nep-mic New Economics Papers
on Microeconomics
Issue of 2020‒11‒02
fifteen papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Dynamic Competition for Attention By Jan Knoepfle
  2. The Rational Group By Franz Dietrich
  3. Belief Inducibility and Informativeness By Herings, P. Jean-Jacques; Karos, Dominik; Kerman, Toygar
  4. “Friends Are Thieves of Time": Heuristic Attention Sharing in Stable Friendship Networks By Tenev, Anastas P.
  5. The structure of (local) ordinal Bayesian incentive compatible random rules By Karmokar, Madhuparna; Roy, Souvik
  6. Endowments-regarding preferences By Van Quy Nguyen
  7. Equilibrium Arrivals to a Last-come First-served Preemptive-resume Queue By Breinbjerg, Jesper; Platz, Trine Tornøe; Østerdal, Lars Peter
  8. Behavioural utilitarianism and distributive justice By Galanis, Giorgos; Veneziani, Roberto
  9. Competitive gerrymandering and the popular vote By Felix Bierbrauer; Mattias Polborn
  10. Persuasion, Spillovers, and Government Interventions By Li, Cheng; Xiao, Yancheng
  11. Ethical Voting in Heterogenous Groups By Alberto Grillo
  12. Roberts' Weak Welfarism Theorem: A Minor Correction By Hammond, Peter J.
  13. Unique Information Elicitation By Hitoshi Matsushima; Shunya Noda
  14. Network Comparative Statics By Harkins, Andrew
  15. How to Sell Hard Information By S. Nageeb Ali; Nima Haghpanah; Xiao Lin; Ron Siegel

  1. By: Jan Knoepfle
    Abstract: This paper studies information transmission in situations in which multiple senders compete for the attention of a decision maker. Senders are partially informed about a state and choose how to reveal information over time to attract maximal attention. A decision maker wants to learn about the state but faces attention costs. I characterise an equilibrium with simple strategies that lead to full information transmission in minimal time. The attention each sender receives is proportional to the residual value of her information. With endogenous information acquisition, increasing initial public information may decrease the aggregate information in society.
    Keywords: Attention, Dynamic Information Provision, Media Competition
    JEL: D43 D83 L86
    Date: 2020–10
  2. By: Franz Dietrich (Centre d'Economie de la Sorbonne, Paris School of Economics)
    Abstract: Can a group be a standard rational agent? This would require the group to hold aggregate preferences which maximise expected utility and change only by Bayesian updating. Group rationality is possible, but the only preference aggregation rules which support it (and are minimally Paretian and continuous) are the linear-geometric rules, which combine individual tastes linearly and individual beliefs geometrically
    Keywords: Bayesian aggregation; preference aggregation under uncertainty; expected-utility hypothesis for groups; Bayesian revision; rational group agents; linear versus geneometric opinion pooling
    JEL: D71 D81
    Date: 2020–06
  3. By: Herings, P. Jean-Jacques (RS: GSBE Theme Data-Driven Decision-Making, RS: GSBE Theme Conflict & Cooperation, Microeconomics & Public Economics); Karos, Dominik; Kerman, Toygar (General Economics 0 (Onderwijs), RS: GSBE other - not theme-related research)
    Abstract: We consider a group of receivers who share a common prior on a finite state space and who observe private correlated signals that are contingent on the true state of the world. We show that, while necessary, Bayes plausibility is not sufficient for a distribution over posterior belief vectors to be inducible, and we provide a characterization of inducible distributions. We classify communication strategies as minimal, direct, and language independent, and show that any inducible distribution can be induced by a language independent communication strategy (LICS). We investigate 12 the role of the different classes of communication strategies for the amount of higher order information that is revealed to receivers. We show that the least informative communication strategy which induces a fixed distribution over posterior belief vec tors lies in the relative interior of the set of all language independent communication strategies which induce that distribution.
    Date: 2020–10–13
  4. By: Tenev, Anastas P. (General Economics 0 (Onderwijs), RS: GSBE Theme Conflict & Cooperation)
    Abstract: This paper studies a model of network formation in which agents create links following a simple heuristic -- they invest their limited resources proportionally more in neighbours who have fewer links. This decision rule captures the notion that when considering social value more connected agents are on average less beneficial as neighbours and node degree is a useful proxy when payoffs are difficult to compute. The decision rule illustrates an externalities effect whereby an agent's actions also influence his neighbours' neighbours. Besides complete networks and fragmented networks with complete components, the pairwise stable networks produced by this model include many non-standard ones with characteristics observed in real life networks like clustering and irregular components. Multiple stable states can develop from the same initial structure -- the stable networks could have cliques linked by intermediary agents while sometimes they have a core-periphery structure. The observed pairwise stable networks have close to optimal welfare. This limited loss of welfare is due to the fact that when a link is established, this is beneficial to the linking agents, but makes them less attractive as neighbours for others, thereby partially internalising the externalities the new connection has generated.
