
on Microeconomics 
By:  Schopohl, Simon (Center for Mathematical Economics, Bielefeld University) 
Abstract:  We consider a SenderReceiver game in which the Sender can choose between sending a cheaptalk message, which is costless, but also not verified and a costly verified message. While the Sender knows the true state of the world, the Receiver does not have this information, but has to choose an action depending on the message he receives. The action then yields to some utility for Sender and Receiver. We only make a few assumptions about the utility functions of both players, so situations may arise where the Senderâ€™s preferences are such that she sends a message trying to convince the Receiver about a certain state of the world, which is not the true one. In a finite setting we state conditions for full revelation, i.e. when the Receiver always learns the truth. Furthermore we describe the playerâ€™s behavior if only partial revelation is possible. For a continuous setting we show that additional conditions have to hold and that these do not hold for "smooth" preferences and utility, e.g. in the classic example of quadratic loss utilities. 
Keywords:  cheaptalk, communication, costly disclosure, full revelation, increasing differences, SenderReceiver game, verifiable information 
Date:  2016–12–23 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:569&r=mic 
By:  James Best (Dept of Economics and Nuffield College, University of Oxford); Daniel Quigley (Dept of Economics and Nuffield College, University of Oxford) 
Abstract:  We examine the limits of persuasion when credibility today is sustained by the incentive of future credibility. We model this as a longrun sender with private information playing a cheap talk game against shortrun receivers where there is a noisy signal at the end of each period on the sender’s exante private information. We compare our model of longrun persuasion to the persuasion baseline of committed persuasion, where the sender can commit to strategies at the stage game. Longrun persuasion can only achieve the optimal committed persuasion payoffs if the optimal committed persuasion strategy is “honest”. When the optimal committed strategy is not honest the use of either a weak communication mechanism called a ‘Coin and Cup’ (CnC) or a standard communication mechanism (a mediator) expands the Pareto frontier of the game. For sufficiently patient senders, a CnC mechanism replicates committed persuasion payoffs when the sender’s information is perfectly observed expost, whereas a mediator can get arbitrarily close whenever systematic deviation from truth telling is asymptotically identified. The advantage of the CnC over the mediator is that it is relatively easy to manufacture and implement. Finally, we show how ‘emergent communication mechanisms’ arise when there are many simultaneous receivers. 
Date:  2016–12–09 
URL:  http://d.repec.org/n?u=RePEc:nuf:econwp:1612&r=mic 
By:  Gerard Llobet (CEMFI, Centro de Estudios Monetarios y Financieros); Jorge Padilla (Compass Lexecon) 
Abstract:  It has been commonly argued that the decision of a large number of inventors to license complementary patents necessary for the development of a product leads to excessively large royalties. This wellknown Cournotcomplements or royaltystacking effect would hurt efficiency and downstream competition. In this paper we show that when we consider patent litigation and introduce heterogeneity in the portfolio of different firms these results change substantially due to what we denote the Inverse Cournot e ect. We show that the lower the total royalty that a downstream producer pays, the lower the royalty that patent holders restricted by the threat of litigation of downstream producers will charge. This effect generates a moderation force in the royalty that unconstrained large patent holders will charge that may overturn some of the standard predictions in the literature. Interestingly, though, this effect can be less relevant when all patent portfolios are weak making royalty stacking more important. 
Keywords:  Intellectual property, standard setting organizations, patent licensing, R&D investment, patent pools. 
JEL:  L15 L24 O31 O34 
Date:  2016–11 
URL:  http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2016_1608&r=mic 
By:  JuanJosé Ganuza (Universitat Pompeu Fabra and Barcelona GSE); Gerard Llobet (CEMFI, Centro de Estudios Monetarios y Financieros) 
Abstract:  This paper shows that the concession model discourages firms from acquiring information about the future profitability of a project. Uniformed contractors carry out good and bad projects because they are profitable in expected terms even though it would have been optimal to invest in screening them out according to their value. White elephants are identified as avoidable negative net presentvalue projects that are nevertheless undertaken. Institutional arrangements that limit the losses that firms can bear exacerbate this distortion. We characterize the optimal concession contract which fosters the acquisition of information and achieves the first best by conditioning the duration of the concession to the realization of the demand and includes payments for not carrying out some projects. 
