nep-mic New Economics Papers
on Microeconomics
Issue of 2019‒03‒11
eighteen papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Quality and Price Personalization under Customer Recognition: A Dynamic Monopoly Model By Didier Laussel; Ngo Van Long; Joana Resende
  2. Optimal Learning and Ellsberg’s Urns By Larry G. Epstein; Shaolin Ji
  3. Persuading part of an audience By Bruno Salcedo
  4. Continuity and Robustness of Bayesian Equilibria in Tullock Contests By Sela, A.; Moreno Ruiz, Diego; Einy, Ezra
  5. Multi-battle contests, finite automata, and the tug-of-war By Christian Ewerhart; Julian Teichgräber
  6. Manipulation of social choice functions under incomplete information By Michele Gori
  7. Analysis of Approval Voting in Poisson Games By François Durand; Antonin Macé; Matias Nunez
  8. Limiting Sender’s Information in Bayesian Persuasion By Shota Ichihashi
  9. On the political economy of income taxation By Berliant, Marcus; Gouveia, Miguel
  10. Repeated Games Without Public Randomization: A Constructive Approach By Ani Dasgupta; Sambuddha Ghosh
  11. Partial Ex-Post Verifiability and Unique Implementation of Social Choice Functions By Hitoshi Matsushima
  12. Mean Field Equilibrium: Uniqueness, Existence, and Comparative Statics By Bar Light; Gabriel Weintraub
  13. Incentives, Pro-social Preferences and Discrimination By Raphael Soubeyran
  14. Social Acceptability of Condorcet Committees By Mostapha Diss; Muhammad Mahajne
  15. Performance Measurement in Agency Models By Koo Chi, Chang; Jin Choi, Kyoung
  16. Data brokers co-opetition By Yiquan Gu; Leonardo Madio; Carlo Reggiani
  17. Marriage Formation with Randomor Assortative Meeting By Elena Parilina; Alessandro Tampieri
  18. Behavioral Theory of Repeated Prisoner’s Dilemma: Generous Tit-For-Tat Strategy By Hitoshi Matsushima

  1. By: Didier Laussel; Ngo Van Long; Joana Resende
    Abstract: We present a model of hyper-segmentation of market, where a monopolist firm uses information technology to acquire, in one period, all the information about the preferences of consumers who purchase its vertically differentiated products within that period. Lower consumer types have an incentive to delay their purchases until next period in order to obtain a higher (and non-distorted) quality offer. The monopolist counters this incentive by offering higher informational rents. We analyse the dynamic game between the monopolist and the customers. We find that in a Markov perfect equilibrium, the firm expands the market progressively. The market is not covered in a twinkle of an eye, i.e., the dynamics is non-Coasian. Also, contrary to the Coasian result for a durable-good monopoly, we find that the profit of our non-durable good monopoly increases as the interval of commitment shrinks. The model yields some implications for regulatory policies regarding information collection and commitment period. Nous présentons un modèle d’hyper-segmentation du marché, dans lequel une entreprise monopoliste utilise les technologies de l’information pour acquérir, en une période, toutes les informations relatives aux préférences des consommateurs qui achètent ses produits différenciés verticalement au cours de cette période. Les consommateurs dont la préférence pour la qualité est faible ont l’intérêt à reporter leurs achats à la période suivante afin d'obtenir une offre de qualité supérieure (sans distorsion). Le monopoleur contrecarre cette intention en proposant des primes d’information plus élevés. Nous analysons le jeu dynamique entre le monopoleur et ses clients. Nous constatons que dans un équilibre parfait de Markov, l'entreprise élargit progressivement le marché. Le marché n’est pas couvert en un clin d’œil, c’est-à-dire que la dynamique n’est pas coasienne. En outre, contrairement au résultat coasien pour un monopole sur les biens durables, nous constatons que le profit de notre monopole sur les biens non durables augmente à mesure que l’intervalle d’engagement diminue. Le modèle entraîne certaines implications pour les politiques réglementaires en matière de collecte d'informations et de période d'engagement.
    Keywords: Coasian Dynamics, Information Collection, Monopoly, Regulatory Policies, La dynamique coasienne, La collecte d’information, Monopole, Politiques réglementaires
    JEL: L12 L15
    Date: 2019–02–25
  2. By: Larry G. Epstein (Department of Economics, Boston University); Shaolin Ji (Institute of Financial Studies, Shandong University)
    Abstract: We consider the dynamics of learning under ambiguity when learning is costly and is chosen optimally. The setting is Ellsberg’s two-urn thought experiment modified by allowing the agent to postpone her choice between bets so that she can learn about the composition of the ambiguous urn. Signals are modeled by a diffusion process whose drift is equal to the true bias of the ambiguous urn and they are observed at a constant cost per unit time. The resulting optimal stopping problem is solved and the effect of ambiguity on the extent of learning is determined. It is shown that rejection of learning opportunities can be optimal for an ambiguity averse agent even given a small cost.
