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on Microeconomics |
| By: | Madhav Chandrasekher (Pinterest, Inc.); Mira Frick (Cowles Foundation, Yale University); Ryota Iijima (Cowles Foundation, Yale University); Yves Le Yaouanq (Ludwig-Maximilians-Universität, Munich) |
| Abstract: | We propose a class of multiple-prior representations of preferences under ambiguity, where the belief the decision-maker (DM) uses to evaluate an uncertain prospect is the outcome of a game played by two conflicting forces, Pessimism and Optimism. The model does not restrict the sign of the DM’s ambiguity attitude, and we show that it provides a uni?ed framework through which to characterize di?erent degrees of ambiguity aversion, and to represent the co-existence of negative and positive ambiguity attitudes within individuals as documented in experiments. We prove that our baseline representation, dual-self expected utility (DSEU), yields a novel representation of the class of invariant biseparable preferences (Ghirardato, Maccheroni, and Marinacci, 2004), which drops uncertainty aversion from maxmin expected utility (Gilboa and Schmeidler, 1989). Extensions of DSEU allow for more general departures from independence. |
| Keywords: | Ambiguity, Multiple priors, Dual-self models |
| JEL: | D81 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2180r2&r=all |
| By: | Kai Hao Yang (Cowles Foundation, Yale University) |
| Abstract: | A data broker sells market segmentations created by consumer data to a producer with private production cost who sells a product to a unit mass of consumers with heterogeneous values. In this setting, I completely characterize the revenue-maximizing mechanisms for the data broker. In particular, every optimal mechanism induces quasi-perfect price discrimination. That is, the data broker sells the producer a market segmentation described by a cost-dependent cutoff, such that all the consumers with values above the cutoff end up buying and paying their values while the rest of consumers do not buy. The characterization of optimal mechanisms leads to additional economically relevant implications. I show that the induced market outcomes remain unchanged even if the data broker becomes more active in the product market by gaining the ability to contract on prices; or by becoming an exclusive retailer, who purchases both the product and the exclusive right to sell the product from the producer, and then sells to the consumers directly. Moreover, vertical integration between the data broker and the producer increases total surplus while leaving the consumer surplus unchanged, since consumer surplus is zero under any optimal mechanism for the data broker. |
| Keywords: | Price discrimination, Market segmentation, Mechanism design, Virtual cost |
| JEL: | D42 D82 D61 D83 L12 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2258&r=all |
| By: | David Rodina |
| Abstract: | This paper studies the interplay between information and incentives in principal-agent relationships with career concerns. I derive conditions for when more precise information about performance or more uncertainty about the agent's ability lead to stronger incentives due to career concerns, absent any ad-hoc restrictions on the production technology or set of information structures. A key condition for deriving these comparative statics is how e ort changes the informativeness of performance signals regarding ability. However, more sophisticated information revelation technologies that are implicitly ruled out in the literature overturn commonly held assertions regarding information design and career concerns. |
| Keywords: | Information Design |
| JEL: | D8 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_220&r=all |
| By: | Yi-Chun; Chen; Xiangqian; Yang |
| Abstract: | We study the information design problem in a single-unit auction setting. The information designer controls independent private signals according to which the buyers infer their binary private values. Assuming that the seller adopts the optimal auction due to Myerson (1981) in response, we characterize both the buyer-optimal information structure, which maximizes the buyers' surplus, and the sellerworst information structure, which minimizes the seller's revenue. We translate both information design problems into finite-dimensional, constrained optimization problems in which one can explicitly solve for the optimal information structures. In contrast to the case with one buyer (Roesler and Szentes, 2017 and Du, 2018), we show that with two or more buyers, the symmetric buyer-optimal information structure is different from the symmetric seller-worst information structure. The good is always sold under the seller-worst information structure but not under the buyer-optimal information structure. Nevertheless, as the number of buyers goes to infinity, both symmetric information structures converge to no disclosure. We also show that in an ex ante symmetric setting, an asymmetric information structure is never seller-worst but can generate a strictly higher surplus for the buyers than the symmetric buyer-optimal information structure. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.08990&r=all |
| By: | Xiaoyu Cheng |
| Abstract: | In a persuasion environment where both players are ambiguity averse, Beauch\^ene, Li and Li (2019) show that the sender can make strictly more profits from sending ambiguous signals if the receiver cares only about his interim payoff. As in the presence of ambiguity, the receiver may not be dynamically consistent. This paper studies ambiguous persuasion when the receiver's goal is to maximize his ex-ante payoff. First of all, if the receiver is dynamically consistent, I show the sender cannot make any profits more than Bayesian persuasion. In other words, ambiguity plays a role in persuasion only through inducing dynamically inconsistent behaviors. On the other hand, if the receiver is dynamically inconsistent and is able to adjust the information structure by ignoring the undesirable messages. Two seemingly undesirable features of ambiguous persuasion, synonyms and dilation, are not always undesirable to the receiver. In fact, they are always undesirable if and only if the payoff-relevant states are binary. Nonetheless, I show that the optimal value of ambiguous persuasion in the interim setting \citep*{Beauch\^ene, Li and Li, 2019} cannot be achieved in the current setting. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.05376&r=all |
| By: | Nicolas Fugger; Vitali Gretschko; Helene Mass; Achim Wambach |
| Abstract: | Procurement regulation aimed at curbing discrimination requires equal treatment of sellers. However, Deb and Pai show that such regulation imposes virtually no restrictions on the ability to discriminate. We propose a simple rule - imitation perfection - that restricts discrimination significantly. It ensures that in every equilibrium bidders with the same valuation distribution and the same valuation earn the same expected utility. If all bidders are homogeneous, revenue and social surplus optimal auctions consistent with imitation perfection exist. For heterogeneous bidders, however, it is incompatible with revenue and social surplus optimization. Thus, a trade-off between non-discrimination and optimality exists. |
