nep-mic New Economics Papers
on Microeconomics
Issue of 2021‒06‒14
thirty papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Contracting with Endogenously Incomplete Commitment: Escape Clauses By Tangerås, Thomas; Gick, Wolfgang
  2. Deliberative Institutions and Optimality By Jérôme Mathis; Marcello Puca; Simone M. Sepe
  3. Sweet Lemons: Mitigating Collusion in Organizations By Colin von Negenborn; Martin Pollrich
  4. Semi-flexible Majority Rules for Public Good Provision By Gersbach, Hans; Tejada, Oriol
  5. Sequencing Bilateral Negotiations with Externalities By Johannes Münster; Markus Reisinger
  6. An Implementation Approach to Rotation Programs By Ville Korpela; Michele Lombardi; Riccardo D. Saulle
  7. Reallocation with Priorities By Julien Combe; Jan Christoph Schlegel
  8. Authority in a theory of the firm By Deimen, Inga; Szalay, Dezso
  9. Sequential Learning with Endogenous Consideration Sets By Fershtman, Daniel; Pavan, Alessandro
  10. Privacy Protection, Security, and Consumer Retention By Jullien, Bruno; Lefouili, Yassine; Riordan, Michael
  11. Stackelberg Independence By Hinnosaar, Toomas
  12. The Economics of Platforms: A Theory Guide for Competition Policy By Jullien, Bruno; Sand-Zantman, Wilfried
  13. Welfare improving tax evasion By Canta, Chiara; Cremer, Helmuth; Gahvari, Firouz
  14. Pragmatic Ambiguity and Rational Miscommunication By Toru Suzuki
  15. The Hidden Costs of Strategic Opacity By Babus, Ana; Farboodi, Maryam
  16. "Soft" Affirmative Action and Minority Recruitment By Fershtman, Daniel; Pavan, Alessandro
  17. The economics of deferral and clawback requirements By Hoffmann, Florian; Inderst, Roman; Opp, Marcus M.
  18. Downstream Subsidization and Upstream Privatization with a Vertically Integrated Foreign Firm By Zhang, Chuyuan; Lee, Sang-Ho
  19. Subjective Causality in Choice By Andrew Ellis; Heidi Christina Thysen
  20. Voting by Simultaneous Vetoes By Margarita Kirneva; Matias Nunez
  21. Are Overconfident Players More Likely to Win Tournaments and Contests? By Luis Santos Pinto
  22. Corruption and Extremism By Attila Gaspar; Tommaso Giommoni; Massimo Morelli; Antonio Nicolò
  23. Taxation behind the veil of ignorance By Biung-Ghi Ju; Juan D. Moreno-Ternero
  24. Mergers with Differentiated Products: Where do we Stand? By Valletti, Tommaso; Zenger, Hans
  25. Investment Timing and Technological Breakthroughs By Décamps, Jean-Paul; Gensbittel, Fabien; Mariotti, Thomas
  26. Privacy, Competition, and Multi-Homing By Jean-Marc Zogheib; Marc Bourreau
  27. Advertising Arbitrage By Kovbasyuk, Sergei; Pagano, Marco
  28. Political activism when voters have a limited attention span By Barankay, Iwan
  29. Memory Retrieval and Harshness of Conflict in the Hawk-Dove Game By Ennio Bilancini; Leonardo Boncinelli; Sebastian Ille; Eugenio Vicario
  30. Pro-social Motivations, Externalities and Incentives By Raphael Soubeyran

  1. By: Tangerås, Thomas (Research Institute of Industrial Economics (IFN)); Gick, Wolfgang (Free University of Bozen/Bolzano, Italy)
    Abstract: We study mechanism design under endogenously incomplete commitment as it arises in contracting with escape clauses. An escape clause permits the agent to end a contractual relationship under specified circumstances, after which the principal can offer an ex-post contract. Escape clauses are valuable when the maximal number of initial contracts is smaller than the number of agent types. We identify a sufficient condition for incentive optimality of ex-post contracting. Escape clauses are always incentive optimal under severely constrained contracting. On the margin, the optimal escape clause balances the benefit of a better-adapted contract against an increase in dynamic inefficiency.