Keywords:  Concession contracts, information acquisition, flexibleterm concessions. 
JEL:  D82 D86 H21 L51 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2017_1701&r=mic 
By:  Auriol, Emmanuelle; PLATTEAU, Jean Philippe 
Abstract:  The relationship between religion and politics is explored from a theoretical standpoint. Religious clerics can be seduced by an autocrat and political stability is at stake. The autocrat's decisions consist of two measures susceptible of antagonising religious clerics: adopting secular reforms and unduly appropriating part of national wealth, which generally are complement. Compared to centralized religions, decentralized religions, such as Islam, tend to discourage secular reforms and corruption but those effects are not guaranteed if the autocrat accepts political instability. The main hypotheses and the central results of the theory are illustrated with regime case studies that refer to contemporary times. 
Keywords:  Autocracy, instrumentalization of religion, centralized and decentralized religion, Islam, economic development, reforms, corruption 
JEL:  D02 D72 N40 O57 P48 Z12 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:tse:wpaper:31421&r=mic 
By:  László Á. Kóczy (Centre for Economic and Regional Studies, Hungarian Academy of Sciences and and Keleti Faculty of Business and Management, Óbuda University); János Kiss Hubert (Centre for Economic and Regional Studies, Hungarian Academy of Sciences) 
Abstract:  The 2016 Nobel Memorial Prize in Economic Sciences was awarded to Oliver Hart and Bengt Holmström for their work on contract theory. Contract theory is a subfield of game theory where the conflict between the owner  the principal  and the CEO  or agent is at the centre of interest. In the following we explain the principalagent model of Holmström with some extensions and then look at the property right aspects of these models based on Hart's work. Although the two researchers are recognised for their theoretical work, in our simple introduction we avoid complex formulae and illustrate the models with examples. 
Keywords:  contract theory, incentives, principalagent problem, Nobel prize, risk, property rights JEL Codes: C72, D82, D86 
Date:  2017 
URL:  http://d.repec.org/n?u=RePEc:pkk:wpaper:1701&r=mic 
By:  Sara Biancini (Université de CaenNormandie, CREM UMR CNRS 6211, France); David Ettinger (Université Paris Dauphine, PSL, LEDa and CEREMADE, France); Baptiste Venet (Université Paris Dauphine, PSL, IRD, LEDa, UMR225, DIAL, France) 
Abstract:  We analyze the relationship between Micro nance Institutions (MFIs) and external donors, with the aim of contributing to the debate on ``mission drift" in microfinance. We assume that both the donor and the MFI are propoor, possibly at different extents. Borrowers can be (very) poor or wealthier (but still unbanked). Incentives have to be provided to the MFI to exert costly effort to identify the more valuable projects and to choose the right share of poorer borrowers (the optimal level of poor outreach). We first concentrate on hidden action. We show that asymmetric information can distort the share of very poor borrowers reached by loans, thus increasing mission drift. We then concentrate on hidden types, assuming that MFIs are characterized by unobservable heterogeneity on the cost of effort. In this case, asymmetric information does not necessarily increase the mission drift. The incentive compatible contracts push efficient MFIs to serve a higher share of poorer borrowers, while less efficient ones decrease their poor outreach. 
Keywords:  Microfinance, Donors, Poverty, Screening 
JEL:  O12 O16 G21 
Date:  2017–02 
URL:  http://d.repec.org/n?u=RePEc:tut:cremwp:201702&r=mic 
By:  Fabrizio Germano; Jonathan Weinstein; Peio ZuazoGarin 
Abstract:  Predictions under common knowledge of payoffs may differ from those under arbitrarily, but finitely, many orders of mutual knowledge; Rubinstein's (1989) Email game is a seminal example. Weinstein and Yildiz (2007) showed that the discontinuity in the example generalizes: for all types with multiple rationalizable (ICR) actions, there exist similar types with unique rationalizable action. This paper studies how a wide class of departures from common belief in rationality impact Weinstein and Yildiz's discontinuity. We weaken ICR to ICRx, where x is a sequence whose nth term is the probability players attach to (n  1)thorder belief in rationality. We find that Weinstein and Yildiz's discontinuity holds when higherorder belief in rationality remains above some threshold (constant x), but fails when higherorder belief in rationality eventually becomes low enough (x converging to 0). 