    Keywords: ambiguity, learning, partial information, optimal stopping, drift-diffusion model
    Date: 2017–08
  3. By: Bruno Salcedo
    Abstract: I propose a cheap-talk model in which the sender can use private messages and only cares about persuading a subset of her audience. For example, a candidate only needs to persuade a majority of the electorate in order to win an election. I find that senders can gain credibility by speaking truthfully to some receivers while lying to others. In general settings, the model admits information transmission in equilibrium for some prior beliefs. The sender can approximate her preferred outcome when the fraction of the audience she needs to persuade is sufficiently small. I characterize the sender-optimal equilibrium and the benefit of not having to persuade your whole audience in separable environments. I also analyze different applications and verify that the results are robust to some perturbations of the model, including non-transparent motives as in Crawford and Sobel (1982), and full commitment as in Kamenica and Gentzkow (2011).
    Date: 2019–02
  4. By: Sela, A.; Moreno Ruiz, Diego; Einy, Ezra
    Abstract: We study the continuity and robustness of the Bayesian equilibria of Tullock contests with incomplete information. We show that the Bayesian equilibrium correspondence is upper semicontinuous. We identify conditions under which the Bayesian equilibrium correspondence of Tullock contests with a unique equilibrium is also lower semicontinous. Furthermore, when the Bayesian equilibrium is unique, it is robust to small perturbations of the contest's attributes (the contest success function, and the players' information, value for the prize, and cost of effort).
    Keywords: Robustness of Equilibria; Bayesian Correspondence; Incomplete Information; Tullock Contests
    JEL: D82 D44 C72
    Date: 2019–02
  5. By: Christian Ewerhart; Julian Teichgräber
    Abstract: This paper examines multi-battle contests whose extensive form can be represented in terms of a finite state machine. We start by showing that any contest that satisfies our assumptions decomposes into two phases, a principal phase (in which states cannot be revisited) and a concluding tie-breaking phase (in which all non-terminal states can be revisited). Degenerate cases are the finite-horizon contests on the one hand (e.g., the match race), and the tug-of-war on the other. Next, assuming a probabilistic technology in each battle, we show that any contest satisfying our assumptions, with either finite or infinite horizon, admits a unique symmetric and interior Markov perfect equilibrium. This entails, in particular, a complete characterization of the equilibrium in the tug-of-war. Finally, we explore, both analytically and numerically, the intricate problem of a contest designer that maximizes expected total effort. In the absence of a complexity constraint, the revenue-maximizing contest is always a match race, where the optimal length of the race increases as the technology of the component contest becomes more noisy. If, however, the complexity constraint is binding, then the optimal contest is typically (but not always) a tug-of-war.
    Keywords: Dynamic contests, finite automata, match race, tug-of-war, Markov perfect equilibrium, contest design
    JEL: C62 C63 C72 D72
    Date: 2019–02
  6. By: Michele Gori
    Abstract: We introduce and study a new property for social choice functions, called PC-strategy-proofness, which is weaker than strategy-proofness. A social choice function is PC-strategy-proof if it cannot be manipulated by an individual whose information about the preferences of the other members of the society is limited to the knowledge, for every pair of alternatives, of the number of individuals preferring the first alternative to the second one. We prove that, when at least three alternatives are considered, there is no Pareto optimal, anonymous and PC-strategy-proof social choice function.
    Keywords: social choice function; manipulability; strategy-proofness; pairwise comparison; anonymity;Pareto optimality.
    JEL: D71 D72
    Date: 2019
  7. By: François Durand (Nokia Bell Labs [Espoo], LINCS - Laboratory of Information, Network and Communication Sciences - Inria - Institut National de Recherche en Informatique et en Automatique - Institut Mines-Télécom [Paris] - Sorbonne Université); Antonin Macé (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - La plante et son environnement - CNRS - Centre National de la Recherche Scientifique - INA P-G - Institut National Agronomique Paris-Grignon - UP11 - Université Paris-Sud - Paris 11 - INRA - Institut National de la Recherche Agronomique); Matias Nunez (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We analyze Approval Voting in Poisson games endowing voters with private values over three candidates. We firsts how that any stable equilibrium is discriminatory: one candidate is commonly regarded as out of contention. We fully characterize stable equilibria and divide them into two classes. In direct equilibria, best responses depend only on ordinal preferences. In indirect equilibria, preference intensities matter. Counter-intuitively, any stable equilibrium violates the ordering conditions, a set of belief restrictions used to derive early results in the literature. We finally use Monte-Carlo simulations to estimate the prevalence of the different sorts of equilibria and their likelihood to elect a Condorcet winner.
