, we develop a coherent framework for the analysis by extending the equilibrium concepts of Koszegi and Rabin (2006, 2007) to strategic interaction and demonstrate how to derive equilibria. Second, we delineate how expectation-based loss-averse players differ in their strategic behavior from their counterparts with standard expected-utility preferences. Third, we analyze equilibrium play under expectation-based loss aversion and comment on the existence of equilibria.
    Keywords: Non-Cooperative Games, Expectation-Based Loss Aversion, Reference-Dependent Preferences, Mixed Strategies
    JEL: C72 D01 D03 D81
    Date: 2016–02
  25. By: John Asker; Heski Bar-Isaac
    Abstract: We consider vertical contracts where the retail market may involve search frictions. Minimum advertised price restrictions (MAP) act as a restraint on customers’ information and so can increase search frictions in the retail sector. Such restraints, thereby, soften retail competition—an impact also generated by resale price maintenance (RPM). However, by accommodating (consumer or retailer) heterogeneity, MAP can allow for higher manufacturer profits than RPM. We show that they can do so through facilitating price discrimination among consumers; encouraging service provision; and facilitating manufacturer collusion. Thus, welfare effects may be positive or negative compared to RPM or to the absence of such restrictions.
    JEL: K21 L13 L15 L22 L42
    Date: 2016–10
  26. By: Hanming Fang; Zenan Wu
    Abstract: A large empirical literature found that the correlation between insurance purchase and ex post realization of risk is often statistically insignificant or negative. This is inconsistent with the predictions from the classic models of insurance a la Akerlof (1970), Pauly (1974) and Rothschild and Stiglitz (1976) where consumers have one-dimensional heterogeneity in their risk types. It is suggested that selection based on multidimensional private information, e.g., risk and risk preference types, may be able to explain the empirical findings. In this paper, we systematically investigate whether selection based on multidimensional private information in risk and risk preferences, can, under different market structures, result in a negative correlation in equilibrium between insurance coverage and ex post realization of risk. We show that if the insurance market is perfectly competitive, selection based on multidimensional private information does not result in negative correlation property in equilibrium, unless there is a sufficiently high loading factor. If the insurance market is monopolistic or imperfectly competitive, however, we show that it is possible to generate negative correlation property in equilibrium when risk and risk preference types are sufficiently negative dependent, a notion we formalize using the concept of copula. We also clarify the connections between some of the important concepts such as adverse/advantageous selection and positive/negative correlation property.
    JEL: D82 G22 H11
    Date: 2016–10
  27. By: Jeitschko, Thomas D.; Liu, Ting; Wang, Tao
    Abstract: We study firms' incentives to acquire private information in a setting where subsequent competition leads to firms' later signaling their private information to rivals. Due to signaling, equilibrium prices are distorted, and so while firms benefit from obtaining more precise private information, the value of information is reduced by the price distortion. Thus, compared with firms that do not attempt to manipulate rivals' beliefs, signaling firms acquire less precise information. An industry-wide trade-association acquiring information increases firm profit and may also increase consumer surplus, so allowing such collective action may be in the interest of regulatory authorities.
    Keywords: information acquisition,signaling,product differentiation
    JEL: D4 D8 L1
    Date: 2016
  28. By: Peeters, Ronald (General Economics 1 (Micro)); Tenev, Anastas (General Economics 1 (Micro))
    Abstract: The second-price sealed-bid common-value auction exhibits lower winner's curse probability compared to the rst-price auction for any number of bidders. For both auction types, above a certain threshold adding more bidders increases the chances of the winner's curse only marginally while it decreases potential losses to the bidders and increases revenue. Below this threshold, having fewer bidders lowers the winner's curse probability and the losses to the bidders, but also the average revenue.
    Keywords: Winner's curse, number of bidders, common value auctions
    JEL: D44 D82 H57
    Date: 2016
  29. By: Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: We consider a model of opinion formation based on aggregation functions. Each player modifies his opinion by arbitrarily aggregating the current opinion of all players. A player is influential on another player if the opinion of the first one matters to the latter. A generalization of an influential player to a coalition whose opinion matters to a player is called an influential coalition. Influential players (coalitions) can be graphically represented by the graph (hypergraph) of influence, and convergence analysis is based on properties of the hypergraphs of influence. In the paper, we focus on the practical issues of applicability of the model w.r.t. a standard framework for opinion formation driven by Markov chain theory. For a qualitative analysis of convergence, knowing the aggregation functions of the players is not required, one only needs to know the set of influential coalitions for each player. We propose simple algorithms that permit us to fully determine the influential coalitions. We distinguish three cases: the symmetric decomposable model, the anonymous model, and the general model. JEL Classification: C7, D7, D85
    Keywords: social network,opinion formation,aggregation function,influential coalition,algorithm
    Date: 2016
  30. By: T. Renee Bowen; George Georgiadis; Nicolas S. Lambert
    Abstract: Two heterogeneous agents contribute over time to a joint project, and collectively decide its scope. A larger scope requires greater cumulative effort and delivers higher benefits upon completion. We show that the efficient agent prefers a smaller scope, and preferences are time-inconsistent: as the project progresses, the efficient (inefficient) agent’s preferred scope shrinks (expands). We characterize the equilibrium outcomes under dictatorship and unanimity, with and without commitment. We find that an agent’s degree of efficiency is a key determinant of control over project scopes. From a welfare perspective, it may be desirable to allocate decision rights to the inefficient agent.
    JEL: C73 D70 D78 H41
    Date: 2016–10

This nep-mic issue is ©2016 by Jing-Yuan Chiou. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.