|
on Microeconomics |
| By: | Rahul Deb; Matthew Mitchell; Mallesh Pai |
| Abstract: | Motivated by reputation management in a variety of different markets for ``expertise'' (such as online content providers and experts in organizations), we develop a novel repeated-game framework in which a principal screens a strategic agent whose type determines the rate at which he privately receives payoff relevant information. The stage game is a bandit setting, where the principal chooses whether or not to experiment with a risky arm which is controlled by an agent who privately knows its type. Irrespective of type, the agent strategically chooses output from the arm to maximize the duration of experimentation. Experimentation is only potentially valuable to the principal if the arm is of the high type. Our main insight is that reputational incentives can be exceedingly strong: the agent makes inefficient output choices in all equilibria (subject to a mild refinement) and that this can result in market breakdown even when the uncertainty about the agent's type is arbitrarily small. We show that (one-sided) transfers do not prevent this inefficiency and we suggest alternate ways to improve the functioning of these markets. |
| Keywords: | reputation, repeated games of imperfect public monitoring, relational contracting, strategic experimentation, markets for expertise, media |
| JEL: | D82 D83 D86 |
| Date: | 2019–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-632&r=all |
| By: | Gabriele Gratton (UNSW Business School); Richard Holden (UNSW Business School); Barton E. Lee (UNSW Business School) |
| Abstract: | An organization must make a binary choice in each of two periods. The optimal choice depends on an unknown state of nature. The leader of the organization has a stock of political capital and observes a private signal of the state. The leader faces an intertemporal choice problem. She may choose to spend (some of) her political capital to increase the probability that the choice is not the one that would otherwise be made. Her political capital increases if the decision is correct ex post. We characterize the optimal use of political capital by the leader and how it evolves over time. We identify different leadership styles that depend on the initial stock of capital of the leader, the precision of her information, and the importance of the issue to her. We study how differing leadership styles determine the evolution of power within the organization. Finally, we consider issues of optimal organizational design that structure the allocation of power to a leader. |
| Keywords: | Organizations, collective decisions, political capital, leadership styles |
| JEL: | D21 D23 D71 D72 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2019-04&r=all |
| By: | Francesc Dilmé |
| Abstract: | This paper investigates the welfare effects of private investments prior to trade. A seller of a durable good can privately invest on changing its quality. After the investment, she receives a take-it-or-leave-it offer from a buyer. Both the seller and the buyer value more goods of higher quality. We obtain that, in equilibrium, the seller mixes the investment choice, adding adverse selection to the exchange. The nonobservability of the investment lowers the buyer’s payoff without giving the seller additional rents. Notably, adding buyer competition exacerbates the adverse selection and completely eliminates the trade surplus. Partial observability increases the equilibrium investment, makes the seller better off, and lowers the payoff of the buyer. |
| Keywords: | Private Investment, Hold Up Problem, Price Dispersion |
| JEL: | D82 D83 D42 L15 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_078&r=all |
| By: | Joosung Lee |
| Abstract: | We study mechanisms for environments in which only some of the agents are directly connected to a mechanism designer and the other agents can participate in a mechanism only through the connected agents' referrals. In such environments, the mechanism designer and agents may have different interest in varying participants so that agents strategically manipulate their preference as well as their network connection to avoid competition or congestion; while the mechanism designer wants to elicit the agents' private information about both preferences and network connections. As a benchmark for an efficient mechanism, we re-define a VCG mechanism. It is incentive compatible and individually rational, but it generically runs a deficit as it requires too much compensation for referrals. Alternatively as a budget-surplus mechanism, we introduce a multilevel mechanism, in which each agent is compensated by the agents who would not be able to participate without her referrals. Under a multilevel mechanism, we show that fully referring one's acquaintances is a dominant strategy and agents have no incentive to under-report their preference if the social welfare is submodular. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:258009&r=all |
| By: | Anujit Chakraborty; Yoram Halevy; Kota Saito |
| Abstract: | The paper establishes a tight relation between non-standard behaviors in the domains of risk and time, by considering a decision maker with non-expected utility preferences who believes that only present consumption is certain while any future consumption is uncertain. We provide the first complete characterizations of the two-way relations between the certainty effect and present biased temporal behavior, and between the common ratio effect and temporal reversals related to the common difference effect. |
| Keywords: | time consistency, hyperbolic discounting, non-expected utility, present bias, implicit risk. |
| JEL: | D01 D81 D91 |
| Date: | 2019–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-633&r=all |
| By: | Sidartha Gordon (Département d'économie); Emeric Henry (Département d'économie); Pauli Murto (Aalto University School of Business) |