    Keywords: Constrained contracting; Escape clauses; Endogenously incomplete commitment; Ratchet effect; Revelation principle
    JEL: D82 D84 D86
    Date: 2021–05–28
  2. By: Jérôme Mathis (Université Paris-Dauphine, PSL Research University, and LEDa.); Marcello Puca (Università di Bergamo, CSEF and Webster University Geneva); Simone M. Sepe (University of Arizona, Toulouse School of Economics, and ECGI)
    Abstract: We derive necessary and sufficient conditions to achieve efficiency in common interest deliberative games. Our model explicitly characterizes a large class of deliberative institutions where privately informed agents strategically deliberate before taking a decision. Under the model's information structure, the transmission of information may require interpretation from agents with specific knowledge. The dynamics of interpretation are suggestive of a variety of frictions in information transmission. Private information is aggregated, and efficient decisions are taken at equilibrium, if and only if deliberative institutions enable the agents to extend deliberation (consensual extension) and freely interact with one another (freedom of reach). When, instead, these conditions do not hold, deliberation is incomplete and “anything goes”: no general conclusion can be drawn as efficiency depends on the details of the deliberative extended-form game. We substantiate some of the implications of this indeterminacy result through detailed examples.
    Keywords: Dynamic group communication, Collective choice, Strategic deliberation.
    JEL: D71 D82 D83
    Date: 2021–05–28
  3. By: Colin von Negenborn; Martin Pollrich
    Abstract: We show that mechanisms which generate endogenous asymmetric information fully mitigate collusion. In our model, an agent has private information and a supervisor observes a signal that is correlated with the agent’s type. Agent and supervisor can form collusive side agreements. We study the implementation of social choice functions that condition on the agent’s type and the supervisory signal. Our main result establishes that any social choice function that is implementable if the signal is public can also be implemented when the signal is private information and collusion is possible. Despite collusion, the signal is obtained for free, i.e., the supervisor does not receive an information rent. Our mechanism breaks collusion via endogenous creation of asymmetric information between agent and supervisor. The associated bargaining frictions prevent formation of collusive agreements, similar to the trade failure in the classical lemons market.
    Keywords: Mechanism Design, Collusion, Correlation, Asymmetric Information, Random Incentives
    JEL: D82 D83 L51
    Date: 2020–02
  4. By: Gersbach, Hans; Tejada, Oriol
    Abstract: We introduce semi-flexible majority rules for public good provision with private valuations. Such rules take the form of a two-stage, multiple-round voting mechanism where the output of the first stage is the default alternative for the second stage and the voting thresholds (a) vary with the proposal on the table and (b) require a qualified majority for final approval in the second stage. We show that the (detail-free) mechanism elicits the information about the valuations and uses it to implement the utilitarian optimal public-good level if valuations can be only high or low. This level is chosen after all potential socially optimal policies have been considered for voting. We explore ways to reduce the number of voting rounds and develop a compound mechanism when there are many types of citizens to approximate the optimal public-good level.
    Keywords: Voting - Utilitarianism - Implementation - Procedural democracy
    JEL: C72 D70
    Date: 2020–07
  5. By: Johannes Münster (Department of Economics, University of Cologne); Markus Reisinger (Department of Economics, Frankfurt School of Finance & Management)
    Abstract: In bilateral negotiations between a principal and two agents, we show that the agents' bargaining strengths are crucial for the determination of the bargaining sequence and the efficiency of decisions. In a general framework with externalities between agents, we find that the surplus is highest if the principal negotiates with the stronger agent first, regardless of externalities being positive or negative. The principal chooses the efficient sequence with negative externalities, but often prefers the inefficient sequence with positive externalities. We show that our results extend to a general number of agents and provide conditions for simultaneous negotiations to be optimal.
