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on Microeconomics |
| By: | Dworczak, Piotr; Pavan, Alessandro |
| Abstract: | We propose a robust solution concept for Bayesian persuasion that accounts for the Sender's ambiguity over (i) the exogenous sources of information the Receivers may learn from, and (ii) the way the Receivers play (when multiple strategy profiles are consistent with the assumed solution concept and the available information). The Sender proceeds in two steps. First, she identifies all information structures that yield the largest payoff in the "worst-case scenario," i.e., when Nature provides information and coordinates the Receivers' play to minimize the Sender's payoff. Second, she picks an information structure that, in case Nature and the Receivers play favorably to her, maximizes her expected payoff over all information structures that are "worst-case optimal." We characterize properties of robust solutions, identify conditions under which robustness requires separation of certain states, and qualify in what sense robustness calls for more information disclosure than standard Bayesian persuasion. Finally, we discuss how some of the results in the Bayesian persuasion literature change once robustness is accounted for. |
| Keywords: | information design; Persuasion; robustness; worst-case optimality |
| JEL: | D82 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15017&r= |
| By: | Antoine L. Noël; Amy Hongfei Sun |
| Abstract: | We propose a theory of optimal firm financing given nested information problems of adverse selection and agency cost. We prove that there exists a unique perfect Bayesian equilibrium with novel features: First, three types of optimal contracts arise endogenously, i.e., equity, transparent debt and opaque debt. Equity and transparent debt are both informational transparent because these contracts require firms to take on a costly technology for verifying types. Opaque debt, however, merely reflects the general information of firms seeking external funds. Any signaling contract that does not involve costly verification does not survive the equilibrium. Second, the equilibrium is either pooling on opaque debt, or mixing with transparent and opaque financing. Third, debt weakly dominates equity. Finally, the optimal debt-to-equity ratio is unique for all firms in a pooling equilibrium, but only for a strict subset of firms in a mixing equilibrium. |
| Keywords: | Optimal Contracts, Capital Structure, External Financing, Asymmetric Information, Information Transparency |
| JEL: | D82 D86 G32 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1459&r= |
| By: | Stéphan Sémirat (GAEL - Laboratoire d'Economie Appliquée de Grenoble - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Francoise Forges (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS - Centre National de la Recherche Scientifique - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres) |
| Abstract: | We consider a sender-receiver game, in which the sender has finitely many types and the receiver's decision is a real number. We assume that utility functions are concave, single-peaked and single-crossing. After the cheap talk phase, the receiver makes a decision, which requires the sender's approval to be implemented. Otherwise, the sender "exits". At a perfect Bayesian equilibrium without exit, the receiver must maximize his expected utility subject to the participation constraints of all positive probability types. This necessary condition may not hold at the receiver's prior belief, so that a non-revealing equilibrium may fail to exist. Similarly, a fully revealing equilibrium may not exist either due to the sender's incentive compatibility conditions.We propose a constructive algorithm that always achieves a perfect Bayesian equilibrium without exit. |
| Keywords: | Approval,cheap talk,sender-receiver game,participation constraints,single-crossing |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03231673&r= |
| By: | Bergemann, Dirk; Strack, Philipp |
| Abstract: | A single seller faces a sequence of buyers with unit demand. The buyers are forward-looking and long-lived but vanish (and are replaced) at a constant rate. The arrival time and the valuation is private information of each buyer and unobservable to the seller. Any incentive compatible mechanism has to induce truth-telling about the arrival time and the evolution of the valuation. We derive the optimal stationary mechanism in closed form and characterize its qualitative structure. As the arrival time is private information, the buyer can choose the time at which he reports his arrival. The truth-telling constraint regarding the arrival time can be represented as an optimal stopping problem. The stopping time determines the time at which the buyer decides to participate in the mechanism. The resulting value function of each buyer cannot be too convex and must be continuously differentiable everywhere, reflecting the option value of delaying participation. The optimal mechanism thus induces progressive participation by each buyer: he participates either immediately or at a future random time. |
| Keywords: | Dynamic Mechanism Design; Interim Incentive Constraints; Interim Participation Constraints; Observable Arrival; Option value; Progressive Participation; Repeated Sales; Stopping Problem; Unobservable Arrival |
| JEL: | D44 D82 D83 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15111&r= |
