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on Microeconomics |
| By: | Levent Celik (University of London); Mikhail Drugov (New Economic School) |
| Abstract: | We study verifiable disclosure by a monopolist when the product has multiple quality attributes. We identify an equilibrium in which the firm discloses a score— the average of the qualities—without revealing any further information. While full unraveling is still an equilibrium, it is dominated by the score equilibrium in terms of ex ante as well as ex post profits. Moreover, it is “defeated†by the score equilibrium. |
| Keywords: | Monopoly, quality uncertainty, verifiable information disclosure, multi- dimensional types. |
| JEL: | D82 D83 L12 L15 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:abo:neswpt:w0285&r= |
| By: | Claude Fluet; Thomas Lanzi |
| Abstract: | Two opposed parties seek to ináuence an uninformed decision maker. They invest in acquiring information and select what to disclose. The decision maker then adjudicates. We compare this benchmark with a procedure allowing adversarial cross-examination. A cross-examiner tests the opponent in order to persuade the decision maker that the opponent is deceitful. How does the opportunity or threat of crossexamination affect the parties' behavior? How does it affect the quality of decision-making? We show that decision-making deteriorates because parties are less likely to acquire information and because crossexamination too often makes the truth appear as falsehood. Next, we consider a form of controlled cross-examination by permitting the cross-examined to be re-examined by his own advocate, i.e., counterpersuasion. More information then reaches the decision maker. Decision-making may or may not improve compared to the benchmark depending on how examination is able to trade off type 1 and 2 errors. |
| Keywords: | Bayesian persuasion, disclosure game, adversarial, redirect examination, procedural rules. |
| JEL: | C72 D71 D82 D83 K41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2021-40&r= |
| By: | Federico Innocenti |
| Abstract: | I study the effect of polarization and competition on information provision. With a single expert who faces decision-makers with het- erogeneous priors, the expert solves a trade-off between persuading sceptics and retaining believers. With high polarization, an expert has incentives to supply low-quality information to leverage believers' credulity. With multiple experts with opposite biases, competition is harmful if attention is limited. Unbiased and Bayesian decision-makers rationally devote attention to like-minded experts. Echo chambers arise endogenously, whereas decision-makers would be better informed in monopoly. My model can rationalize the spread and persistence of conspiracy theories and fake news. |
| Keywords: | Bayesian Persuasion, Competition, Echo Chambers, Heterogeneous Priors, Limited Attention, Media Pluralism |
| JEL: | D82 D83 L82 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_298v1&r= |
| By: | Barelli, Paulo (?); Govindan, Srihari (?); Wilson, Robert (Stanford U) |
| Abstract: | We posit a standard model of an asymmetric double auction with interdependent values in which each trader observes a private signal about a hidden state before submitting a bid or ask price for a unit demand or supply. The state and signals are one-dimensional, traders’ signals are independent conditional on the state, and their distributions have the strict monotone likelihood ratio property. The model encompasses auctions by allowing sellers to be non-strategic. We study a version in which there are n replicates of each type of trader, with each replicate observing a signal drawn independently from the same conditional distribution as the original trader of that type, and all traders of the same type using the same strategy. The limit economy with a countable set of traders has a unique Walrasian equilibrium, whose clearing price reveals the state. If this equilibrium is totally monotone in that each buyer's (resp. seller's) probability of trading decreases (resp. increases) with the state, then the limit auction has a monotone equilibrium yielding the Walrasian price as the clearing price. We present four asymptotic results as n grows large: (1) a sequence of monotone strategies comprises epsilon-equilibria iff limit points are monotone equilibria of the limit auction; (2) for a sequence of monotone strategy profiles converging to a monotone equilibrium, the Strong Law of Large Numbers for prices holds, in that the sequence of price functions converges a.s. to the price function of the limit equilibrium; (3) if the effect of the state on traders' valuations is symmetric (around the equilibrium) then large but finite auctions have monotone equilibria whose outcomes approximate the Walrasian equilibrium outcome when bidders are restricted to sufficiently fine bid-grids; and (4) the same conclusion holds true without the symmetry assumption when we discretize the state space as well. Total monotonicity seems to be crucial: an example has a Walrasian equilibrium that is not the outcome of a Nash equilibrium of an auction. |
