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on Microeconomics |
| By: | Galit Ashkenazi-Golan (The School of Mathematical Sciences, Tel Aviv University, Tel Aviv 6997800, Israel.); Yevgeny Tsodikovich (Aix Marseille Univ, CNRS, AMSE, Marseille, France.); Yannick Viossat (PSL, Université Paris-Dauphine, CEREMADE UMR7534, Paris, France) |
| Abstract: | A common practice in many auctions is to offer bidders an opportunity to improve their bids, known as a Best and Final Offer (BAFO) stage. This final bid can depend on new information provided about either the asset or the competitors. This paper examines the effects of new information regarding competitors, seeking to determine what information the auctioneer should provide assuming the set of allowable bids is discrete. The rational strategy profile that maximizes the revenue of the auctioneer is the one where each bidder makes the highest possible bid that is lower than his valuation of the item. This strategy profile is an equilibrium for a large enough number of bidders, regardless of the information released. We compare the number of bidders needed for this profile to be an equilibrium under different information settings. We find that it becomes an equilibrium with fewer bidders when no additional information is made available to the bidders compared to when information regarding the competition is available. As a result, from the auctioneer's revenue perspective, when the number of bidders is unknown, there are some advantages to not revealing information between the stages of the auction. |
| Keywords: | auctions, multistage auctions, BAFO, information utilization |
| JEL: | D44 D82 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2044&r=all |
| By: | Kaustav Das; Nicolas Klein |
| Abstract: | We analyse a model of two firms that are engaged in a patent race. Firms have to choose in continuous time between a traditional and an innovative method of pursuing the decisive breakthrough. They share a common belief about the likelihood of the innovative method being good. The unique Markov perfect equilibrium coincides with the cartel solution if and only if firms are symmetric in their abilities of leveraging a good innovative method or there is no patent protection. Otherwise, equilibrium will entail excessive duplication of efforts in the innovative method, as compared to the cartel benchmark, for any level of patent protection. We show that the expected time to a breakthrough is minimised at an interior level of patent protection, providing a possible explanation for the decrease in R&D productivity sometimes associated with stronger patent protections. |
| Keywords: | R&D competition, Duplication, Two-armed Bandit, Learning |
| JEL: | C73 D83 O31 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:20/03&r=all |
| By: | Victor Augias; Daniel M. A. Barreto |
| Abstract: | How can motivated thinking impact strategic information disclosure? We investigate this question by modelling a game of persuasion in which Receiver is a "wishful thinker" in the fashion of Caplin and Leahy (2019). Following reception of Sender's signal, Receiver optimally chooses its subjective belief by trading off the anticipatory utility she derives from being optimistic and the psychological cost of distorting beliefs. We derive the optimal correspondence between Bayesian and motivated belief and characterize conditions on primitives of the model that define whether the persuader is better or worse off when facing a wishful thinker vis-\`a-vis the Bayesian canonical model of Kamenica and Gentzkow (2011). We apply those results to explain some stylized facts such as why financial advisors often mislead their clients and why informational interventions are often inefficient in inducing more investment in preventive health treatments. Finally, we extend the model to a binary majority voting setting in which wishful voters hold heterogeneous partisan preferences. We show that, if voters' preferences are symmetrically distributed around the median voter, optimal public persuasion induces maximum belief polarization in the electorate. This formalizes a new mechanism for the emergence of polarization: as a byproduct of strategic information disclosure to wishful agents. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2011.13846&r=all |
| By: | Mark Whitmeyer |
| Abstract: | This paper extends the sequential search model of Wolinsky (1986) by allowing firms to choose how much match value information to disclose to visiting consumers. This restores the Diamond paradox (Diamond 1971): there exist no symmetric equilibria in which consumers engage in active search, so consumers obtain zero surplus and firms obtain monopoly profits. Modifying the scenario to one in which prices are advertised, we discover that the no-active-search result persists, although the resulting symmetric equilibria are ones in which firms price at marginal cost. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2011.13900&r=all |
| By: | Aoyama, Tomohito |
| Abstract: | Consider a decision-maker who has an opportunity to wait for information before making a choice. He can obtain more information by waiting more, but this is costly. As a result, he endogenously determines the length of time to choose an alternative, which is called the response time. The present study models such a decision-maker as if he solves an optimal stopping problem. The model incorporates a dynamic information structure formalized as an evolving information partition, which is called filtration. I axiomatically characterize the model using behavioral data consisting of choices and response times that depend on choice situations and states. That is, from the data, we can identify filtration that governs the decision-maker's learning process as well as other model parameters. This result implies that using response time helps us understand the human cognitive process. |
| Keywords: | Response time, Subjective learning, Information acquisition |