| By: | Bandyopadhyay, Siddhartha; Cabrales, Antonio |
| Abstract: | We consider a model where agents differ in their 'types' which determines their voluntary contribution towards a public good. We analyze what the equilibrium composition of groups are under centralized and centralized choice. We show that there exists a top-down sorting equilibrium i.e. an equilibrium where there exists a set of prices which leads to groups that can be ordered by level of types, with the first k types in the group with the highest price and so on. This exists both under decentralized and centralized choosing. We also analyze the model with endogenous group size and examine under what conditions is top-down sorting socially ecient. We illustrate when integration (i.e. mixing types so that each group's average type if the same) is socially better than top-down sorting. Finally, we show that top down sorting is efficient even when groups compete among themselves. |
| Keywords: | Group-formation; integration; Public Good; Segregation; Top-down sorting |
| JEL: | D02 D64 D71 H41 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15137&r= |
| By: | Ljungqvist, Alexander P.; Raff, Konrad |
| Abstract: | We ask when and how a diverse board can benefit shareholders. Board diversity may be value-increasing even if some directors have agendas that are not perfectly aligned with shareholders' interests. Diversity commits the board to a high information standard because directors with opposing agendas are deadlocked unless they have persuasive information in support of the optimal course of action. Since deadlock is costly, diversity strengthens directors' incentives to gather information ex ante, which raises expected firm value. Diversity is more likely desirable if the firm's information environment is poor and if directors' opposing agendas are accompanied by sufficiently strong incentives for value maximization. However, if directors cannot credibly communicate their information, a homogeneous board dominates a diverse board. |
| Keywords: | Boards of directors; deadlock; diversity; Monitoring |
| JEL: | G34 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15165&r= |
| By: | Foarta, Dana; Morelli, Massimo |
| Abstract: | Decision makers called to evaluate and approve a reform, proposed by an interest group, a politician, or a bureaucracy, suffer from a double asymmetric information problem: about the competence of the proposer and the consequences of the proposal. Moreover, the ability of decision makers to evaluate proposals depends on the complexity of the legislative environment, itself a product of past reforms. We model the strategic interaction between reformers and decision makers as a function of legislative complexity, and study the dynamics of endogenous complexity and stability of reforms. Complexication-simplication cycles can occur on the equilibrium path, and expected long-run complexity may be higher when competence of reform proposers is lower. The results apply to regulatory reforms, legislative politics, and institutional design. |
| Keywords: | bureaucracy; Checks and balances; competence; Incremental Reforms; Information; interest groups; Politicians; Regulatory Complexity |
| JEL: | D73 G28 H83 L51 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15136&r= |
| By: | Ghatak, Maitreesh; Wahhaj, Zaki |
| Abstract: | What are the determinants of an organization's investment in the loyalty and motivation of its workers? We develop a simple principal-agent model where the standard optimal contract is to offer a bonus that trades off incentive provision versus rent extraction. We allow the principal to undertake two types of motivational investments - one that increases the agent's disutility from deviating from a prescribed effort level, and another that increases the agent's on-the-job satisfaction. We argue that these two types of investments can capture a range of organizational practices - other than extrinsic rewards - that aim to raise worker motivation. We show that the two types of motivational investments are complements and both are substitutes to financial incentives. Our analysis implies that technological improvements in the form of improved worker productivity or greater observability of output will induce profit-maximizing firms to make greater use of financial incentives and less use of motivational investments. The reason is that while financial incentives have constant returns in terms of its effect on the worker's effort level, motivational investments by their very nature have decreasing returns. |
| Keywords: | investment in worker motivation; Job Satisfaction; Motivated agents; worker moral hazard |
| JEL: | D23 D86 D91 J33 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15172&r= |
| By: | Belleflamme, Paul; Peitz, Martin; Toulemonde, Eric |
| Abstract: | We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This platform enjoys a competitive advantage on one or both sides. Our finding raises further doubts on using market shares as a measure of market power in platform markets. |
| Keywords: | Antitrust; market power; Market Share; network effects; oligopoly; Two-sided platforms |
| JEL: | D43 L13 L86 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15204&r= |
| By: | Rahul Deb; Anne-Katrin Roesler |