    Keywords: C72, C78, D62, L14
    Date: 2021–06
  6. By: Ville Korpela (University of Turku); Michele Lombardi (University of Glasgow); Riccardo D. Saulle (University of Padova)
    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: Rotation Programs, Job Rotation, Assignment Problems, Implementation, Right Structures, Stability
    JEL: C71 D71 D82
    Date: 2021–05
  7. By: Julien Combe (CREST, Ecole Polytechnique, France); Jan Christoph Schlegel (City, University of London, United Kingdom)
    Abstract: We consider a reallocation problem with priorities where each agent is initially endowed with a house and is willing to exchange it but each house has a priority ordering over the agents of the market. In this setting, it is well known that there is no individually rational and stable mechanism. As a result, the literature has introduced a modified stability notion called µ0-stability. In contrast to college admission problems, in which priorities are present but there is no initial endowment, we show that the modified Deferred Acceptance mechanism identified in the literature is not the only individually rational, strategy-proof and µ0-stable mechanism. By introducing a new axiom called the independence of irrelevant agents and using the standard axiom of unanimity, we show that the modified Deferred Acceptance mechanism is the unique mechanism that is individually rational, strategy-proof, µ0-stable, unanimous and independent of irrelevant agents.
    Keywords: Matching, Housing Market, Reallocation, Stability, Priorities.
    JEL: C78 D47
    Date: 2021–06–03
  8. By: Deimen, Inga; Szalay, Dezso
    Abstract: We study a simple model of the firm comprised of a production unit, a sales unit, and an owner with interests in both units. The owner has the right to adapt the production quantity to changes in demand and costs. Whether the owner effectively assumes this right or delegates decision-making depends on the relative uncertainty about demand and costs, on the division of surplus in the firm, and on the riskiness of the environment the firm faces. We characterize conditions that make acquiring ownership rights feasible and effcient. The same conditions determine the boundaries of the firm in our model.
    Keywords: authority; common and private values; delegation; Noisy information; organizations; ownership; Strategic communication
    JEL: D82 D83
    Date: 2020–07
  9. By: Fershtman, Daniel; Pavan, Alessandro
    Abstract: We study the problem of a decision maker alternating between exploring existing alternatives and searching for new ones. We show that the decision to search depends on the composition of the consideration set only through the information the latter contains about the probability of finding new alternatives. When the search technology is stationary, or improves over time, search is equivalent to replacement. With deteriorating technologies, instead, alternatives are revisited after search is launched and each expansion is treated as if it were the last one. The analysis yields a formula for pricing new alternatives and/or the option to expand the consideration set in the future. We also show how to accommodate for certain irreversible choices that admit as special case a generalization of Weitzman's (1979) "Pandora's boxes" problem in which the set of boxes is endogenous and each alternative may require multiple explorations before it can be selected.
    Keywords: Consideration sets; Experimentation; learning; Multi-Arm Bandit Problems; platforms; sequential search
    JEL: D82
    Date: 2020–07
  10. By: Jullien, Bruno; Lefouili, Yassine; Riordan, Michael
    Abstract: A website monetizes information it collects about its customers by charging third parties for targeted access to them. Allowing for third parties who are well-intentioned, a nuisance, or even malicious, the resulting consumer experiences might be good, bad, or neutral. As consumers learn from experience, the website especially risks losing those customers who suffer a bad experience. Customer retention thus motivates the website to be cautious about monetization, or to spend resources to screen third parties. We study the website's equilibrium privacy policy, its welfare properties, competition in the market for information, and the impact of regulations improving transparency and consumer control.
    Keywords: Consumer Retention; Personal Data; Privacy Policy; regulation
    JEL: D83 L15 L51
    Date: 2020–07
  11. By: Hinnosaar, Toomas
    Abstract: The standard model of sequential capacity choices is the Stackelberg quantity leadership model with linear demand. I show that under the standard assumptions, leaders' actions are informative about market conditions and independent of leaders' beliefs about the arrivals of followers. However, this Stackelberg independence property relies on all standard assumptions being satisfied. It fails to hold whenever the demand function is non-linear, marginal cost is not constant, goods are differentiated, firms are non-identical, or there are any externalities. I show that small deviations from the linear demand assumption may make the leaders' choices completely uninformative.
