nep-mic New Economics Papers
on Microeconomics
Issue of 2017‒03‒19
ten papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Memory, Attention, and Choice By Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer
  2. Subjective expected utility representations for Savage preferences on topological spaces By Pivato, Marcus; Vergopoulos, Vassili
  3. Take-it-or-leave-it contracts in many-to-many matching markets By Triossi, Matteo; Romero-Medina, Antonio
  4. Committee Design with Endogenous Participation By Hahn, Volker
  5. Equality of When ? By Giorgos Galanis; Roberto Veneziani
  6. Self-Enforcing Trade Credit By Marta Troya-Martinez
  7. The symmetric equilibria of symmetric voter participation games with complete information By Nöldeke, Georg; Peña, Jorge
  8. Absolute Qualified Majoritarianism: How Does the Threshold Matter? By Ali Ihsan Ozkes; M. Remzi Sanver
  9. Complementarity and Bargaining Power By Bonnet, Céline; Bouamra-Mechemache, Zohra; Richards, Timothy
  10. Fighting Collusion by Permitting Price Discrimination By Helfrich, Magdalena; Herweg, Fabian

  1. By: Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer
    Abstract: We present a theory in which the choice set cues a consumer to recall a norm, and surprise relative to the norm shapes his attention and choice. We model memory based on Kahana (2012), where past experiences that are more recent or more similar to the cue are recalled and crowd out others. We model surprise relative to the norm using our salience model of attention and choice. The model predicts unstable and inconsistent behavior in new contexts, because these are evaluated relative to past norms. Under some conditions, repeated experience causes norms to adapt, inducing stable ? sometimes rational ?behavior across different contexts. We test some of the model?s predictions using an expanded data set on rental decisions of movers between US cities first analyzed by Simonsohn and Loewenstein (2006).
    Date: 2017–03
  2. By: Pivato, Marcus; Vergopoulos, Vassili
    Abstract: In many decisions under uncertainty, there are technological constraints on both the acts an agent can perform and the events she can observe. To model this, we assume that the set S of possible states of the world and the set X of possible outcomes each have a topological structure. The only feasible acts are continuous functions from S to X, and the only observable events are regular open subsets of S. In this environment, we axiomatically characterize a Subjective Expected Utility (SEU) representation of preferences over acts, involving a continuous utility function on X (unique up to positive affine transformations), and a unique probability measure on a Boolean algebra B of regular open subsets of S. With additional topological hypotheses, we obtain a unique Borel probability measure on S, along with an auxiliary apparatus called a liminal structure, which describes the agent’s informational constraints. We also obtain SEU representations involving subjective state spaces, such as the Stone-Čech compactification of S and the Stone space of B.
    Keywords: Subjective expected utility; topological space; technological feasibility; continuous utility; regular open set; Borel measure.
    JEL: D81
    Date: 2017–03–08
  3. By: Triossi, Matteo; Romero-Medina, Antonio
    Abstract: We study a class of sequential non-revelation mechanisms where hospitals make simultaneous take-it-or-leave-it offers to doctors that either accept or reject them. We show that the mechanisms in this class are equivalent. They (weakly) implement the set of stable allocations in subgame perfect equilibrium. When all preferences are substitutable, the set of equilibria of the mechanisms in the class forms a lattice. Our results reveal a first-mover advantage absent in the model without contracts. We apply our findings to centralize school admissions problems, and we show obtaining pairwise stable allocations is possible through the immediate acceptance mechanism.
    Keywords: ultimatum games; contracts; Many-to-many
    Date: 2017–02
  4. By: Hahn, Volker
    Abstract: We analyze different committee designs in a model with the endogenous participation of experts who have private information about their own abilities. Each committee design involves a test of abilities whose accuracy influences experts’ decisions to participate. We derive the following findings. First, higher wages lead to lower quality experts. Second, an increase in transparency improves the quality of experts on the committee. Third, larger committees attract less able experts than smaller ones, unless the committee operates under full transparency. Fourth, we derive the properties of optimal committees. They involve low wages and can be transparent or opaque.