| Abstract: | A monopolist seller of multiple goods screens a buyer whose type is initially unknown to both but drawn from a commonly known distribution. The buyer privately learns about his type via a signal. We derive the seller's optimal mechanism in two different information environments. We begin by deriving the buyer-optimal outcome. Here, an information designer first selects a signal, and then the seller chooses an optimal mechanism in response; the designer's objective is to maximize consumer surplus. Then, we derive the optimal informationally robust mechanism. In this case, the seller first chooses the mechanism, and then nature picks the signal that minimizes the seller's profits. We derive the relation between both problems and show that the optimal mechanism in both cases takes the form of pure bundling. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.12304&r= |
| By: | Gomes, Renato; Mantovani, Andrea |
| Abstract: | Online marketplaces, such as Amazon, or online travel agencies, such as Booking.com, greatly expand consumer information about market offers, but also raise firms' marginal costs by charging high commissions. To prevent show-rooming, platforms adopted price parity clauses, which restrict sellers' ability to offer lower prices in alternative sales channels. Whether to uphold, reform, or ban price parity has been at the center of the policy debate, but so far little consensus has emerged. In this paper, we investigate a natural alternative to lifting price parity; namely, we study how to optimally cap platforms' commissions. The optimal cap reflects the Pigouvian precept according to which the platform should not charge fees greater than the externality that its presence generates on other market participants. Employing techniques from extreme-value theory, we are able to express the optimal cap in terms of observable quantities. In an application to online travel agencies, we find that current average fees are welfare increasing only if platforms at least double consumers' consideration sets (relative to alternative ways of gathering information online). This suggests that, in some markets, regulation capping commissions should bind if optimally set. |
| Keywords: | commission caps; Extreme value theory; platforms; price parity; regulation |
| JEL: | D83 L10 L41 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15048&r= |
| By: | Yoichi Kasajima (School of Social Sciences, Waseda University); Manabu Toda (School of Social Sciences, Waseda University) |
| Abstract: | We consider two-sided one-to-one matching problems (between men and women) and study a new requirement called gown-side singles monotonicity. h Suppose that there is an agent who is not matched in a problem. Suppose for simplicity it is a woman. Now in a new problem (with the same set of agents), we improve (or leave unchanged) her ranking for each agent on the opposite side of her. Own-side singles monotonicity requires that each agent on her side should not be made better off (except for her). Unfortunately, no single-valued solution satisfies own-side singles monotonicity and stability. However, there is a (multi-valued) solution, the stable solution, that does. We provide two characterizations of the stable solution based on this property. It is the unique solution satisfying weak unanimity, null player invariance, own-side singles monotonicity, and consistency. The uniqueness also holds by replacing consistency with Maskin invariance. In addition, we study the impact of improving her ranking on the welfare of the agents on the opposite side of her. |
| Keywords: | property regimes, one-to-one matching; own-side singles monotonicity; other-side singles monotonicity; stability; consistency; Maskin invariance. |
| JEL: | C71 C78 D47 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2023&r= |
| By: | Seungjin Han |
| Abstract: | This paper proposes a general competing mechanism game of incomplete information where a mechanism allows its designer to send a message to himself at the same time agents send messages. This paper introduces a notion of robust equilibrium. If each agent’s payoff function is separable with respect to principals’ actions, they lead to the full characterization of equilibrium allocations in terms of incentive compatible direct mechanisms without reference to the set of arbitrary mechanisms allowed in the game. Szentes’ Critique (Szentes (2010)) on the standard competing mechanism game of complete information is also valid in a model with incomplete information. |
| Keywords: | competing mechanisms; robust equations; general mechanisms; direct mechanisms |
| JEL: | D82 D86 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2021-07&r= |
| By: | Takashi Nishiwaki (Graduate School of Economics,Waseda University. 1-6-1, Nishi-Waseda, Shinjukuku, Tokyo 169-8050, Japan.) |
| Abstract: | This study examines the optimal investment strategies for risk-and-ambiguityaverse investors and characterizes conditions under which ambiguity induces investors to buy or sell options. Under identical hyperbolic absolute risk aversion (HARA) utility functions, we illustrate that ambiguity-averse investors should sell portfolio insurance if their preferences exhibit constant relative risk aversion (CRRA). In particular, when investors f relative risk aversion is less than or equal to two, ambiguity-averse investors should sell options at any realization values of a reference asset. Further, if the relative risk aversion is greater than two, we demonstrate that ambiguity-averse investors should sell and buy options at smaller and higher realization values of the reference asset, respectively. Furthermore, if the utility functions display constant absolute risk aversion (CARA), then an ambiguity-averse investor should buy options at any realization values of the reference asset. |