    JEL: A13 C72 D85
    Date: 2020–10–12
  5. By: Karmokar, Madhuparna; Roy, Souvik
    Abstract: We explore the structure of local ordinal Bayesian incentive compatible (LOBIC) random Bayesian rules (RBRs). We show that under lower contour monotonicity, almost all (with Lebesgue measure 1) LOBIC RBRs are local dominant strategy incentive compatible (LDSIC). We also provide conditions on domains so that unanimity implies lower contour monotonicity for almost all LOBIC RBRs. We provide sufficient conditions on a domain so that almost all unanimous RBRs on it (i) are Pareto optimal, (ii) are tops-only, and (iii) are only-topset. Finally, we provide a wide range of applications of our results on the unrestricted, single-peaked (on graphs), hybrid, multiple single-peaked, single-dipped, single-crossing, multidimensional separable, lexicographic, and domains under partitioning. We additionally establish the marginal decomposability property for both random social choice functions and almost all RBRs on multi-dimensional domains, and thereby generalize Breton and Sen (1999). Since OBIC implies LOBIC by definition, all our results hold for OBIC RBRs.
    Keywords: random Bayesian rules; random social choice functions; (local) ordinal Bayesian incentive compatibility; (local) dominant strategy incentive compatibility
    JEL: D71 D82
    Date: 2020–10–12
  6. By: Van Quy Nguyen (Centre d'Economie de la Sorbonne Author-Workplace-Homepage:
    Abstract: We consider a pure exchange economy model with endowments-regarding regarding preferences, which means that demand functions and preferences depend not only on the own consumption of a consumer but also on other consumer's endowments. First, we study the particular case called wealth concern by Balasko (2015) when the consumers care about the wealth of the others. We generalise the result of Balasko by showing that most properties of the standard general equilibrium model without externalities are robust with respect to these kind of externalities if the external effect produced by only one agent is a wealth effect and not all. Next, we clarify under which sufficient conditions those properties hold true under the most general form of endowments externalities. Furthermore, we generalise the above sufficient condition to obtain generic regularity results in the economies with consumption and endowments externalities
    Keywords: Endowment externalities; other-regarding preferences; regular economy; general equilibrium
    JEL: D50 D51 D62
    Date: 2020–07
  7. By: Breinbjerg, Jesper (Department of Business and Economics, University of Southern Denmark); Platz, Trine Tornøe (Department of Economics, Copenhagen Business School); Østerdal, Lars Peter (Department of Economics, Copenhagen Business School)
    Abstract: We consider a queueing system where a single server opens and serves users according to the last-come first-served discipline with preemptive-resume (LCFS-PR). A finite number of strategic users must choose individually when to arrive at the server. We allow for general classes of user preferences and service time distributions and show existence and uniqueness of a symmetric Nash equilibrium. Furthermore, we show that no asymmetric equilibrium exists, if the population consists of only two users, or if arrival strategies satisfy a mild regularity condition. Based on the constructive existence proof for the symmetric equilibrium, we provide a numerical example in which we compute the symmetric equilibrium strategy and compare the resulting social efficiency to that obtained if users are instead served on a first-come first-served (FCFS) basis.
    Keywords: Queueing; Strategic arrivals; Nash equilibrium; LCFS-PR; FCFS
    JEL: C72 D62 R41
    Date: 2020–10–02
  8. By: Galanis, Giorgos (Goldsmiths, University of London and Centre for Research in Economic Theory and its Applications, University of Warwick.); Veneziani, Roberto (School of Economics and Finance, Queen Mary, University of London)
    Abstract: What are the distributive implications of utilitarianism? Is it compatible with a concern for equality, as many utilitarians have argued? We analyse these questions in the context of a pure allocation problem. We consider an in nitely-lived economy and, drawing on the behavioural literature, assume that individuals have reference-dependent preferences: agents' utility is a function of current consumption and a reference point which captures consumption habits, or the agents' upbringing. Assuming a history of inequalities in consumption and welfare, we show that the utilitarian allocation is equalising: starting from an unequal distribution, consumption and welfare inequalities decrease over time at the utilitarian optimum. However, even though agents are in a relevant sense identical, equality does not obtain at any finite time.
    Keywords: utilitarianism ; inequality ; reference dependent preferences JEL Codes: D63 ; D9
    Date: 2020
  9. By: Felix Bierbrauer (University of Cologne); Mattias Polborn (
    Abstract: Gerrymandering undermines representative democracy by creating many uncompetitive legislative districts, and generating the very real possibility that a party that wins a clear majority of the popular vote does not win a majority of districts. We present a new approach to the determination of electoral districts, taking a design perspective. Specifically, we develop a redistricting game between two parties who both seek an advantage in upcoming elections, and show that we can achieve two desirable properties: First, the overall election outcome corresponds to the popular vote. Second, most districts are competitive.