| JEL: | C7 D44 D82 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3984&r= |
| By: | Lucas Pahl |
| Abstract: | This paper considers an infinitely repeated three-player Bayesian game with lack of information on two sides, in which an informed player plays two zero-sum games simultaneously at each stage against two uninformed players. This is a generalization of the Aumann et al. [1] two-player zero-sum one-sided incomplete information model. Under a correlated prior, the informed player faces the problem of how to optimally disclose information among two uninformed players in order to maximize his long-term average payoffs. Our objective is to understand the adverse effects of \information spillover" from one game to the other in the equilibrium payoff set of the informed player. We provide conditions under which the informed player can fully overcome such adverse effects and characterize equilibrium payoffs. In a second result, we show how the effects of information spillover on the equilibrium payoff set of the informed player might be severe. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.01647&r= |
| By: | Rastislav Rehak; Maxim Senkov |
| Abstract: | We study a Bayesian persuasion model in which the state space is finite, the sender and the receiver have state-dependent quadratic loss functions, and their disagreement regarding the preferred action is of arbitrary form. This framework enables us to focus on the understudied sender’s trade-off between the informativeness of the signal and the concealment of the statedependent disagreement about the preferred action. In particular, we study which states are pooled together in the supports of posteriors of the optimal signal. We provide an illustrative graph procedure that takes the form of preference misalignment and outputs potential representations of the state-pooling structure. Our model provides insights into situations in which the sender and the receiver care about two different but connected issues, for example, the interaction of a political advisor who cares about the state of the economy with a politician who cares about the political situation. |
| Keywords: | Bayesian persuasion; strategic state pooling; preference misalignment; graph procedure; |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp708&r= |
| By: | Sergey Kovbasyuk (New Economic School); Giancarlo Spagnolo (SITE-Stockholm School of Economics, EIEF, Tor Vergata & CEPR) |
| Abstract: | In many environments, including credit and online markets, past records about participants are collected, published, and erased after some time. We study the effects of erasing past records in a dynamic market where sellers’ quality follows a Markov process and buyers leave feedback about sellers to an information intermediary. When the average quality of sellers is low, unlimited records lead to a market breakdown in the long run. We consider the general information design problem and characterize information policies that can sustain trade and that maximize welfare. These policies hide some information from the market in order to foster socially desirable experimentation. We show that these outcomes can be implemented by appropriately deleting observable past records. Crucially, positive and negative records play opposite roles with different intensity and must have different length: negative records must be sufficiently long, and positive records sufficiently short. |
| Keywords: | Limited records, rating systems, information design, credit registers, privacy, data retention, online reputation, market experimentation |
| JEL: | D82 D53 G20 G28 K35 L14 L15 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:abo:neswpt:w0284&r= |
| By: | Ilwoo Hwang; Jee Seon Jeon |
| Abstract: | We study an infinite-horizon multilateral bargaining game in which the status quo policy, players¡¯ recognition probabilities, and their voting weights are endogenously determined by the previous bargaining outcome. With players not discounting future payoffs, we show that the long-run equilibrium outcome features the concentration of power by one or two players, depending on the initial bargaining state. If the players¡¯ initial shares are relatively equal, they successfully prevent tyranny, but a two-player oligarchy nevertheless emerges and persists. The same results are obtained with payoff discounting, provided that the players¡¯ shares are not too small. Our results highlight the importance of the initial power distribution and discounting of future payoffs in the long-run development of power configuration. |
| Keywords: | Dynamic bargaining; Endogenous political power; Endogenous institution; Markov perfect equilibrium, Oligarchy; |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:snu:ioerwp:no145&r= |
| By: | Senran Lin |