| Keywords: | Ambiguity; Multiple prior model; Options demand; Kullback? Leibler divergence |
| JEL: | G11 G12 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2102&r= |
| By: | Korpela, Ville; Lombardi, Michele; Saulle, Riccardo D. |
| Abstract: | Rotation programs are widely used in societies. Some examples are job rotations, rotation schemes in the management of common-pool resources, and rotation procedures in fair division problems. We study rotation programs via the implementation of Pareto efficient social choice rules under complete information. The notion of the rotation program predicts the outcomes. A rotation program is a myopic stable set whose states are arranged circularly, and agents can effectively move only between two consecutive states. We provide characterizing conditions for the implementation in rotation programs and show that, for multi-valued rules, our notion of rotation monotonicity is necessary and sufficient for implementation. Finally, we identify two classes of assignment problems that are implementable in rotation programs. |
| Keywords: | Research Methods/ Statistical Methods |
| Date: | 2021–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:311054&r= |
| By: | Anderson, Simon P; Peitz, Martin |
| Abstract: | We introduce advertising congestion along with a time-use model of consumer choice among media. Both consumers and advertisers multi-home. Higher equilibrium advertising levels ensue on less popular media platforms because platforms treat consumer attention as a common property resource: smaller platforms internalize less the congestion from advertising and so advertise more. Platform entry raises the ad nuisance "price" to consumers and diminishes the quality of the consumption experience on all platforms. With symmetric platforms, entry still leads to higher consumer benefits. However, entry of less attractive platforms can increase ad nuisance levels so much that consumers are worse off. |
| Keywords: | advertising clutter; information congestion; limited attention; Media economics; two-sided markets |
| JEL: | D43 L13 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15130&r= |
| By: | Mark Armstrong; John Vickers |
| Abstract: | We explore patterns of price competition in an oligopoly where consumers vary in the set of firms they consider for their purchase and buy from the lowest-priced firm they consider. We study a pattern of consideration, termed "symmetric interactions", that generalises models used in existing work (duopoly, symmetric firms, and firms with independent reach). Within this class, equilibrium profits are proportional to a firm's reach, firms with a larger reach set higher average prices, and a reduction in the number of firms (either by exit or by merger) harms consumers. However, increased competition (either by entry of by increased consumer awareness) does not always benefit consumers. We go on to study patterns of consideration with asymmetric interactions. In situations with disjoint reach and with nested reach we find equilibria in which price competition is "duopolistic": only two firms compete within each price range. We characterize the contrasting equilibrium patterns of price competition for all patterns of consideration in the three-firm case. |
| Keywords: | Price competition, consideration sets, price dispersion, entry and merger |
| JEL: | C72 D43 D83 L13 |
| Date: | 2021–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:936&r= |
| By: | Aldashev, Gani; Jaimovich, Esteban; Verdier, Thierry |
| Abstract: | We study the implications of transparency policies on the decentralized public good provision, by focusing on how the moral hazard problem inside non-profits interacts with the competitive structure of the sector under alternative informational regimes. More transparency on the use of funds has an ambiguous effect on the total public good provision and the welfare of donors. On the one hand, more transparency encourages non-profit managers to devote more resources to curbing rent-seeking inside organizations. On the other hand, it tilts the playing field against non-profits managers who face higher cost of monitoring, inducing them to abandon their missions. From the donors' perspective, there are two corresponding opposing effects: transparency is good because of the reduction in rent-seeking in the non-profits active in the market, but it can backfire because of a lower diversity of non-profits. Donors' welfare is lower under transparency (than under no information on the use of funds) for intermediate levels of asymmetry in the cost of monitoring. |
| Keywords: | altruism; Charitable Giving; Non-profit organizations; transparency |
| JEL: | D23 D43 D64 L31 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15030&r= |
| By: | Argenziano, Rossella; Bonatti, Alessandro |
