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on Microeconomics |
| By: | Bezalel Peleg; Shmuel Zamir |
| Abstract: | We consider a standard model of judgment aggregation as presented, for example, in Dietrich (2015). For this model we introduce a sequential majority procedure (SMP) which uses the majority rule as much as possible. The ordering of the issues is assumed to be exogenous. The definition of SMP is given in Section 2. In Section 4 we construct an intuitive relevance relation for our model, closely related to conditional entailment, for our model. While in Dietrich (2015), the relevance relation is given exogenously as part of the model, we insist that the relevance relation be derived from the agenda. We prove that SMP has the property of independence of irrelevant issues (III) with respect to (the transitive closure of) our relevance relation. As III is weaker than the property of proposition-wise independence (PI) we do not run into impossibility results as does List (2004) who incorporates PI in some parts of his analysis. We proceed to characterize SMP by anonymity, restricted monotonicity, limited neutrality, restricted agenda property, and independence of past deliberations (see Section 3 for the precise details). SMP inherits the first three axioms from the Majority Rule. The axiom of restricted agenda property guarantees sequentiality. The most important axiom, independence of past deliberations (IPD), says that the choice at time (t+1) depends only on the choices in dates 1, ..., t and the judgments at (t +1) (and not on the judgments in dates 1, ..., t) . Also, we use this occasion to point out that Roberts (1991) characterization of choice by plurality voting may be adapted to our model. |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp719&r=mic |
| By: | Rhodes, Andrew; Zhou, Jidong |
| Abstract: | A puzzling feature of many retail markets is the coexistence of large multiproduct firms and smaller firms with narrow product ranges. This paper provides a possible explanation for this puzzle, by studying how consumer search frictions influence the structure of retail markets. In our model single-product firms which supply different products can merge to form a multiproduct firm. Consumers wish to buy multiple products, and due to search frictions value the one-stop shopping convenience associated with a multiproduct firm. We find that when search frictions are relatively large all ?rms are multiproduct in equilibrium. However when search frictions are smaller the equilibrium market structure is asymmetric, with di¤erent retail formats coexisting. This allows firms to better segment the market, and as such typically leads to the weakest price competition. When search frictions are low this asymmetric market structure is also the worst for consumers. Moreover due to the endogeneity of market structure, a reduction in the search friction can increase market prices and harm consumers. |
| Keywords: | consumer search; multiproduct pricing; one-stop shopping; retail market structure; conglomerate merger |
| JEL: | D11 D43 D83 L13 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:32715&r=mic |
| By: | Xi Chen (Nanjing University, China); Yu Chen (University of Graz, Austria); Xuhu Wan (Hong Kong University of Science and Technology, Hong Kong) |
| Abstract: | This paper explores a new continuous-time principal-agent problem for a firm with both moral hazard and adverse selection. Adverse selection appears at random times. The agent finds projects sequentially by exerting costly effort. Each project brings output to the firm, subject to the agent’s private shocks. These serial shocks are i.i.d and independent of the arrival time of new projects and the agent’s efforts. The shocks and efforts constitute the agent’s asymmetric information. We provide a full characterization of optimal contracts in which moral hazard effect and adverse selection effects interact. The second-best contract with moral hazard can achieve first-best efficiency, and third-best contract with the moral hazard and adverse selection can achieve second-best efficiency under pure adverse selection, if the agent is expectably rich enough. The payment is front-loaded under pure moral hazard. When moral hazard is combined with adverse selection, the payment can be backloaded or front-loaded, depending on the level of expectable wealth. |
| Keywords: | Dynamic Contract; Continuous Time; Moral Hazard; Adverse Selection; Project Search |
| JEL: | C61 D82 D86 J30 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2018-11&r=mic |
| By: | David Rietzke (Lancaster University); Yu Chen (University of Graz, Austria) |
| Abstract: | We study a principal-agent model wherein the agent is better informed of the prospects of the project, and the project requires both an observable and unobservable input. We characterize the optimal contracts, and explore the trade-offs between high and low-powered incentive schemes. We discuss the implications for push and pull programs used to encourage R&D activity, but our results are relevant in other contexts. |
| Keywords: | Pay for Performance; Moral Hazard; Adverse Selection; Observable Action; Principal-Agent Problem |