| JEL: | D01 D81 D83 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-101&r=all |
| By: | Ingela Alger (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Institute for Advanced Study Toulouse); Jean-François Laslier (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This paper revisits two classical problems in the theory of voting-viz. the divided majority problem and the strategic revelation of information by majority vote-in the light of evolutionarily founded partial Kantian morality. It is shown that, compared to electorates consisting of purely self-interested voters, such Kantian morality helps voters solve coordination problems and improves the information aggregation properties of equilibria, even for modest levels of morality. |
| Keywords: | Condorcet jury theorem,divided majority problem,voting,Homo moralis,Kantian morality,social dilemmas |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-03031118&r=all |
| By: | Vasudha Chopra (Department of Economics, University of Tennessee); Hieu M. Nguyen (Department of Economics, University of Tennessee); Christian A. Vossler (Department of Economics, University of Tennessee) |
| Abstract: | This study examines how behavior in inter-group contests is altered when players have incomplete information on their opponent. We model a Tullock contest where there are two possible types of groups that are heterogeneous in the incentives they face, and players only know the probability their opponent is a particular group type. Relative to a contest with complete information, we find theoretically that incomplete information lowers contest-level effort in (even) contests between groups of the same type, whereas it increases effort in uneven contests. Through an experiment, we compare three sources of heterogeneity – differences in cost-of-effort, prize value, and group size. For the cost and value treatments, we find that incomplete information increases effort in uneven contests but has no effect in even contests. For the group size treatments, incomplete information has no effect. A theory that assumes players are altruistic towards group members, rather than purely self-interested, is much better at predicting outcomes. |
| Keywords: | inter-group competition; heterogeneous contests; Tullock contests; incomplete information; public goods; group size paradox; experiments; altruism |
| JEL: | C72 C92 D74 D82 D91 H41 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ten:wpaper:2020-05&r=all |
| By: | Thomas Byrne; S\'andor P. Fekete; J\"org Kalcsics; Linda Kleist |
| Abstract: | We study competitive location problems in a continuous setting, in which facilities have to be placed in a rectangular domain $R$ of normalized dimensions of $1$ and $\rho\geq 1$, and distances are measured according to the Manhattan metric. We show that the family of 'balanced' facility configurations (in which the Voronoi cells of individual facilities are equalized with respect to a number of geometric properties) is considerably richer in this metric than for Euclidean distances. Our main result considers the 'One-Round Voronoi Game' with Manhattan distances, in which first player White and then player Black each place $n$ points in $R$; each player scores the area for which one of its facilities is closer than the facilities of the opponent. We give a tight characterization: White has a winning strategy if and only if $\rho\geq n$; for all other cases, we present a winning strategy for Black. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2011.13275&r=all |
| By: | Antonio Mele (University of Lugano; Swiss Finance Institute; Centre for Economic Policy Research (CEPR)); Francesco Sangiorgi (Frankfurt School of Finance & Management gemeinnützige GmbH) |
| Abstract: | We analyze the effects of trading disclosure requirements in markets with insider traders and professional investors. The insiders garble their trading throughout a mixed strategy. A number of differentially informed professional investors acquire information and contribute to increased mar- ket efficiency. A “reform” introducing post-trade transparency leads these professional investors to acquire less information and, then, to trade less, contributing to less price discovery. This information crowding-out may be so strong to neutralize the generally positive effects related to public disclosure or to harm market quality, resulting in diminished liquidity and informationally less efficient market. |
| Keywords: | post-trade transparency, information crowding-out |
| JEL: | D82 G14 G18 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp20118&r=all |
| By: | Gossner, Olivier; Steiner, Jakub; Stewart, Colin |
| Abstract: | We study the impact of manipulating the attention of a decision-maker who learns sequentially about a number of items before making a choice. Under natural assumptions on the decision-maker’s strategy, directing attention toward one item increases its likelihood of being chosen regardless of its value. This result applies when the decisionmaker can reject all items in favor of an outside option with known value; if no outside option is available, the direction of the effect of manipulation depends on the value of the item. A similar result applies to manipulation of choices in bandit problems. |
| Keywords: | sequential sampling; marketing; persuasion; attention; 770652 |
| JEL: | J1 |
| Date: | 2020–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107907&r=all |
| By: | Milgrom, Paul R. (Stanford University) |
| Abstract: | Paul R. Milgrom delivered his Prize Lecture on 7 December 2020. He was introduced by Professor Tore Ellingsen. |
| Keywords: | Auctions |
| JEL: | D44 |
| Date: | 2020–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_003&r=all |
| By: | Wilson, Robert B. (Stanford University) |
| Abstract: | Robert B. Wilson delivered his Prize Lecture on 7 December 2020. He was introduced by Professor Tore Ellingsen. |
| Keywords: | Auctions; |
| JEL: | D44 |
| Date: | 2020–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:nobelp:2020_004&r=all |