    Keywords: Approval voting,Poisson games,Stable equilibria,Monte-Carlo simulations
    Date: 2019–03
  8. By: Shota Ichihashi
    Abstract: This paper studies how the outcome of Bayesian persuasion depends on a sender’s information. I study a game in which, prior to the sender’s information disclosure, the designer can restrict the most informative signal that the sender can generate. In the binary action case, I consider arbitrary preferences of the designer and characterize all equilibrium outcomes. As a corollary, I solve a problem of how to maximize a receiver’s payoffs by restricting the sender’s information: Whenever the designer can increase the receiver’s payoffs by restricting the sender’s information, the receiver-optimal way coincides with an equilibrium of the game in which the receiver persuades the sender.
    Keywords: Economic models
    JEL: D82 D83
    Date: 2019
  9. By: Berliant, Marcus; Gouveia, Miguel
    Abstract: The literatures dealing with voting, optimal income taxation, implementation, and pure public goods are integrated here to address the problem of voting over income taxes and public goods. In contrast with previous articles, general nonlinear income taxes that affect the labor-leisure decisions of consumers who work and vote are allowed. Uncertainty plays an important role in that the government does not know the true realizations of the abilities of consumers drawn from a known distribution, but must meet the realization-dependent budget. Even though the space of alternatives is infinite dimensional, conditions on primitives are found to assure existence of a majority rule equilibrium when agents vote over both a public good and income taxes to finance it.
    Keywords: Voting; Income taxation; Public good
    JEL: D72 D82 H21 H41
    Date: 2019–03–04
  10. By: Ani Dasgupta (International Maritime Business Department, Massachusetts Maritime Academy and Economics Department, Boston University.); Sambuddha Ghosh (Economics Group, Shanghai University of Finance and Economics)
    Abstract: We study discounted infinitely repeated games with perfect monitoring and without public randomization. Both symmetric and asymmetric discounting cases are considered; a new geometric construct called ‘self-accessibility’ is proposed and used to unify the analyses of these two cases. For symmetric discounting, our approach leads to easy computability of a discount factor bound needed to support a specific payoff vector in equilibrium. When discounting is allowed to be asymmetric, we show that any payoff vector that is in the interior of the smallest rectangular region containing the pureaction payoffs is realizable in the repeated game. Next, an easily-verifiable condition, ‘strict diagonalizability’, is offered as a sufficient and almost necessary condition for a payoff vector to be an equilibrium payoff for some discount factor vector. ‘Turnpike strategies’ that support a target payoff are explicitly constructed. Our results thus encompass and generalize Fudenberg and Maskin (1986, 1991).
    Keywords: ambiguity, Repeated Games, Public Randomization, Asymmetric Discounting
    Date: 2017–09
  11. By: Hitoshi Matsushima (University of Tokyo)
    Abstract: This study investigates the unique implementation of a social choice function in iterative dominance in the ex-post term. We assume partial ex-post verifiability; that is, after determining an allocation, the central planner can only observe partial information about the state as verifiable. We demonstrate a condition of the state space, termed “full detection,†under which any social choice function is uniquely implementable even if the range of the players’ lies, which the ex-post verifiable information directly detects, is quite narrow. To prove this, we construct a dynamic mechanism according to which each player announces his (or her) private signal before the other players observe this signal at an earlier stage, and each player also announces the state at a later stage. In this construction, we can impose several severe restrictions, such as boundedness, permission of only tiny transfers off the equilibrium path, and no permission of transfers on the equilibrium path. This study does not assume either expected utility or quasi-linearity.
    Date: 2019–02
  12. By: Bar Light; Gabriel Weintraub
    Abstract: The standard solution concept for stochastic games is Markov perfect equilibrium (MPE); however, its computation becomes intractable as the number of players increases. Instead, we consider mean field equilibrium (MFE) that has been popularized in the recent literature. MFE takes advantage of averaging effects in models with a large number of agents. We make three main contributions. First, our main result in the paper provides conditions that ensure the uniqueness of an MFE. Second, we generalize previous MFE existence results. Third, we provide general comparative statics results. We apply our results to dynamic oligopoly models and to heterogeneous agent macroeconomic models commonly used in previous work. We believe our uniqueness result is the first of its nature in the class of models we study.