| JEL: | D82 D86 O31 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2018-12&r=mic |
| By: | Duffie, Darrell (Stanford University); Qiao, Lei (Shanghai University of Finance and Economics); Sun, Yeneng (National University of Singapore) |
| Abstract: | We develop a general and unified model in which a continuum of agents conduct directed random searches for counterparties. Our results provide the first probabilistic foundation for static and dynamic models of directed search (including the matching-function approach) that are common in search-based models of financial markets, monetary theory, and labor economics. The agents' types are shown to be independent discrete-time Markov processes that incorporate the effects of random mutation, random matching with match-induced type changes, and with the potential for enduring partnerships that may have randomly timed break-ups. The multi-period cross-sectional distribution of types is shown to be deterministic and is calculated using the exact law of large numbers. |
| JEL: | C02 D83 E00 G10 J64 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:repec:ecl:stabus:3359&r=mic |
| By: | Babus, Ana; Kondor, Peter |
| Abstract: | We propose a model of trade in over-the-counter (OTC) markets in which each dealer with private information can engage in bilateral transactions with other dealers, as determined by her links in a network. Each dealer's strategy is represented as a quantity-price schedule. We analyze the effect of trade decentralization and adverse selection on information diffusion, expected profits, trading costs and welfare. Information diffusion through prices is not affected by dealers' strategic trading motives, and there is an informational externality that constrains the informativeness of prices. Trade decentralization can both increase or decrease welfare. A dealer's trading cost is driven by both her own and her counterparties' centrality. Central dealers tend to learn more, trade more at lower costs and earn higher expected profit |
| Keywords: | information aggregation; bilateral trading; demand schedule equilibrium; trading networks. |
| JEL: | D82 D85 G14 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:88050&r=mic |
| By: | Colin von Negenborn; Martin Pollrich |
| Abstract: | This paper shows that the possibility of collusion between an agent and a supervisor imposes no restrictions on the set of implementable social choice functions (SCF) and associated payoff vectors. Any SCF and any payoff profile that are implementable if the supervisor’s information was public is also implementable when this information is private and collusion is possible. To implement a given SCF we propose a one-sided mechanism that endogenously creates private information for the supervisor vis-Ã -vis the agent, and conditions both players’ payoffs on this endogenous information. We show that in such a mechanism all collusive side-bargaining fails, similar to the trade failure in Akerlof’s (1970) car market and in models of bilateral trade. |
| Keywords: | Mechanism Design, Collusion, Asymmetric Information, Correlation |
| JEL: | D82 D83 L51 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_019_2018&r=mic |
| By: | William B. Haskell; Wenjie Huang; Huifu Xu |
| Abstract: | Decision maker's preferences are often captured by some choice functions which are used to rank prospects. In this paper, we consider ambiguity in choice functions over a multi-attribute prospect space. Our main result is a robust preference model where the optimal decision is based on the worst-case choice function from an ambiguity set constructed through preference elicitation with pairwise comparisons of prospects. Differing from existing works in the area, our focus is on quasi-concave choice functions rather than concave functions and this enables us to cover a wide range of utility/risk preference problems including multi-attribute expected utility and $S$-shaped aspirational risk preferences. The robust choice function is increasing and quasi-concave but not necessarily translation invariant, a key property of monetary risk measures. We propose two approaches based respectively on the support functions and level functions of quasi-concave functions to develop tractable formulations of the maximin preference robust optimization model. The former gives rise to a mixed integer linear programming problem whereas the latter is equivalent to solving a sequence of convex risk minimization problems. To assess the effectiveness of the proposed robust preference optimization model and numerical schemes, we apply them to a security budget allocation problem and report some preliminary results from experiments. |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1805.06632&r=mic |
| By: | David Bounie (Télécom ParisTech); Antoine Dubus (Télécom ParisTech); Patrick Waelbroeck (Ecole Nationale Supérieure des Télécommunications de Bretagne) |