    Keywords: Oligopolies; Sequential Games; Stackelberg leadership model
    JEL: C72 C73 D43 L13
    Date: 2020–07
  12. By: Jullien, Bruno; Sand-Zantman, Wilfried
    Abstract: We propose an analysis of platform competition based on the academic literature with a view toward competition policy. First, we discuss to which extent competition can emerge in digital markets and show which forms it can take. In particular, we underline the role of dynamics, but also of platform differentiation, consumers multihoming and beliefs to allow competition in platform markets. Second, we analyze competition policy issues and discuss how rules designed for standard markets can perform in two-sided markets. We show that multi-sided externalities create new opportunities for anti-competitive conducts, often related to pricing and contractual imperfections.
    Keywords: competition policy; networks; platforms; two-sided markets
    JEL: D82 L13 L41 L86
    Date: 2020–07
  13. By: Canta, Chiara; Cremer, Helmuth; Gahvari, Firouz
    Abstract: We study optimal income taxation in a framework where one's willingness to report his income truthfully is positively correlated with his type. We show that allowing low-productivity types to cheat leads to Pareto-superior outcomes as compared to deterring them, even if audits can be performed costlessly. When there is no cheating, redistribution takes place on first- and second-best frontiers and can never make low-ability types more well-off than high-ability types. Letting low-ability types cheat allows first-best redistribution up to a limit at which low-ability types are better off than high-ability types.
    Keywords: audits; optimal taxation; tax evasion; welfare-improving
    JEL: H20 H21 H26
    Date: 2020–07
  14. By: Toru Suzuki (University of Technology Sydney)
    Abstract: This paper provides a model of miscommunication in a common-interest setting. The speaker describes the state with a preexisting language to the decision-maker, whereas using a longer description is more costly. It is shown that, given any non-zero communication cost, any reasonably efficient equilibrium exhibits miscommunication caused by ambiguous descriptions whenever agents communicate across various occasions and their perceptions of occasions are imperfect but sufficiently accurate. Equilibrium miscommunication disappears when agents’ perceptions of occasions are too noisy, suggesting more accurate perceptions do not always reduce miscommunication. The model also provides insight into the miscommunication that triggered a well-known aircraft crash.
    Keywords: Miscommunication; common-interest communication; pragmatic ambiguity;economics and language
    JEL: D83
    Date: 2021–06–02
  15. By: Babus, Ana; Farboodi, Maryam
    Abstract: We explore a model in which banks strategically hold interconnected and opaque portfolios, despite increasing the likelihood they are subject to financial crises. In our framework, banks choose their degree of exposure to other banks to influence how investors can use their information. In equilibrium banks choose portfolios which are neither fully opaque, nor fully transparent. However, their portfolios are excessively interconnected to obfuscate investor information. Banks can create a degree of opacity that decreases welfare, and makes bank crises more likely. Our model is suggestive about the implications of asset securitization, as well as government bailouts.
    Keywords: banking crises; interdependent portfolios; opacity
    JEL: D43 D82 G14 G21
    Date: 2020–07
  16. By: Fershtman, Daniel; Pavan, Alessandro
    Abstract: We study search, evaluation, and selection of candidates of unknown quality for a position. We examine the effects of "soft" affirmative action policies increasing the relative percentage of minority candidates in the candidate pool. We show that, while meant to encourage minority hiring, such policies may backfire if the evaluation of minority candidates is noisier than that of non-minorities. This may occur even if minorities are at least as qualified and as valuable as non-minorities. The results provide a possible explanation for why certain soft affirmative action policies have proved counterproductive, even in the absence of (implicit) bias.