| Abstract: | We introduce a neighborhood structure in a waiting game, where the payoff of stopping increases each time a neighbor stops. We show that the dynamic evolution of the network depends on initial parameters and can take the form of either a shrinking network, where players at the edges stop first, or a fragmenting network where interior players stop first. We find that, in addition to the coordination inefficiency standard in waiting games, the neighborhood structure gives rise to two other inefficiencies, the first linked to the order of exit and the second to the final distribution of remaining nodes. |
| Keywords: | Waiting games; Networks; Inefficiencies |
| JEL: | D85 C73 D83 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/3lcrvb72lq9f08o6s7j1m8j4d7&r=all |
| By: | Emeric Henry (Département d'économie); Charles Louis-Sidois |
| Abstract: | Members of groups and organizations often have to decide on rules that regulate their contributions to common tasks. They typically differ in their propensity to contribute and often care about the image they project: in particular, they want to be perceived by other group members as being high contributors. In such environments we study, from both a positive and normative perspective, the interaction between the way members vote on rules and their subsequent contribution decisions. We show how endogenous norms can emerge. We study in particular the role played by the visibility of individual actions, votes or contributions. While making votes visible always increases welfare in our setting, making contributions public can be welfare decreasing as it makes some rules more likely to be rejected. |
| Keywords: | Image concern; Voting; Public good |
| JEL: | D71 D72 H41 D23 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpecon:info:hdl:2441/4g5hemr5o18g7os4h53mulpcam&r=all |
| By: | Furukawa, Chishio |
| Abstract: | This paper questions the conventional wisdom that publication bias must result from the biased preferences of researchers. When readers only compare the number of positive and negative results of papers to make their decisions, even unbiased researchers will omit noisy null results and inflate some marginally insignificant estimates. Nonetheless, the equilibrium with such publication bias is socially optimal. The model predicts that published non-positive results are either precise null results or noisy but extreme negative results. This paper shows this prediction holds with some data, and proposes a new stem-based bias correction method that is robust to this and other publication selection processes. |
| Keywords: | publication bias,information aggregation,meta-analysis,bias correction method |
| JEL: | C13 C18 D71 D82 D83 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:194798&r=all |
| By: | Thomas Demuynck; P. Jean-Jacques Herings; Riccardo D. 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 non-empty. 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 non-empty; with the set of stable matchings in the standard one-to-one 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 in finite 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: | Research Methods/ Statistical Methods |
| Date: | 2017–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:258008&r=all |
| By: | Herings, P. Jean-Jacques; Mauleon; Ana; Vincent Vannetelbosch, Vincent |
| Abstract: | We study stable sets for marriage problems under the assumption that players can be both myopic and farsighted. We introduce the new notion of the myopic-farsighted stable set. For the special cases where all players are myopic and where all players are farsighted, our concept predicts the set of matchings in the core. When all men are myopic and the top choice of each man is a farsighted woman, we show that the singleton consisting of the woman-optimal stable matching is a myopic-farsighted stable set. The same result holds when all women are farsighted. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:259484&r=all |
| By: | Francis Bloch; Anne van den Nouweland |
| Abstract: | This paper analyzes farsighted stable sets when agents have heterogeneous expectations over the dominance paths. We consider expectation functions satisfying two properties of path-persistence and consistency. We show that farsighted stable sets with heterogeneous expectations always exist and that any singleton farsighted stable set with common expectations is a farsighted stable set with heterogeneous expectations. We characterize singleton farsighted stable sets with heterogeneous expectations in one-to-one matching models and voting models, and show that the relaxation of the hypothesis of common expectations greatly expands the set of states that can be supported as singleton farsighted stable sets. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:259479&r=all |
| By: | Vladimir Asriyan; Dana Foarta; Victoria Vanasco |
| Abstract: | This paper explores the incentives of product designers to complexify products, and the resulting implications for overall product quality. In our model, a consumer can accept or reject a product proposed by a designer, who can affect the quality and the complexity of the product. While the product’s quality determines the direct benefits of the product to the consumer, the product’s complexity affects the information a Bayesian consumer can extract about the product’s quality. Examples include policymakers who propose policies for approval by voters, or banks that design financial products that they later offer to retail investors. We find that complexity is not necessarily a feature of low quality products. For example, while an increase in alignment between the consumer and the designer leads to more complex but better quality products, higher product demand or lower competition among designers leads to more complex and lower quality products. Our findings can help rationalize the observed trends in quality and complexity of regulatory policies and financial products. |