| Abstract: | We propose a microfoundation for consumers' privacy preferences and examine how it shapes the outcome of regulation. A single consumer interacts sequentially with two heterogeneous firms: the first firm collects data on consumer behavior, which the second firm uses to set a quality level and a price. Thus, the consumer manipulates her behavior to influence the future terms of trade. In equilibrium, manipulation is beneficial to the consumer when the recipient firm is sufficiently similar to the collecting firm (as measured by the relative salience of quality and price of their two products). We then evaluate the impact of privacy regulation, including mandatory transparency, explicit consent requirements, and limits to discriminatory offers. We show that transparency has an ambiguous effect on consumer welfare and that consent requirements are unambiguously beneficial to consumers but that limits to discrimination are harmful to consumers in equilibrium. |
| Keywords: | consumer consent; consumer privacy; data linkages; data rights; personal information; price discrimination; Ratchet Effect; signaling |
| JEL: | D44 D82 D83 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15203&r= |
| By: | Daron Acemoglu; James A. Robinson |
| Abstract: | This paper proposes a new framework for studying the interplay between culture and institutions. We follow the recent sociology literature and interpret culture as a \repertoire", which allows rich cultural responses to changes in the environment and shifts in political power. Specifically, we start with a culture set, which consists of attributes and the feasible connections between them. Combinations of attributes produce cultural configurations, which provide meaning, interpretation and justification for individual and group actions. Cultural figurations also legitimize and support different institutional arrangements. Culture matters as it shapes the set of feasible cultural figurations and via this channel institutions. Yet, changes in politics and institutions can cause a rewiring of existing attributes, generating very different cultural configurations. Cultural persistence may result from the dynamics of political and economic factors - rather than being a consequence of an unchanging culture. We distinguish cultures by how fluid they are - whereby more fluid cultures allow a richer set of cultural configurations. Fluidity in turn depends on how specific (vs. abstract) and entangled (vs. free-standing) attributes in a culture set are. We illustrate these ideas using examples from African, England, China, the Islamic world, the Indian caste system and the Crow. In all cases, our interpretation highlights that culture becomes more of a constraint when it is less fluid (more hardwired), for example because its attributes are more specific or entangled. We also emphasize that less fluid cultures are not necessarily "bad cultures", and may create a range of benefits, though they may reduce the responsiveness of culture to changing circumstances. In many instances, including in the African, Chinese and English cases, we show that there is a lot of fluidity and very different, almost diametrically-opposed, cultural configurations are feasible, often compete with each other for acceptance and can gain the upper hand depending on political factors. |
| JEL: | P10 P16 P50 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28832&r= |
| By: | Broccardo, Eleonora; Hart, Oliver; Zingales, Luigi |
| Abstract: | We study the relative effectiveness of exit (divestment and boycott) and voice (engagement) strategies in promoting socially desirable outcomes in companies. We show that in a competitive world exit is less effective than voice in pushing firms to act in a socially responsible manner. Furthermore, we demonstrate that individual incentives to join an exit strategy are not necessarily aligned with social incentives, whereas they are when well-diversified investors are allowed to express their voice. We discuss what social and legal considerations might sometimes make exit preferable to voice. |
| Keywords: | Boycott; Divestment; engagement; exit; Social Responsibility; voice |
| JEL: | D02 D21 D23 D62 D64 H41 L21 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15176&r= |
| By: | Helios Herrera (University of Warwick [Coventry], CEPII - Centre d'études prospectives et d'informations internationales); Antonin Macé (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 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 Paris 1 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); Matias Nùnez (CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz], IP Paris - Institut Polytechnique de Paris, GENES - Groupe des Ecoles Nationales d'Economie et Statistique - Institut national de la statistique et des études économiques (INSEE)) |
| Abstract: | We study how door die threats ending negotiations affect gridlock and welfare in the ratification of deals/treaties between opposing parties. Failure to agree in any period, as usual, implies a status-quo disagreement payoff and a continuation of the negotiation: a renegotiated amended agreement to be ratified next period. However, under brinkmanship, agreement failure in any period may precipitate instead a "hard" outcome, worse than the status-quo and than any feasible agreement. Such brinkmanship threats improve the scope for agreement, but also entail costs as we show. With symmetric parties only more extreme brinkmanship is beneficial: when an agreement is unlikely to begin with mild brinkmanship only reduces welfare by increasing the equilibrium chance of a hard outcome. If a party is advantaged it typically benefits even from mild threats, as the expected agreement shifts in its favor, while only extreme brinkmanship threats can benefit the disadvantaged party. |