    Keywords: affirmative action; learning from endogenous consideration sets; Recruitment; sequential evaluations
    Date: 2020–07
  17. By: Hoffmann, Florian; Inderst, Roman; Opp, Marcus M.
    Abstract: We analyze the effects of regulatory interference in compensation contracts, focusing on recent mandatory deferral and clawback requirements restricting (incentive) compensation of material risk-takers in the financial sector. Moderate deferral requirements have a robustly positive effect on equilibrium risk-management effort only if the bank manager's outside option is sufficiently high, else, their effectiveness depends on the dynamics of information arrival. Stringent deferral requirements unambiguously backfire. We characterize when regulators should not impose any deferral regulation at all, when it can achieve second-best welfare, when additional clawback requirements are of value, and highlight the interaction with capital regulation.
    Keywords: bonus deferral; clawbacks; compensation regulation; moral hazard; principal-agent models with externalities; Short-termism
    JEL: D86 G21 G28
    Date: 2020–07
  18. By: Zhang, Chuyuan; Lee, Sang-Ho
    Abstract: This study constructs a model with a vertical structure in which a state-owned enterprise (SOE) in an upstream market and a private firm in a downstream market compete with a vertically integrated foreign firm (VIFF). Given a cost-inefficient SOE, we examine the strategic entry decision of a VIFF that can enter either the upstream, or the downstream market, or both, under downstream subsidization and upstream privatization policies. We find that when the government implements a subsidy policy, the VIFF enters only the downstream market if the cost inefficiency is low and enters both markets otherwise; however, the social welfare of the later is always higher than that of the former. We also find that reducing the cost inefficiency might cause welfare loss when ex-ante inefficiency is intermediate, below which the VIFF might change its entry decision. Finally, we show that an upstream privatization policy reduces welfare either when the cost inefficiency ex-post privatization decreases to a lesser degree or when the ex-ante inefficiency is relatively low.
    Keywords: Downstream Subsidization · Upstream Privatization · Vertically Integrated Foreign Firm · Cost Inefficiency · Entry Decision · Mixed Market
    JEL: D43 H21 L13
    Date: 2021–06
  19. By: Andrew Ellis; Heidi Christina Thysen
    Abstract: An agent makes a stochastic choice from a set of lotteries. She infers the outcomes of her options using a subjective causal model represented by a directed acyclic graph, and consequently may misinterpret correlation as causation. Her choices affect her inferences which in turn affect her choices, so the two together must form a personal equilibrium. We show how an analyst can identify the agent's subjective causal model from her random choice rule. In addition, we provide necessary and sufficient conditions that allow an analyst to test whether the agent's behavior is compatible with the model.
    Date: 2021–06
  20. By: Margarita Kirneva (CREST, CNRS, Ecole Polytechnique); Matias Nunez (CREST, CNRS, Ecole Polytechnique)
    Abstract: We design voting mechanisms in which every Nash equilibrium is coalition proof, preventing the well known coordination failures of usual voting systems. In each of these simultaneous mechanisms, each voter has the right to select a list of alternatives to veto, and the winner is selected randomly from the nonvetoed alternatives. For each specification of the veto rights, we show that each of these mechanisms implements a veto by random priority rule introduced by Moulin[1981]. We then discuss necessary conditions for arbitrary mechanisms to satisfy implementation in both Nash and coalition proof and show that the existence of veto rights in the mechanism is unavoidableto achieve this demanding implementation notion.
    Keywords: Implementation, Voting, Vetoes, Coalition Formation, Efficiency.
    JEL: D71 D72
    Date: 2021–06–03
  21. By: Luis Santos Pinto
    Abstract: This paper investigates whether an overconfident player is more likely to win a competition against a rational player. The two players are identical, except that the overconfident player overestimates his productivity of effort and, as a consequence, his probability of winning. The competition can take the form of either a tournament or a contest. The paper shows that the overconfident player is the Nash winner (loser) of a tournament with monotonic best responses when his effort and overconfidence are complements (substitutes). The overconfident player is the Nash winner (loser) of a tournament with non-monotonic best responses when he is slightly (significantly) overconfident. In contrast, the overconfident player is always the Nash loser of a contest. The paper also discusses the welfare implications of overconfidence.