| Keywords: | Product design, information frictions, information transmission, signaling; complexity, Regulation, financial products |
| JEL: | D82 D83 G18 P16 D78 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1079&r=all |
| By: | Richefort, Lionel |
| Abstract: | This paper explores a voluntary contribution game in the presence of warm-glow effects. There are many public goods and each public good benefits a different group of players. The structure of the game induces a bipartite network structure, where players are listed on one side and the public good groups they form are listed on the other side. The main result of the paper shows the existence and uniqueness of a Nash equilibrium. The unique Nash equilibrium is also shown to be locally asymptotically stable. Then the paper provides some comparative statics analysis regarding pure redistribution, taxation and subsidies. It appears that small redistributions of wealth may sometimes be neutral, but generally, the effects of redistributive policies depend on how public good groups are related in the contribution network structure. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:259480&r=all |
| By: | H. Dharma Kwon |
| Abstract: | We consider a stochastic game of contribution to the common good in which the players have continuous control over the degree of contribution, and we examine the gradualism arising from the free rider effect. This game belongs to the class of variable concession games which generalize wars of attrition. Previously known examples of variable concession games in the literature yield equilibria characterized by singular control strategies without any delay of concession. However, these no-delay equilibria are in contrast to mixed strategy equilibria of canonical wars of attrition in which each player delays concession by a randomized time. We find that a variable contribution game with a single state variable, which extends the Nerlove-Arrow model, possesses an equilibrium characterized by regular control strategies that result in a gradual concession. This equilibrium naturally generalizes the mixed strategy equilibria from the canonical wars of attrition. Stochasticity of the problem accentuates the qualitative difference between a singular control solution and a regular control equilibrium solution. We also find that asymmetry between the players can mitigate the inefficiency caused by the gradualism. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.00500&r=all |
| By: | Larry G. Epstein; Yoram Halevy |
| Abstract: | Decisions under uncertainty are often made with information that is difficult to interpret because multiple interpretations are possible. Individuals may perceive and handle uncertainty about interpretation differently and in ways that are not directly observable to a modeler. This paper identifies and experimentally examines behavior that can be interpreted as reflecting an individual's attitude towards such uncertainty. |
| Keywords: | Ambiguity, updating, information, experiment |
| JEL: | D81 D91 C91 |
| Date: | 2019–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-634&r=all |
| By: | Andrew Caplin; John V. Leahy |
| Abstract: | We model agents who get utility from their beliefs and therefore interpret information optimistically. They may exhibit several biases observed in psychological studies such as optimism, procrastination, confirmation bias, polarization, and the endowment effect. In some formulations, they exhibit these biases even though they are subjectively Bayesian. We argue that wishful thinking can lead to reduced saving, can make possible information-based trade, and can generate asset bubbles. |
| JEL: | D84 D91 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25707&r=all |
| By: | Takayuki Oishi (Meisei University) |
| Abstract: | We propose a variant of the nucleolus associated with distorted satisfaction of each coalition in TU games. This solution is referred to as the α-nucleolus in which α is a profile of distortion rates of satisfaction of all the coalitions. We apply the α-nucleolus to constant-sum weighted majority games. We show that under assumptions of distortions of satisfaction of winning coalitions the α-nucleolus is the unique normalized homogeneous representation of constant-sum weighted majority games which assigns a zero to each null player. As corollary of this result, we derive the well-known Peleg’s representation theorem. |
| Keywords: | Constant-sum weighted majority games; Homogeneous representation; α-Nucleolus; Distorted satisfaction; Peleg’s representation theorem |
| JEL: | C71 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:mei:wpaper:43&r=all |
| By: | Elif Ozcan Tok |
| Abstract: | In this study, a bargaining between buyers and sellers on a stationary two-sided supply chain network is modelled. Any further restrictions on the network structure is not imposed. Both buyers and sellers are allowed to make offers in the bargaining game. Furthermore, valuations of buyers for the good are heterogeneous. The results reveal that the equilibrium payoffs in the bargaining game that we study depend on the valuations of the buyers and the network positions of all players. As such, these two factors turn out to be the main sources of bargaining power. |
| Keywords: | Bargaining, Heterogeneity, Networks, Supply chain |
| JEL: | C78 L14 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:1907&r=all |
| By: | Melo, Emerson |
| Abstract: | This paper studies strategic interaction in networks. We focus on games of strategic substitutes and strategic complements, and departing from previous literature, we do not assume particular functional forms on players' payoffs. By exploiting variational methods, we show that the uniqueness, the comparative statics, and the approximation of a Nash equilibrium are determined by a precise relationship between the lowest eigenvalue of the network, a measure of players' payoff concavity, and a parameter capturing the strength of the strategic interaction among players. We apply our framework to the study of aggregative network games, games of mixed interactions, and Bayesian network games. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2018–02–26 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:268732&r=all |