    JEL: D71 D82 J45
    Date: 2016
  5. By: Giorgos Galanis (University of Warwick); Roberto Veneziani (Queen Mary University of London)
    Abstract: This paper analyses the temporal unit of egalitarian concern. In the intertemporal context, the differences between egalitarian views can be appreciated not only in inequality analysis but also as regards the ideal egalitarian distribution to be established. In this paper, three intergenerational egalitarian principles ( Complete Lives Egalitarianism , Corresponding Segments Egalitarianism and Simultaneous Segments Egalitarianism ) are analysed and CSE is argued to be the appropriate egalitarian bench-mark. The relations between the three principles and other moral ideals, namely maximin and utilitarianism, are also analysed. It is proved that CLE and CSE are compatible with a concern for the worst off and, partially, with a utilitarian concern, while the adoption of SSE implies a worse trade-off between egalitarianism and the other moral ideals.
    Keywords: Time, Inequality, Intertemporal setting, Difference principle
    JEL: D63 C61
    Date: 2017–01
  6. By: Marta Troya-Martinez (New Economic School)
    Abstract: Trade credit plays a very important role in inter-firm transactions. Because formal contracts are often unavailable, it is granted within an ongoing relationship. We characterize the optimal self-enforcing contract, when the ability to repay is unknown to the supplier and the threat of trade suspension is used to discipline the buyer. The optimal contract resembles a debt contract: if the fixed repayment is met, the contract is renewed. Otherwise, the supplier demands the highest feasible repayment and suspends trade for some time. The length of the trade suspension is contingent on the repayment. We provide a novel explanation for why the quantity is undersupplied, even when a repayment is met.
    Keywords: Limited Enforcement, Trade Credit, Imperfect Monitoring, Debt Contract
    JEL: C73 D82 L14
    Date: 2017–03
  7. By: Nöldeke, Georg; Peña, Jorge
    Abstract: We characterize the symmetric Nash equilibria of the symmetric voter participation game with complete information introduced by Palfrey and Rosenthal (1983). Our results confirm their conjecture on the existence, multiplicity, and comparative statics of such equilibria and yield more precise information on how changes in team size affect the location of equilibria.
    JEL: D72 C72 C02
    Date: 2016
  8. By: Ali Ihsan Ozkes (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, EHESS); M. Remzi Sanver (Université Paris-Dauphine, PSL Research University)
    Abstract: We study absolute qualified majority rules in a setting with more than two alternatives. We show that given two qualified majority rules, if transitivity is desired for the societal outcome and if the thresholds of one of these rules are at least as high as the other's for any pair of alternatives, then at each preference profile the rule with higher thresholds results in a coarser social ranking. Hence all absolute qualified majority rules can be expressed as specific coarsenings of the simple majority rule.
    Keywords: simple majority rule, qualified majority rules
    JEL: D7
    Date: 2016–11
  9. By: Bonnet, Céline; Bouamra-Mechemache, Zohra; Richards, Timothy
    Abstract: Bargaining power in vertical channels depends critically on the "disagreement profit" or the opportunity cost to each player should negotiations fail. In a multiproduct context, disagreement profit depends on the degree of substitutability among the products offered by the downstream retailer. Horn and Wolinsky (1988) use this fact to argue for the clear importance of complementarity relationships on bargaining power. We develop an empirical framework that is able to estimate the effect of retail complementarity on bargaining power, and margins earned by manufacturers and retailers in the French soft drink industry. We show that complementarity increases the strength of retailers' bargaining position, so their share of the total margin increases by almost 28% relative to the no-complementarity case.
    Keywords: Bargaining power, complementary goods, Nash-in-Nash equilibrium, retailing, soft drinks, vertical relationships
    JEL: D43 L13 M31
    Date: 2017–03
  10. By: Helfrich, Magdalena; Herweg, Fabian
    Abstract: We investigate the effect of a ban on third-degree price discrimination on the sustainability of collusion. We build a model with two firms that may be able to discriminate between two consumer groups. Two cases are analyzed: (i) Best-response symmetries so that profits in the static Nash equilibrium are higher if price discrimination is allowed. (ii) Best-response asymmetries so that profits in the static Nash equilibrium are lower if price discrimination is allowed. In both cases, firms' discount factor has to be higher in order to sustain collusion in grim-trigger strategies under price discrimination than under uniform pricing.
    JEL: D43 K21 L13
    Date: 2016

This nep-mic issue is ©2017 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.