Keywords:  Robustness, rationalizability, bounded rationality, incomplete information, belief hierarchies. 
JEL:  C72 D82 D83 
Date:  2016–12 
URL:  http://d.repec.org/n?u=RePEc:upf:upfgen:1548&r=mic 
By:  Beißner, Patrick (Center for Mathematical Economics, Bielefeld University); Riedel, Frank (Center for Mathematical Economics, Bielefeld University) 
Abstract:  Knightian uncertainty leads naturally to nonlinear expectations. We introduce a corresponding equilibrium concept with sublinear prices and establish their existence. In general, such equilibria lead to Pareto inefficiency and coincide with ArrowDebreu equilibria only if the values of net trades are ambiguityfree in the mean. Without aggregate uncertainty, inefficiencies arise generically. We introduce a constrained efficiency concept, uncertaintyneutral efficiency and show that KnightWalras equilibrium allocations are efficient in this constrained sense. ArrowDebreu equilibria turn out to be nonrobust with respect to the introduction of Knightian uncertainty. 
Keywords:  Knightian Uncertainty, Ambiguity, General Equilibrium 
Date:  2016–05–30 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:558&r=mic 
By:  Decerf, Benoit (Center for Mathematical Economics, Bielefeld University); Riedel, Frank (Center for Mathematical Economics, Bielefeld University) 
Abstract:  Riedel and Sass (2013) study complete information normal form games in which ambiguity averse players use ambiguous randomization strategies, in addition to pure and mixed strategies. The solution concept they propose, the Ellsberg equilibrium, is a coarsening of the classical Nash equilibrium. We provide a foundation of the new equilibrium concept in the spirit of Harsanyi. We prove an extension of the Purification Theorem for 2x2 normal form games. Our result implies that any Ellsberg equilibrium of such game is the limit case of a mixed strategy equilibrium in a disturbed version of the game for which payoffs are ambiguously disturbed. 
Keywords:  Knightian uncertainty, Ellsberg games, Ambiguity aversion, Purification, Disambiguation 
Date:  2016–03–03 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:554&r=mic 
By:  Sela, Aner 
Abstract:  We use the theoretical framework of signaling games to determine whether precontest communications would occur in contest models with asymmetric information. We find that in Tullock contests signals can be effectively used in equilibrium. We then study allpay contests and show that such signals are not effective, and therefore precontest communications will not occur in equilibrium. 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:cpr:ceprdp:11798&r=mic 
By:  Matthias Dahm (School of Economics, University of Nottingham) 
Abstract:  This paper studies the effects of a specific affirmative action policy in complete information allpay auctions when players differ in ability. We call this policy an extra prize. The contest organiser splits the prize of the competition into a main prize and an extra prize. Extra prizes differ from second prizes, because they are targeted towards disadvantaged (lowability) agents. We consider a setting with one highability and two lowability contestants and fully characterise equilibrium. Assuming that the contest organiser aims to maximise expected total effort, we show that (i) almost any extra prize is preferable to a standard allpay auction without extra prize; (ii) the exclusion principle (Baye, Kovenock and de Vries, 1993) can be implemented by a wide range of sufficiently large extra prizes; and (iii) partial exclusion by means of an appropriately chosen extra prize benefits the organiser more than complete exclusion. 