| By: | Herings, P. Jean-Jacques (General Economics 1 (Micro)); Zhou, Yu (osaka university) |
| Abstract: | We consider the one-to-one two-sided matching with contracts model in which buyers face financial constraints. In this model there is a stable outcome, but not necessarily a competitive equilibrium as defined in the standard way. We propose a new equilibrium notion, quantity-constrained competitive equilibrium (QCCE) that allows buyers to form rational expectations on the lack of supply when their financial constraints are binding. We show the existence of QCCEs and establish the equivalence among QCCE outcomes, stable outcomes, and core outcomes. We also analyze the existence of QCCEs with uniform prices, the lattice property of QCCEs, and the rural hospital theorem of QCCEs. We finally examine the relation between models with financial constraints and models with price controls. |
| Keywords: | financial constraints, matching with contracts, stable outcome, quantity-constrained competitive equilibrium, equivalence result, lattice property, core outcome, rural hospital theorem |
| JEL: | C71 C78 D45 D52 |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2019007&r=all |
| By: | Matros, Alexander; Ponomareva, Natalia; Smirnov, Vladimir; Wait, Andrew |
| Abstract: | We analyze a search game in which multiple agents search an area (an island) for a hidden prize of known value. In every period until discovery, the rivals decide where and how much of the unsearched island to explore. The game ends when a player or players discover the prize. If one player discovers the prize on their own, they alone enjoy the spoils. Players have a per-period discount factor and costs proportional to how much they search. We compare two cases when: (i) the search of rivals (past and present) is observable to all; and (ii) players cannot observe others’ previous and current search. We show that welfare in the unique SMPE with observability is always (weakly) higher than in the case without observability. However, we show that there is a self-enforcing mechanism without observability in which a third party ex ante allocates search zones to each of the players that ensures the same outcome is achievable as with observability. Our results have implications for the design of search games (patents, prizes, information sharing, and so on) by regulators. |
| Keywords: | search; uncertainty; regulatory design. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2019-04&r=all |
| By: | Sareh Vosooghi |
| Abstract: | I examine a setting, where an information sender conducts research into a payoff-relevant state variable, and releases information to agents, who consider joining a coalition. The agents' actions can cause harm by contributing to a public bad. The sender, who has commitment power, by designing an information mechanism (a set of signals and a probability distribution over them), maximises his payoff, which depends on the action taken by the agents, and the state variable. I show that the coalition size, as a function of beliefs of agents, is an endogenous variable, induced by the information sender. The optimal information mechanism from the general set of public information mechanisms, in coalition formation games is derived. I also apply the results to International Environmental Agreements (IEAs), where a central authority, as an information sender, attempts to reduce the global level of greenhouse gases (GHG) by communication of information on social cost of GHG. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2017–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:258010&r=all |
| By: | Buso, Marco; Dosi, Cesare; Moretto, Michele |
| Abstract: | We study the effects of granting an exit option that enables the private party to early terminate a PPP project if it turns out to be loss-making. In a continuous time setting with hidden information about stochastic operating profits, we show that a revenue-maximizing government can optimally trade-off direct subsidies for capital investment against the right of opting out the PPP. In particular, the exit option, acting as a risk-sharing device, can soften agency problems and increase the value-for-money of public spending, even while taking into account the budgetary resources needed to resume the project in the event of early termination by the contractor. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2019–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:281284&r=all |
| By: | Sander Heinsalu |
| Abstract: | Observational learning often involves congestion: an agent gets lower payoff from an action when more predecessors have taken that action. This preference to act differently from previous agents may paradoxically increase all but one agent's probability of matching the actions of the predecessors. The reason is that when previous agents conform to their predecessors despite the preference to differ, their actions become more informative. The desire to match predecessors' actions may reduce herding by a similar reasoning. |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.00454&r=all |
| By: | Creane, Anthony; Jeitschko, Thomas D.; Sim, Kyoungbo |
| Abstract: | Asymmetric information is a classic example of market failure that undermines the efficiency associated with perfectly competitive market outcomes: the "lemons" market. Credible certification, that substantiates unobservable characteristics of products that consumers value, is often considered a potential solution to such market failure. This paper examines welfare effects of certification in markets in which there is asymmetric information, but without an adverse selection problem. We analyze the market equilibrium when the certification technology becomes available and contrast this with the equilibrium without certification. We find that despite an improvement in allocative efficiency, overall welfare may decrease due to the possibility of certification when such certification is either costly or inaccurate. In fact, most of these results are not derived from the direct welfare cost of certification, but rather from certification's effect on the market(s). |