| Keywords: | Discrimination, symmetric auctions, procurement regulation |
| JEL: | D44 D73 D82 L13 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_225&r=all |
| By: | Van Nguyen (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| 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: | general equilibrium,regular economy,Endowment externalities,other-regarding preferences |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-02966848&r=all |
| By: | Nejat Anbarc{\i}; Kutay Cingiz; Mehmet S. Ismail |
| Abstract: | We introduce a novel and general model of dynamic n-player Blotto contests. The players have asymmetric resources, the battlefields are heterogenous, and contest success functions are general as well. We obtain one possibility and one impossibility result. When players maximize the expected value of the battles, the strategy profile in which players allocate their resources proportional to the sizes of the battles at every history---whether their resources are fixed from the beginning or can be subject to shocks in time---is a subgame perfect equilibrium. However, when players maximize the probability of winning, there is always a distribution of values over the battles such that proportional resource allocation cannot be supported as an equilibrium. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.05087&r=all |
| By: | Mario Vazquez Corte; Levent \"Ulk\"u |
| Abstract: | I formulate and characterize the following two-stage choice behavior. The decision maker is endowed with two preferences. She shortlists all maximal alternatives according to the first preference. If the first preference is decisive, in the sense that it shortlists a unique alternative, then that alternative is the choice. If multiple alternatives are shortlisted, then, in a second stage, the second preference vetoes its minimal alternative in the shortlist, and the remaining members of the shortlist form the choice set. Only the final choice set is observable. I assume that the first preference is a weak order and the second is a linear order. Hence the shortlist is fully rationalizable but one of its members can drop out in the second stage, leading to bounded rational behavior. Given the asymmetric roles played by the underlying binary relations, the consequent behavior exhibits a minimal compromise between two preferences. To our knowledge it is the first Choice function that satisfies Sen's $\beta$ axiom of choice,but not $\alpha$. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.08771&r=all |
| By: | Ezra Tampubolon; Haris Ceribasic; Holger Boche |
| Abstract: | In this work, we study the system of interacting non-cooperative two Q-learning agents, where one agent has the privilege of observing the other's actions. We show that this information asymmetry can lead to a stable outcome of population learning, which does not occur in an environment of general independent learners. Furthermore, we discuss the resulted post-learning policies, show that they are almost optimal in the underlying game sense, and provide numerical hints of almost welfare-optimal of the resulted policies. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.10901&r=all |
| By: | Carl Heese |
| Abstract: | In this note, I study a variant of the canonical binary-state binary-choice social learning model (Bikhchandani et al., 1992). An individual would like to choose an action only in the high state. When making her own decision, she observes previous decision-makers who chose the action. Importantly, the likelihood of observing the action of previous decision-maker depends on the state. I show that when observing the action is more likely in the low state, the individual faces an inference problem: does she observe many actions because the state is high and previous decision-makers had private information about this or because the state is low and previous actions are more visible. In this situation, learning is confounded (Smith and Sorensen, 2011). |
| Keywords: | Social Learning, Confounded Learning |
| JEL: | D83 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_222&r=all |
| By: | Edi Karni (Johns Hopkins University); Marie-Louise Vierø (Queen's University) |
| Abstract: | This paper introduces measures of overall incompleteness of preference relations under risk and uncertainty, as well as measures of incompleteness of beliefs and tastes. These measures are used to define "more incomplete than" relations among different preference relations. We show how greater incompleteness is manifested in the representations of decision makers' preferences and illustrate its behavioral implications. In addition, the paper introduces incentive compatible schemes of eliciting the degrees of overall incompleteness and those of beliefs and tastes. |
| Keywords: | Incomplete Preferences, Knightian Uncertainty, Comparative Incompleteness, Elicitation Mechanisms |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1443&r=all |
| By: | David Rodina; John Farragut |
| Abstract: | We study the problem of a principal who wants to incentivize an agent's investment in productivity through an information disclosure policy. The agent participates in a market and benefits from an improved perception of his productivity. Under asymmetric information about the agent's ability we explore how qualitative features of the optimal deterministic grading scheme depend on the distribution of the agent's ability. Perhaps surprisingly, random grades can induce higher investment. When the effect of the agent's investment is subject to exogenous shocks and there is no asymmetric information, in a wide variety of circumstances the optimal disclosure policy has a relatively simple threshold form. |
| Keywords: | Information Design |
| JEL: | D8 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_221&r=all |
| By: | Jens Gudmundsson (Department of Food and Resource Economics, University of Copenhagen); Jens Leth Hougaard (NYU-Shanghai, China; Department of Food and Resource Economics, University of Copenhagen); Trine Tornøe Platz (Department of Food and Resource Economics, University of Copenhagen) |
| Abstract: | We study decentralized task coordination. Tasks are of varying complexity and agents asymmetric: agents capable of completing high-level tasks may also take on tasks originally contracted by lower-level agents, facilitating system-wide cost reductions. We suggest a family of decentralized two-stage mechanisms in which agents first announce preferred individual workloads and then bargain over the induced joint cost savings. The second-stage negotiations depend on the first-stage announcements as specified through the mechanism's recognition function. We characterize mechanisms that incentivize cost-effective task allocation and further single out a particular mechanism, which additionally ensures a fair distribution of the system-wide cost savings. |
| Keywords: | Decentralized mechanisms, Implementation, Bargaining, Consistency, Blockchain |
| JEL: | C72 C78 D47 D63 D78 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:foi:wpaper:2020_11&r=all |