Keywords:  Asymmetric contests, multiprize contests, equality of opportunity, affirmative action, discrimination, prize structure, exclusion principle 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:not:notcdx:201701&r=mic 
By:  Steg, JanHenrik (Center for Mathematical Economics, Bielefeld University) 
Abstract:  The seminal work of Fudenberg and Tirole (1985) on how preemption erodes the value of an option to wait raises general questions about the relation between models in discrete and continuous time and thus about the interpretation of its central result, relying on an â€œinfinitely fine gridâ€ . Here it is shown that the preemption equilibrium is the limit of the unique symmetric equilibria of the game when reduced to any sequence of grids becoming infinitely fine. Furthermore, additional subgame perfect equilibria using conventional continuoustime mixed strategies are identified. 
Keywords:  Preemption, discrete time, continuous time, subgame perfect equilibrium, convergence 
Date:  2016–04–11 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:556&r=mic 
By:  Konstantinos Georgalos; Sonali Sen Gupta; Indrajit Ray 
Abstract:  In a coarse correlated equilibrium (Moulin and Vial 1978), each player finds it optimal to commit ex ante to the future outcome from a probabilistic correlation device instead of playing any strategy of their own. In this paper, we consider a specific twoperson game with unique pure Nash and correlated equilibrium and test the concept of coarse correlated equilibrium with a device which is an equally weighted lottery over three symmetric outcomes in the game including the Nash equilibrium, with higher expected payoff than the Nash payoff (as in Moulin and Vial 1978). We also test an individual choice between a lottery over the same payoffs with equal probabilities and the sure payoff as in the Nash equilibrium of the game. Subjects choose the individual lottery, however, they do not commit to the device in the game and instead coordinate to play the Nash equilibrium. We explain this behaviour as an equilibrium in the game. 
Keywords:  Correlation, Coordination, Lottery 
JEL:  C72 C91 C92 D63 D83 
Date:  2017 
URL:  http://d.repec.org/n?u=RePEc:lan:wpaper:151235570&r=mic 
By:  Johansen, Bjørn Olav (Department of Economics, University of Bergen, Norway); Vergé, Thibaud (CREST, ENSAE, Université ParisSaclay and Norwegian School of Economics) 
Abstract:  In the context of vertical contractual relationships, where competing sellers distribute their products directly as well as through competing intermediation platforms, we analyze the welfare effects of price parity clauses. These contractual clauses prevent a seller from offering its product at a lower price on other platforms or through its own direct sales channel. Recently, they have been the subject of several antitrust investigations. Contrary to the theories of harm developed by competition agencies and in some of the recent literature, we show that when we account for the sellers’ participation constraints, price parity clauses do not always lead to higher commissions and final prices. Instead, we find that they may simultaneously bene.t all the actors (platforms, sellers and consumers), even in the absence of traditional efficiency arguments. 
Keywords:  Vertical contracts; price parity clauses; platforms; endogenous participation 
JEL:  L13 L42 
Date:  2017–01–27 
URL:  http://d.repec.org/n?u=RePEc:hhs:bergec:2017_001&r=mic 
By:  Gauer, Florian (Center for Mathematical Economics, Bielefeld University); Kuzmics, Christoph (Center for Mathematical Economics, Bielefeld University) 
Abstract:  Two individuals are involved in a conflict situation in which preferences are ex ante uncertain. While they eventually learn their own preferences, they have to pay a small cost if they want to learn their opponentâ€™s preferences. We show that, for sufficiently small positive costs of information acquisition, in any Bayesian Nash equilibrium of the resulting game of incomplete information the probability of getting informed about the opponentâ€™s preferences is bounded away from zero and one. 
Keywords:  Incomplete Information, Information Acquisition, Theory of Mind, Conflict, Imperfect Empathy 
Date:  2016–01–15 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:551&r=mic 
By:  Cheremukhin, Anton A. (Federal Reserve Bank of Dallas); RestrepoEchavarria, Paulina (Federal Reserve Bank of St. Louis); Tutino, Antonella (Federal Reserve Bank of Dallas) 
Abstract:  We endogenize the degree of randomness in the matching process by proposing a model where agents have to pay a search cost to locate potential matches more accurately. The model features a tension between an agent’s desire to find a more productive match and to maximize the odds of finding a match. This tension drives a wedge between the shape of sorting patterns and the shape of the underlying match payoff function. We show the empirical relevance of the latter prediction by applying the model to the U.S. marriage market. 