| Abstract: | This paper investigates the strategies of a data broker in selling information to one or to two competing firms that can price-discriminate consumers. The data broker can strategically choose any segment of the consumer demand (information structure) to sell to firms that implement third-degree price-discrimination. We show that the equilibrium profits of the data broker are maximized when (1) information identifies the consumers with the highest willingness to pay; (2) consumers with a low willingness to pay remain unidentified; (3) the data broker sells two symmetrical information structures. The data broker therefore strategically sells partial information on consumers in order to soften competition between firms. Extending the baseline model, we prove that these results hold under first-degree price-discrimination. |
| Keywords: | Data broker,Information Structure,Price-discrimination |
| Date: | 2018–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01794886&r=mic |
| By: | Janssen, Maarten |
| Abstract: | This paper analyses the incentives of manufacturers to discriminate between exante symmetric retailers who compete for consumers with different search cost. By discriminating, a manufacturer indirectly screens searching consumers, creates more retail competition, increases its profits, but lowers consumer welfare. Low-cost retailers sell to a disproportionate share of low search cost consumers, providing strong incentives to compete; high-cost retailers also lower margins given their smaller customer base. For wholesale price discrimination to be an equilibrium outcome, some form of commitment is necessary. Legislation requiring sales at the recommended retail price serves as such a commitment device, making consumers worse off. |
| Keywords: | consumer search; double marginalization; Vertical Relations; Wholesale Price Discrimination. |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12945&r=mic |
| By: | Sarah Auster; Nicola Pavoni |
| Abstract: | We study the delegation problem between an investor and a nancial intermediary, who not only has better information about the performance of the di erent investments but also has superior awareness of the available investment opportunities. The intermediary decides which of the feasible investments to reveal and which ones to hide. We show that the intermediary nds it optimal to make the investor aware of investment opportunities at the extremes, e.g. very risky and very safe projects, but leaves the investor unaware of intermediate options. We further study the role of competition between intermediaries and allow for investors with di erent levels of awareness to coexist in the same market. Self-reported data from customers in the Italian retail investment sector support the key predictions of the model: more knowledgable investors receive richer menus that are nevertheless perceived to have less products at the extremes. |
| JEL: | D82 D83 G24 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp1869&r=mic |
| By: | Claus-Jochen Haake (Paderborn University); Cheng-Zhong Qin (University of California) |
| Abstract: | We establish axioms under which a bargaining solution can be found by the maximization of the CES function and is unique up to specification of the distribution and elasticity parameters. This solution is referred to as the CES solution which includes the NASH and egalitarian solutions as special cases. Next, we consider a normalization of the CES function and establish axioms, under which a bargaining solution can be found by the maximization of the normalized CES and is unique up to the specifications of the distribution and its substitution parameters. We refer to this solution as the normalized CES solution, which includes the Nash and Kalai-Smorodinsky solutions as special cases. Our paper contributes to bargaining theory by establishing unified characterizations of existing as well as a great variety of new bargaining solutions. |
| Keywords: | Bargaining problem, CES Function, Normalized CES Function, Nash solution, Kalai-Smorodinsky Solution, Egalitarian Solution. |
| JEL: | C78 D21 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:ciepap:113&r=mic |
| By: | Sara Negrelli |
| Abstract: | Recent empirical studies suggest that, during times of unexpected innovation, agents heterogeneously update their beliefs about an asset fundamental value, and they are uncertain about other agents’ beliefs on it. In this paper I show that, when there is uncertainty about the market sentiment, defined as other investors’ beliefs over an asset fundamental value, market manipulation can act through a previously unconsidered channel, by misleading agents’ learning on the market sentiment. This novel type of market manipulation becomes a severe concern with the recent diffusion of big data on agents’ beliefs, as it could strengthen existing financial bubbles, or even give rise to new ones.spect to anonymity; at the same time, the probability of the CBDC introduction increases if a return can be paid on it, and/or its implementation can guarantee at least the counterparty anonymity. |
| Keywords: | Bubbles, Heterogenous Priors, Higher-Order Beliefs, Market Manipulation, Bayesian Persuasion |
| JEL: | C73 D82 D83 D84 G14 G24 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp1876&r=mic |