    Keywords: Overconfidence, Tournaments, Contests, Welfare
    JEL: D60 D69 D91
    Date: 2021–05
  22. By: Attila Gaspar; Tommaso Giommoni; Massimo Morelli; Antonio Nicolò
    Abstract: This paper shows that corruption generates extremism, but almost exclusively on the opposition side. When the majority has greater ability to use corruption to obtain her favorite policy outcome from the minority, then the minority group has an incentive to select a more extreme representative because it is more unlikely that such a type will accept a bribe. On the majority side, on the other hand, the perception of more likely use of the corruption tool does not create any distortion in the choice of political representatives. We provide strong causal evidence for these novel predictions using two different types of corruption signals, in Indonesia and Brazil.
    Keywords: Corruption, Extremism, Delegation, elections
    JEL: D72 D73
    Date: 2021
  23. By: Biung-Ghi Ju (Department of Economics, Seoul National University); Juan D. Moreno-Ternero (Department of Economics, Universidad Pablo de Olavide;)
    Abstract: We explore the design of impartial tax schemes in a simple setup where agents’ incomes are completely determined by their inborn talents. Building on Harsanyi’s veil-of-ignorance approach, we conceptualize an impartial observer who chooses a tax scheme without know- ing her own preferences and the distribution of talents, and whose vNM preferences behind the veil obey Harsanyi’s principle of acceptance and are independent, in terms of utility-scale, of the distribution of talents. Our results in the resulting framework provide three main messages: (i) the veil of ignorance implies anonymity of tax schemes; (ii) the veil of ignorance generically rejects utilitarian tax schemes; (iii) the veil of ignorance endorses the (Rawlsian) leveling tax scheme.
    Keywords: veil of ignorance, impartiality, anonymity, leveling tax, utilitarianism
    JEL: D63 D71 H24
    Date: 2021
  24. By: Valletti, Tommaso; Zenger, Hans
    Abstract: On the occasion of the 10th anniversary of the 2010 U.S. Horizontal Merger Guidelines, this article provides an overview of the state of economic analysis of unilateral effects in mergers with differentiated products. Drawing on our experience with merger enforcement in Europe, we discuss both static and dynamic competition, with a special emphasis on the calibration of competitive effects. We also discuss the role of market shares and structural presumptions in differentiated product markets.
    Keywords: differentiated products; mergers; Unilateral Effects
    JEL: L11 L13 L40 L41
    Date: 2020–07
  25. By: Décamps, Jean-Paul; Gensbittel, Fabien; Mariotti, Thomas
    Abstract: We study the optimal investment policy of a firm facing both technological and cash-flow uncertainty. At any point in time, the firm can decide to invest in a standalone technology or to wait for a technological breakthrough. Breakthroughs occur when market conditions become favorable enough, exceeding a certain threshold value that is ex-ante unknown to the firm. A microfoundation for this assumption is that a breakthrough occurs when the share of the surplus from the new technology accruing to its developer is high enough to cover her privately observed cost. We show that the relevant Markov state variables for the firm’s optimal investment policy are the current market conditions and their current historic maximum, and that the firm optimally invests in the stand-alone technology only when market conditions deteriorate enough after reaching a maximum. Empirically, investments in new technologies requiring the active cooperation of developers should thus take place in booms, whereas investments in state-of-the-art technologies should take place in busts. Moreover, the required return for investing in the stand-alone technology is always higher than if this were the only available technology and can take arbitrarily large values following certain histories. Finally, a decrease in development costs, or an increase in the value of the new technology, makes the firm more prone to bear downside risk and to delay investment in the stand-alone technology.
    Keywords: Investment Timing; Technological Uncertainty; Optimal Stopping.