Keywords:  Matching; sorting; assignment; search 
JEL:  C78 D83 E24 J64 
Date:  2016–05–20 
URL:  http://d.repec.org/n?u=RePEc:fip:feddwp:1610&r=mic 
By:  Caleb Stroup (Department of Economics, Davidson College); Matthew L. Gentry (Department of Economics, London School of Economics and Political Science) 
Abstract:  We show that in many cases target shareholders would obtain higher prices if their company were sold via a negotiation, rather than via an auction. We show that fewer than half of invited potential bidders participate in takeover auctions. Endogenous participation is thus an important feature of takeover auction markets. Accounting for the endogenous determination of the size and composition of the bidder pool, we show that possible bidders in takeover auctions face substantial uncertainty prior to their entry into an auction, but that this uncertainty encourages participation in competitive bidding, thus making auctions preferable when uncertainty is high. In negotiations, uncertainty reduces the effectiveness of upward bidshading to deter potential competitors, so negotiations are preferable when uncertainty is low. Crosssectional averages thus mask dramatic variation in the best way to sell a company, but over 40 percent of this variation is accounted for by preentry uncertainty and the costs of overcoming it. Our results call into question claims that target directors necessarily violate their fiduciary duty by selling a company via a negotiated transaction, even in the absence of a formal market check. 
Keywords:  Takeover Auctions, Mergers and Acquisitions 
JEL:  D44 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:dav:wpaper:1701&r=mic 
By:  Hans Gersbach (Swiss Federal Institute of Technology Zurich, Institute for the Study of Labor (IZA), CESifo (Center for Economic Studies and Ifo Institute) and Centre for Economic Policy Research (CEPR)); JeanCharles Rochet (University of Zurich, University of Toulouse I, Ecole Polytechnique Fédérale de Lausanne, and Swiss Finance Institute) 
Abstract:  Evidence suggests that banks tend to lend a lot during booms, and very little during recessions. We propose a simple explanation for this phenomenon. We show that, instead of dampening productivity shocks, the banking sector tends to exacerbate them, leading to excessive fluctuations of credit, output and asset prices. Our explanation relies on three ingredients that are characteristic of modern banks' activities. The first ingredient is moral hazard: banks are supposed to monitor the small and medium sized enterprises that borrow from them, but they may shirk on their monitoring activities, unless they are given sufficient informational rents. These rents limit the amount that investors are ready to lend them, to a multiple of the banks' own capital. The second ingredient is the banks' high exposure to aggregate shocks: banks' assets have positively correlated returns. Finally the third ingredient is the ease with which modern banks can reallocate capital between different lines of business. At the competitive equilibrium, banks offer privately optimal contracts to their investors but these contracts are not socially optimal: banks' decisions of reallocating capital react too strongly to aggregate shocks. This is because banks do not internalize the impact of their decisions on asset prices. This generates excessive fluctuations of credit, output and asset prices. We examine the efficacy of several possible policy responses to these properties of credit markets, and show that it can provide a rationale for macroprudential regulation. 
Keywords:  Bank Credit Fluctuations, Macroprudential Regulation, Investment Externalities 
JEL:  G21 G28 D86 
URL:  http://d.repec.org/n?u=RePEc:chf:rpseri:rp1203&r=mic 
By:  Ioannis Pinopoulos (Department of Economics, University of Macedonia) 
Abstract:  We consider an upstream supplier who bargains with two costasymmetric downstream firms over the terms of interim observable twopart tariff contracts: contracts are initially secret (acceptance decisions are based on beliefs) but downstream firms observe the accepted contract terms before competing in prices. We show that the more efficient downstream firm pays a higher input price than its less efficient rival, a finding that is in stark contrast to the previous findings in the literature on input price discrimination with twopart tariff contracts. We also show that a ban on input price discrimination will reduce both consumer and total welfare when the upstream supplier bargains the common twopart tariff contract with the less efficient firm. This result is interesting from a policy perspective since it implies that even though under discriminatory input prices the upstream supplier favors the “wrong” firm, nondiscriminatory input pricing can make things even worse in terms of welfare. 