    Date: 2019–03
  13. By: Raphael Soubeyran (CEE-M)
    Abstract: In this paper, I study how a principal can provide incentives, at minimal cost, to a group of agents who have pro-social preferences in order to induce successful coordination in the presence of network externalities. I show that agents’ pro-social preferences – specifically a preference for the sum of the agents payoffs and for the minimum payoff – lead to a decrease in the implementation cost for the principal, a decrease in the payoff of each agent, and an increase in discrimination. The model can be applied in various contexts and it delivers policy implications for designing policies that support the adoption of new technologies, for motivating a group of workers, or for inducing successful coordination of NGOs.
    Keywords: incentives, externality, principal, agents, pro-social
    JEL: D91 D62 D82 D86 O33
    Date: 2019–02
  14. By: Mostapha Diss (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Muhammad Mahajne (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We define and examine the concept of social acceptability of committees, in multi-winner elections context. We say that a committee is socially acceptable if each member in this committee is socially acceptable, i.e., the number of voters who rank her in their top half of the candidates is at least as large as the number of voters who rank her in the least preferred half, otherwise she is unacceptable. We focus on the social acceptability of Condorcet committees, where each committee member beats every non-member by a majority, and we show that a Condorcet committee may be completely unacceptable, i.e., all its members are unacceptable. However, if the preferences of the voters are single-peaked or single-caved and the committee size is not "too large" then a Condorcet committee must be socially acceptable, but if the preferences are single-crossing or group-separable, then a Condorcet committee may be socially acceptable but may not. Furthermore, we evaluate the probability for a Condorcet committee, when it exists, to be socially (un)acceptable under Impartial Anonymous Culture (IAC) assumption. It turns to be that, in general, Condorcet committees are significantly exposed to social unacceptability.
    Keywords: Social Acceptability,Voting,Multiwinner Elections,Committee,Condorcet
    Date: 2019–02–08
  15. By: Koo Chi, Chang (Dept. of Economics, Norwegian School of Economics and Business Administration); Jin Choi, Kyoung (University of Calgary)
    Abstract: This note explores how to evaluate an agent’s performance in standard incentive contracts. We show that the MPS criterion proposed by Kim (1995) becomes a tight condition for one performance measurement system to be more informative than another, as long as the first-order approach can be justified. In the one-signal case obeying the monotone likelihood ratio property, the MPS criterion is equivalent to the way of ordering signals developed by Lehmann (1988), establishing a link to statistical decision theory. Our results demonstrate that depending on the agent’s potential deviations, ideal performance measures can be different.
    Keywords: Agency problems; performance measurement; informativeness criterion; signal orderings
    JEL: D86
    Date: 2019–02–25
  16. By: Yiquan Gu; Leonardo Madio; Carlo Reggiani
    Abstract: Data brokers collect, manage, and sell customer data. We propose a simple model, in which data brokers sell data to downstream firms. We characterise the optimal strategy of data brokers and highlight the role played by the data structure for co-opetition. If data are “sub-additive”, with the combined value lower than the sum of the values of the two datasets, data brokers share data and sell them jointly. When data are “additive” or “supra- additive”, with the combined value equal to or greater than the sum of the two datasets, data brokers compete. Results are robust to several extensions.
    Keywords: data brokers, personal information, privacy, co-opetition
    JEL: D43 L13 L86 M31
    Date: 2019
  17. By: Elena Parilina; Alessandro Tampieri
    Abstract: In this paper, we study marriage formation in an optimal stopping problem where meetings can be of two types: one in which individuals meet potential partners randomly, and one ("assortative") in which the meeting occurs between individuals with similar characteristics. The presence of assortative meetings influences the expectations of the quality of potential spouses, and in turn the marriage choice. We show that individuals of high rank tend to be pickier in their marriage hunting. This does not necessarily mean that they marry later than other individuals, since the higher expected quality of their potential partners can make them marry earlier than individuals with a lower universal characteristic. In particular, individuals with medium rank tend to marry later than the other types, since they are picky but the quality of their potential partners is usually lower than for high-rank individuals.
    Keywords: secretary problem, mate choice, random meeting, assortative meeting
    JEL: C73 C78
    Date: 2019
  18. By: Hitoshi Matsushima (University of Tokyo)
    Abstract: This study investigates infinitely repeated games of a prisoner’s dilemma with additive separability in which the monitoring technology is imperfect and private. Behavioral incentives indicate that, in this setting, a player is not only motivated by pure self-interest but also by reciprocity. Players often become naïve and select an action unconsciously. By focusing on generous tit-for-tat strategies, we characterize a Nash equilibrium with behavioral incentives, termed behavioral equilibrium, in an accuracy-contingent manner. By eliminating the gap between theory and evidence, this study argues that reciprocity plays a substantial role in motivating a player to consciously make decisions.
    Date: 2019–02

This nep-mic issue is ©2019 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.