    JEL: C61 D25 D83
    Date: 2021–06
  26. By: Jean-Marc Zogheib; Marc Bourreau
    Abstract: Two firms compete in prices and information disclosure levels. Firms derive revenues from two possible channels, i.e., by selling their service to consumers and by exploiting user data, sold to a monopoly data broker. A consumer signing up to one firm's service decides on the amount of personal information to provide. In a single-homing framework, firms engage in either a strict privacy regime with no information disclosure and high prices or a flexible privacy regime with positive disclosure levels and low prices, depending on consumer valuations. With the possibility of multi-homing, firms face issues in the monetization of multi-homing user data, which affects privacy regimes. On top of consumer valuations, the incentives to multi-home and product differentiation also impact firms' strategies. Firms may even end up engaging in a zero-privacy regime with maximal disclosure levels if monetization issues on multi-homing user data are not too significant.
    Keywords: competition, online privacy, information disclosure, multi-homing.
    JEL: D11 D40 L21 L41
    Date: 2021
  27. By: Kovbasyuk, Sergei; Pagano, Marco
    Abstract: Arbitrageurs with a short investment horizon gain from accelerating price discovery by advertising their private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So arbitrageurs optimally concentrate advertising on just a few assets, which they overweight in their portfolios. Unlike classic insiders, advertisers prefer assets with the least noise trading. If several arbitrageurs share information about the same assets, inefficient equilibria can arise, where investors' attention is overloaded and substantial mispricing persists. When they do not share, the overloading of investors' attention is maximal.
    Keywords: advertising; limited attention; Limits to Arbitrage; price discovery
    JEL: D84 G11 G14 G2
    Date: 2020–07
  28. By: Barankay, Iwan
    Abstract: We discuss the relationship between two forms of political activism and openness. We focus on direct democratic institutions and measure political activism by the number of direct democratic ballots and voter participation in those ballots. Openness is measured by the signature requirement that has to be met in order to qualify for a ballot. We show that in models where the status quo policy that elicits the political activity is invariant to changes in openness, more openness leads to more political activism results. However, looking at the empirical evidence on the frequency of ballots in Swiss Cantons, we find no relationship between openness and the number of ballots. This can be explained by allowing voters to have a limited attention span or that the status quo policy adapts to the more acute threat. We also find empirical evidence that more openness increases voter participation, which is due to the information externalities of signature collections.
    Keywords: direct democracy; limited attention; Political openness
    JEL: D72 D91
    Date: 2020–07
  29. By: Ennio Bilancini; Leonardo Boncinelli; Sebastian Ille; Eugenio Vicario
    Abstract: We study the long-run dynamics of a repeated non-symmetric Haw-Dove type interaction between agents of two different populations. Agents choose a strategy based on their previous experience with the other population by sampling from a collective memory of past interactions. We assume that the sample size differs between populations and define a measure of harshness of conflict in the Hawk-Dove interaction. We then show how the properties of the long-run equilibrium depend on the harshness of conflict and the relative length of the sample. In symmetric interactions, if conflict is harsh, the population which samples relatively more past interactions is able to appropriate a higher payoff in the long-run, while the population with a relatively smaller sample do so if conflict is mild. These results hold subject to constraints on the sample size which we discuss in detail. We further extend our results to non-symmetric Hawk-Dove games.
    Keywords: conflict, memory, hawk dove, evolution, stochastic stability
    Date: 2021
  30. By: Raphael Soubeyran (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UMR 5211 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper analyzes how pro-social motivations shape the relationship between incentives and inequality. I consider a principal who offers individual rewards to a group of agents to induce them to exert effort and to coordinate at least-cost. The agents value the payoffs of the other agents, and they are averse to inequality. My analysis highlights that pro-social motivations have an a priori ambiguous effect on inequality in the reward distribution. Despite this initial ambiguity, I show that the rewards are more unequal and lower when the agents have pro-social preferences. The model delivers empirical implications for intervention programs supporting the adoption of new health or agricultural technologies.
    Keywords: incentives,externality,principal,agents,coordination,pro-social preferences
    Date: 2021–04–30

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