Keywords:  Vertical relations, input price discrimination, twopart tariffs, bargaining, welfare. 
JEL:  D4 L1 L4 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:mcd:mcddps:2017_01&r=mic 
By:  Nicolas GRAVEL; Brice MAGDALOU; Patrick MOYES 
Abstract:  What would be the analogue of the Lorenz quasiordering when the variable of interest is of a purely ordinal nature? We argue that it is possible to derive such a criterion by substituting for the PigouDalton transfer used in the standard inequality literature what we refer to as a Hammond progressive transfer. According to this criterion, one distribution of utilities is considered to be less unequal than another if it is judged better by both the lexicographic extensions of the maximin and the minimax, henceforth referred to as the leximin and the antileximax, respectively. If one imposes in addition that an increase in someone\'s utility makes the society better off, then one is left with the leximin, while the requirement that society welfare increases as the result of a decrease of one person\'s utility results in the antileximax criterion. Incidently, the paper provides an alternative and simple characterisation of the leximin principle widely used in the social choice and welfare literature. 
Keywords:  Ordinal inequality, Hammond equity principle, Leximin, Antileximax. 
JEL:  D30 D63 
Date:  2017 
URL:  http://d.repec.org/n?u=RePEc:grt:wpegrt:201703&r=mic 
By:  Sun, Lan (Center for Mathematical Economics, Bielefeld University) 
Abstract:  In this paper, we propose a definition of Hypothesis Testing Equilibrium (HTE) for general signaling games with nonBayesian players nested by an updating rule according to Hypothesis Testing model characterized by Ortoleva (2012). An HTE may be different from a sequential Nash equilibrium because of the dynamic inconsistency. However, when player 2 only takes zeroprobability message as an unexpected news, an HTE is a refinement of sequential Nash equilibrium and it survives Intuitive Criterion, but not vice versa. We provide existence theorem covering a broad class of signaling games often studied in economics, and the constrained HTE is unique in such signaling games. 
Keywords:  Signaling Games, Hypothesis Testing Equilibrium, Equilibrium Refinement 
Date:  2016–05–30 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:557&r=mic 
By:  Bettina Klaus; Flip Klijn 
Abstract:  We study manytomany matching markets in which agents from a set A are matched to agents from a disjoint set B through a twostage nonrevelation mechanism. In the first stage, Aagents, who are endowed with a quota that describes the maximal number of agents they can be matched to, simultaneously make proposals to the Bagents. In the second stage,Bagents sequentially, and respecting the quota, choose and match to available Aproposers. We study the subgame perfect Nash equilibria of the induced game. We prove that stable matchings are equilibrium outcomes if all Aagents' preferences are substitutable. We also show that the implementation of the set of stable matchings is closely related to the quotas of the Aagents. In particular, implementation holds when Aagents' preferences are substitutable and their quotas are nonbinding. 
Keywords:  implementation; matching; mechanisms; stability; substitutability 
JEL:  C78 D78 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:lau:crdeep:17.01&r=mic 
By:  Miettinen, Paavo 
Abstract:  This paper considers equilibrium behavior in a descending price auction with two players that are asymmetrically informed. The ”informed” player knows his valuation while the other does not. The uninformed player can acquire information about his valuation with a positive cost during the auction. We assume that the information acquisition activity is covert and we characterize the equilibrium behavior in the setting where players’ valuations are independently and identically distributed. We derive the explicit ”inverse bid” functions in the case of the uniformly distributed valuations and provide a revenue comparison between the ascending and descending price auctions in this case. 