| Keywords: | Hard Brexit,Gridlock,Government Shutdown,Collective Search |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03225030&r= |
| By: | Bergemann, Dirk; Heumann, Tibor; Morris, Stephen |
| Abstract: | We consider demand function competition with a finite number of agents and private information. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. Regardless of the number of agents and the correlation of payo¤ shocks, market power may be arbitrarily close to zero (the competitive outcome) or arbitrarily large (so there is no trade). By contrast, price volatility is always lower than the variance of the aggregate shock across all information structures. Alternative trading mechanisms lead to very distinct bounds as a comparison with Cournot competition establishes. |
| Keywords: | Cournot Competition; Demand function competition; incomplete information; market power; price impact; Price volatility; Supply function competition |
| JEL: | C72 D43 D44 D83 G12 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15104&r= |
| By: | Gaia Belardinelli; Rasmus K. Rendsvig |
| Abstract: | Where information grows abundant, attention becomes a scarce resource. As a result, agents must plan wisely how to allocate their attention in order to achieve epistemic efficiency. Here, we present a framework for multi-agent epistemic planning with attention, based on Dynamic Epistemic Logic (DEL, a powerful formalism for epistemic planning). We identify the framework as a fragment of standard DEL, and consider its plan existence problem. While in the general case undecidable, we show that when attention is required for learning, all instances of the problem are decidable. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.09976&r= |
| By: | Fumagalli, Chiara; Motta, Massimo; Tarantino, Emanuele |
| Abstract: | We analyse the optimal policy of an antitrust authority towards the acquisitions of potential competitors in a model with financial constraints and asymmetric information. With respect to traditional mergers, these acquisitions trigger a new trade-off. On the one hand, the acquirer may decide to shelve the project of the potential entrant. On the other hand, the acquisition may allow for the development of a project that would otherwise never reach the market. We first show that a merger policy does not need to be lenient towards acquisitions of potential competitors to take advantage of their pro-competitive effects on project development. This purpose is achieved by a strict merger policy that pushes the incumbent towards the acquisition of potential competitors lacking the financial resources to develop their project independently. An equivalent rule would consist in blocking takeovers whose acquisition price is above a certain threshold. However, we also show that, if the anticipation of a takeover relaxes the target firm's financial constraints, a more lenient merger policy, which allows for the acquisition of firms that have already committed to enter the market, may be optimal. We identify the cumulative conditions necessary for this to be the case. They include the presence of pronounced financial imperfections. Hence, the more developed financial markets, the more likely that a stringent merger policy will be optimal. |
| Keywords: | Conglomerate mergers; Digital Markets; Merger Policy; Potential competition |
| JEL: | K21 L13 L41 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15113&r= |
| By: | Template-Type: ReDIF-Paper 1.0; Takahiro Ishii (Graduate School of Economics, Osaka University) |
| Abstract: | The present study examines the effects of free technology sharing by a monopolistic final-good firm with other final-good firms. To this end, we consider two cases-first, where there exists one final-good firm in the final-good market and second, where there exist two final-good firms in the final-good market. Considering the free entry into the differentiated intermediate-goods market , the results of this study show that, when another firm enters the final-good market and transforms it into a two-firm oligopoly, cost efficiency improves because of an increase in the number of intermediate-goods firms. Furthermore, there is a possibility that the incumbent firm fs profits increases not only for a two-firm oligopoly, but also for an oligopoly with three or more firms. Thus, sharing technology for free could improve the profits of incumbent firms. |
| Keywords: | Monopolistic competition; Endogenous variety of intermediate goods; T echnology sharing; Intermediate goods; Technology transfer |
| JEL: | D43 L13 L16 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2105&r= |
| By: | Andrew Ellis |
| Abstract: | In many choice problems, the interaction between several distinct variables determines the payoff of each alternative. I propose and axiomatize a model of a decision maker who recognizes that she may not accurately perceive the correlation between these variables, and who takes this into account when making her decision. She chooses as if she calculates each alternative's expected outcome under multiple possible correlation structures, and then evaluates it according to the worst expected outcome. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.13341&r= |