| Abstract: | This paper studies the advance-purchase problem when a consumer has reference-dependent preferences in the form of Koszegi and Rabin (2009), in which planning affects reference formation. When the consumer exhibits plan revisability, loss aversion increases the price at which she is willing to pre-purchase. This implies that loss aversion can lead to risk-seeking. Moreover, I endogenize the seller$'$s price-commitment behavior in the advance-purchase problem. The result shows that the seller commits to his spot price even if he is not obliged to, which was treated as a given assumption in previous literature. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.14929&r= |
| By: | Endre Cs\'oka |
| Abstract: | Athey and Segal introduced an efficient budget-balanced mechanism for a dynamic stochastic model with quasilinear payoffs and private values, using the solution concept of perfect Bayesian equilibrium (PBE). However, this implementation is not robust in multiple senses. For example, we will show a generic setup where the efficient strategy profiles can be eliminated by iterative elimination of weakly dominated strategies. Furthermore, this model used strong assumptions about the information of the agents, and the mechanism was not robust to the relaxation of these assumptions. In this paper, we will show a different mechanism that implements efficiency under weaker assumptions and using the stronger solution concept of "efficient Nash equilibrium with guaranteed expected payoffs". |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.15219&r= |
| By: | Johari, Ramesh (Stanford U); Light, Bar (Stanford U); Weintraub, Gabriel Y. (Stanford U) |
| Abstract: | Online platforms collect rich information about participants and then share some of this information back with them to improve market outcomes. In this paper we study the following information disclosure problem in two-sided markets: If a platform wants to maximize revenue, which sellers should the platform allow to participate, and how much of its available information about participating sellers' quality should the platform share with buyers? We study this information disclosure problem in the context of two distinct two-sided market models: one in which the platform chooses prices and the sellers choose quantities (similar to ride-sharing), and one in which the sellers choose prices (similar to e-commerce). Our main results provide conditions under which simple information structures commonly observed in practice, such as banning certain sellers from the platform while not distinguishing between participating sellers, maximize the platform's revenue. An important innovation in our analysis is to transform the platform's information disclosure problem into a constrained price discrimination problem. We leverage this transformation to obtain our structural results. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3905&r= |
| By: | Seungjin Han; Siyang Xiong |
| Abstract: | This paper provides a unified approach to equilibrium analysis in models for competing mechanisms (e.g., Szentes (2009), Yamashita (2010)), which may differ in terms of delegation of action choice, announcement of mechanisms, observability of messages, and equilibrium notions. |
| Keywords: | competing mechanisms; unified equilibrium analysis; multiple principals |
| JEL: | D82 C79 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2021-09&r= |
| By: | Maria Gabriella Graziano (Università di Napoli Federico II and CSEF); Marialaura Pesce (Università di Napoli Federico II and CSEF); Maria Romaniello (Università degli Studi della Campania Luigi Vanvitelli.) |
| Abstract: | We consider pure exchange economies with finitely many private goods including also non-Samuelsonian public goods. For this type of economies, the notion of competitive equilibrium called cost share equilibrium is founded on individual payments for public goods varying according to individual benefits. This situation naturally arises when a level of provision is interpreted as a whole configuration of public policies or when cost share functions are interpreted as voluntary contributions instead of predetermined tax systems (Mas Colell (1980)). We establish the equivalence of cost share equilibria with cooperative and non-cooperative game-theoretic solutions. In particular: 1. we characterize cost share equilibria as those allocations which cannot be improved upon by the society; 2. we characterize cost share equilibria as Nash equilibria of a game with two players. Then we discuss the existence of cost share equilibria in economies with public projects satisfying standard assumptions and provide a condition for the set of cost share equilibria to be non-empty. Our analysis of cooperative solutions is based on contribution schemes which capture the fraction of the total cost of collective goods that each coalition of agents is expected to cover. |
| Keywords: | Non-Samuelsonian public goods, Cost share equilibrium, Aubin core, Nash equilibrium. |
| JEL: | D49 D51 C72 |
| Date: | 2021–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:628&r= |