JEL:  D44 D82 
Date:  2017–01–27 
URL:  http://d.repec.org/n?u=RePEc:bof:bofrdp:2017_005&r=mic 
By:  Kuzmics, Christoph (Center for Mathematical Economics, Bielefeld University); Steg, JanHenrik (Center for Mathematical Economics, Bielefeld University) 
Abstract:  Consider a mechanism for the binary public good provision problem that is dominant strategy incentive compatible (DSIC), expost individually rational (EPIR), and expost budget balanced (EPBB). Suppose this mechanism has the additional property that the utility from participating in the mechanism to the lowest types is zero for all agents. Such a mechanism must be of a threshold form, in which there is a fixed threshold for each agent such that the public good is not provided if there is an agent with a value below her threshold and is provided if all agentsâ€™ values exceed their respective threshold. There are mechanism that are DSIC, EPIR, and EPBB that are not of the threshold form. Mechanisms that maximize welfare subject to DSIC, EPIR, and EPBB must again have the threshold form. Finally, mechanisms that are DSIC, EPIR, EPBB and that furthermore satisfy the condition that there is at least one type profile in which all agents can block the provision of the public good, also must be of the threshold form. As we allow individualsâ€™ values for the public good to be negative and positive, our results cover examples including bilateral trade, bilateral wage negotiations, a seller selling to a group of individuals (who then have joint ownership rights), and rezoning the use of land. 
Keywords:  Public good provision, asymmetric information, dominant strategy 
Date:  2016–03–02 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:553&r=mic 
By:  Thomas Demuynck; JeanJacques Herings; Riccardo Saulle; Christian Seel 
Abstract:  We introduce a new solution concept for models of coalition formation, called the myopic stable set. The myopic stable set is defined for a very general class of social environments and allows for an infinite state space. We show that the myopic stable set exists and is nonempty. Under minor continuity conditions, we also demonstrate uniqueness. Furthermore, the myopic stable set is a superset of the core and of the set of pure strategy Nash equilibria in noncooperative games. Additionally, the myopic stable set generalizes and unifies various results from more specific environments. In particular, the myopic stable set coincides with the coalition structure core in coalition function form games if the coalition structure core is nonempty; with the set of stable matchings in the standard onetoone matching model; with the set of pairwise stable networks and closed cycles in models of network formation; and with the set of pure strategy Nash equilibria infinite supermodular games, finite potential games, and aggregative games. We illustrate the versatility of our concept by characterizing the myopic stable set in a model of Bertrand competition with asymmetric costs, for which the literature so far has not been able to fully characterize the set of all (mixed) Nash equilibria. 
Keywords:  social environments; group formation; stability; Nash equilibrium 
JEL:  C70 C71 
Date:  2017–01 
URL:  http://d.repec.org/n?u=RePEc:eca:wpaper:2013/244778&r=mic 
By:  Duman, Papatya (Center for Mathematical Economics, Bielefeld University); Trockel, Walter (Center for Mathematical Economics, Bielefeld University) 
Abstract:  The alternating offers game due to Rubinstein (1982) had been used by Binmore (1980) and by Binmore et.al. (1986) to provide via its unique subgame perfect equilibrium an approximate noncooperative support for the Nash bargaining solution of associated cooperative twoperson bargaining games. These results had strengthened the prominent role of the Nash bargaining solution in cooperative axiomatic bargaining theory and its application, for instance in labor markets, and have often even be interpreted as a mechanism theoretical implementation of the Nash solution. Our results in the present paper provide exact noncooperative foundations first, in our Proposition, via weakly subgame perfect equilibria of a game that is a modification of RubinsteinÂ´s game, then in our Theorem, via subgame perfect equilibria of a game that is a further modification of our first game. Moreover, they provide a general rule how to transform approximate support results into exact ones. Finally, we discuss the relation of the above mentioned support results, including our present ones, with mechanism theoretic implementation in (weakly) subgame perfect equilibrium of the Nash solution. There we come to the conclusion that a sound interpretation as an implementation can hardly be found except in very rare cases of extremely restricted domains of playersÂ´ preferences. 
Keywords:  Nash program, Noncooperative foundation, Implementation, Nash solution, Rubinstein game, Subgame perfect equilibrium 
Date:  2016–01–15 
URL:  http://d.repec.org/n?u=RePEc:bie:wpaper:550&r=mic 