| Keywords: | credible certification,welfare-reducing certification,asymmetric information,adverse selection |
| JEL: | D8 D4 L1 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:312&r=all |
| By: | Kiri Sakahara; Takashi Sato |
| Abstract: | When we enumerate numbers up to some specific value, or, even if we do not specify the number, we know at the same time that there are much greater numbers which should be reachable by the same enumeration, but indeed we also congnize them without practical enumeration. Namely, if we deem enumeration to be a way of reaching a number without any "jump", there is a "jump'' in our way of cognition of such greater numbers. In this article, making use of a set theoretical framework by Vop\v{e}nka (1979) (alternative set theory) which describes such structure, we attempt to shed light on an analogous sturucture in human and social phenomenon. As an example, we examine a problem of common knowledge in electronic mail game presented by Rubinstein (1989). We show an event comes to common knowledge by a "cognitive jump". |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.00613&r=all |
| By: | Joseph Abdou (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics, UP1 - Université Panthéon-Sorbonne); Nikolaos Pnevmatikos (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - Sorbonne Universités); Marco Scarsini (LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma]); Xavier Venel (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics, UP1 - Université Panthéon-Sorbonne) |
| Abstract: | Candogan et al. (2011) provide an orthogonal direct-sum decomposition of finite games into potential, harmonic and non-strategic components. In this paper we study the issue of decomposing games that are strategically equivalent from a game-theoretical point of view, for instance games obtained via duplications of strategies or suitable linear transformations of payoffs. We consider classes of decompositions and show when two decompositions of equivalent games are coherent. |
| Abstract: | Candogan et al. (2011) a introduit une décomposition en somme orthogonale des jeux finis en trois composantes : potentielle, harmonique et non stratégique. Dans cet article, nous étudions la question de la décomposition de jeux qui sont stratégiquement équivalents, par exemple obtenus par duplication des stratégies ou par certaines transformations linéaires des paiements. Nous considérons une famille de décompositions et montrons à quelles conditions deux décompositions de jeux équivalents sont cohérentes. |
| Keywords: | Decomposition of games,Potential games,Harmonic games,Duplicate strategies,Gradient operator,Projection operator,Décomposition de jeux,Jeux potentiels,Jeux harmoniques,Stratégies dupliquées,Opérateur gradient,Opérateur de projection |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-02079215&r=all |
| By: | Nasimeh Heydaribeni; Achilleas Anastasopoulos |
| Abstract: | In the standard Mechanism Design framework, agents' messages are gathered at a central point and allocation/tax functions are calculated in a centralized manner, i.e., as functions of all network agents' messages. This requirement may cause communication and computation overhead and necessitates the design of mechanisms that alleviate this bottleneck. We consider a scenario where message transmission can only be performed locally so that the mechanism allocation/tax functions can be calculated in a decentralized manner. Each agent transmits messages to her local neighborhood, as defined by a given message-exchange network, and her allocation/tax functions are only functions of the available neighborhood messages. This scenario gives rise to a novel research problem that we call "Distributed Mechanism Design". In this paper, we propose two distributed mechanisms for network utility maximization problems that involve private and public goods with competition and cooperation between agents. As a concrete example, we use the problems of rate allocation in networks with either unicast or multirate multicast transmission protocols. The proposed mechanism for each of the protocols fully implements the optimal allocation in Nash equilibria and its message space dimensionality scales linearly with respect to the number of agents in the network. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1904.01222&r=all |
| By: | Valentini, Edilio; Vitale, Paolo |
| Abstract: | In this paper we present a dynamic discrete-time model that allows to investigate the impact of risk-aversion in an oligopoly characterized by a homogeneous non-storable good, sticky prices and uncertainty. Our model nests the classical dynamic oligopoly model with sticky prices by Fershtman and Kamien (Fershtman and Kamien, 1987), which can be viewed as the continuous-time limit of our model with no uncertainty and no risk-aversion. Focusing on the continuous-time limit of the infinite horizon formulation we show that the optimal production strategy and the consequent equilibrium price are, respectively, directly and inversely related to the degrees of uncertainty and risk-aversion. However, the effect of uncertainty and risk-aversion crucially depends on price stickiness since, when prices can adjust instantaneously, the steady state equilibrium in our model with uncertainty and risk aversion collapses to Fershtman and Kamien’s analogue. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2019–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemth:285025&r=all |