    Keywords: Gerrymandering, Popular Vote
    JEL: C72 D71 D72 D82
    Date: 2020–10
  10. By: Li, Cheng; Xiao, Yancheng
    Abstract: We develop a model of Bayesian persuasion with spillovers to investigate the impact of information production on optimal policy design. A sender produces information to persuade a receiver to take an action with external effects, and the government implements corrective subsidies and taxes to maximize social welfare. Subsidies to the sender’s preferred action incentivize her to produce less information, while taxes motivating her to produce more. Such an informational effect impacts the receiver’s decision and social welfare. We show that the optimal corrective subsidies and taxes may be different from the Pigouvian level. Most notably, the optimal policy is no government intervention when the spillover is positive and small.
    Keywords: persuasion; spillover effects; externalities; Pigouvian taxes; subsidies; social welfare
    JEL: C72 D8 H21 H23
    Date: 2020
  11. By: Alberto Grillo (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université)
    Abstract: Voting in large elections appears to be both ethically motivated and influenced by strategic considerations. One way to capture this interplay postulates a rule-utilitarian calculus, which abstracts away from heterogeneity in the intensity of support (Feddersen and Sandroni 2006, Coate and Conlin 2004). I argue that this approach is unsatisfactory when such heterogeneity is considered, since it implies that idiosyncratic preferences are irrelevant for participation, in contrast to the empirical evidence. A model of Kantian optimizationà la Roemer (2019), based on the maximization of individual utility under a universalization principle, predicts instead differential participation and links ethical motivation to the spatial theory of voting.
    Keywords: Voting,Turnout,Ethical Voter,Rule-utilitarian,Kantian Optimization
    Date: 2020–10–08
  12. By: Hammond, Peter J. (University of Warwick)
    Abstract: Roberts' "weak neutrality" or "weak welfarism" theorem concerns Sen social welfare functionals which are defined on an unrestricted domain of utility function profiles and satisfy independence of irrelevant alternatives, the Pareto condition, and a form of weak continuity. Roberts (1980) claimed that the induced welfare ordering on social states has a one-way representation by a continuous, monotonic real-valued welfare function defined on the Euclidean space of interpersonal utility vectors that is, an increase in this welfare function is sufficient, but may not be necessary, for social strict preference. A counter-example shows that weak continuity is insufficient; a minor strengthening to pairwise continuity is proposed instead and its sufficiency demonstrated.
    Keywords: social welfare functionals ; weak welfarism JEL codes: D71
    Date: 2020
  13. By: Hitoshi Matsushima (University of Tokyo); Shunya Noda (University of British Columbia)
    Abstract: This study investigates the unique information elicitation problem. A central planner attempts to elicit correct information from multiple informed agents through mutual monitoring. There is a severe restriction on incentive devices: we assume neither public monitoring technology nor allocation rule is available; thus, the central planner only uses monetary payment rules. It is well-known that if all agents are selfish, it is impossible to elicit information as a unique equilibrium. We consider an epistemological possibility that some agents could be motivated by an intrinsic preference for honesty, while we allow that honest agents are mostly motivated by monetary interest. We prove that, once we introduce an epistemic type space that allows agents to be (weakly) honest, then the impossibility theorem reduces to a knife-edge case: The central planner can elicit correct information from agents as a unique Bayes Nash equilibrium behavior if and only if it is never common knowledge that all agents are selfish.
    Date: 2020–10
  14. By: Harkins, Andrew (University of Warwick)
    Abstract: This paper develops a framework for analyzing the effect of arbitrary changes to network structure in linear-quadratic games on networks. Changes to network structure which increase total activity and total utility are studied for the case of strategic complements and strategic substitutes. Changes which are welfare increasing are found to depend on a new measure of centrality which counts the total length of walks from a node. Two optimal network design problems are then considered. Total activity is found to be a convex function of the edge weights of the network, which allows for convex optimization techniques to be applied to minimize total activity as in the traditional ‘key player’ problem. Welfare maximizing network structures are also studied and previous results which associate optimal networks with nested split graphs are generalized.
    Date: 2020
  15. By: S. Nageeb Ali; Nima Haghpanah; Xiao Lin; Ron Siegel
    Abstract: The seller of an asset has the option to buy hard information about the value of the asset from an intermediary. The seller can then disclose the acquired information before selling the asset in a competitive market. We study how the intermediary designs and sells hard information to robustly maximize her revenue across all equilibria. Even though the intermediary could use an accurate test that reveals the asset's value, we show that robust revenue maximization leads to a noisy test with a continuum of possible scores that are distributed exponentially. In addition, the intermediary always charges the seller for disclosing the test score to the market, but not necessarily for running the test. This enables the intermediary to robustly appropriate a significant share of the surplus resulting from the asset sale even though the information generated by the test provides no social value.
    Date: 2020–10

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