nep-mic New Economics Papers
on Microeconomics
Issue of 2022‒10‒31
twelve papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Choosing the Prize in Contests By de Roos, Nicolas; Matros, Alexander; Smirnov, Vladimir; Valencia, Zehra
  2. Implementation with Uncertain Evidence By Soumen Banerjee; Yi-Chun Chen
  3. Information Design in Cheap Talk By Qianjun Lyu; Wing Suen
  4. Equilibrium (non-)Existence in Games with Competing Principals By Attar, Andrea; Campioni, Eloisa; Piaser, Gwenaël
  5. Why do experts give simple advice? By Benjamin Davies
  6. Rank-Preserving Multidimensional Mechanisms By Sushil Bikhchandani; Debasis Mishra
  7. Personalized pricing when consumers can purchase multiple items By Qiuyu Lu; Noriaki Matsushima
  8. The countervailing power hypothesis and contingent contracts By Noriaki Matsushima; Shohei Yoshida
  9. Key players in bullying networks By Atay, Ata; Mauleon, Ana; Schopohl, Simon; Vannetelbosch, Vincent
  10. Influence or Advertise: The Role of Social Learning in Influencer Marketing By Ron Berman; Aniko Oery; Xudong Zheng
  11. Screening Adaptive Cartels By Juan Ortner; Sylvain Chassang; Jun Nakabayashi; Kei Kawai
  12. Simple but powerful models of stereotype formation * By Denis Bouyssou; M Remzi Sanver

  1. By: de Roos, Nicolas; Matros, Alexander; Smirnov, Vladimir; Valencia, Zehra
    Abstract: In many contests, a participant’s choices can influence the value of the prize on offer. However, in the standard contest model, the value of the prize is exogenous and participants have discretion only over the effort they exert. This paper proposes a new type of N-player contest in which each participant chooses both her own prize and effort. We present a general model and establish sufficient conditions for equilibrium existence. We then describe sufficient conditions for the existence of symmetric equilibria, and discuss comparative statics with respect to the number of players. Finally, we discuss asymmetric contests.
    Date: 2022–09
  2. By: Soumen Banerjee; Yi-Chun Chen
    Abstract: We study a full implementation problem with hard evidence where the state is common knowledge but agents face uncertainty about the evidence endowments of other agents. We identify a necessary and sufficient condition for implementation in mixed-strategy Bayesian Nash equilibria called No Perfect Deceptions. The implementing mechanism requires only two agents and a finite message space, imposes transfers only off the equilibrium, and invoke no device with "...questionable features..." such as integer or modulo games. Requiring only implementation in pure-strategy equilibria weakens the necessary and sufficient condition to No Pure-Perfect Deceptions. In general type spaces where the state is not common knowledge, a condition called higher-order measurability is necessary and sufficient for rationalizable implementation with arbitrarily small transfers alongside.
    Date: 2022–09
  3. By: Qianjun Lyu (University of Bonn); Wing Suen (University of HongKong)
    Abstract: An uninformed sender publicly commits to an informative experiment about an uncertain state, privately observes its outcome, and sends a cheap-talk message to a receiver. We provide an algorithm valid for arbitrary state-dependent preferences that will determine the sender’s optimal experiment, and give sufficient conditions for information design to be valuable or not under different payoff structures. These conditions depend more on marginal incentives—how payoffs vary with the state—than on the alignment of sender’s and receiver’s rankings over actions within a state.
    Keywords: Information design, cheap talk
    JEL: D82 D83
    Date: 2022–09
  4. By: Attar, Andrea; Campioni, Eloisa; Piaser, Gwenaël
    Abstract: We study competing-mechanism games, in which multiple principals contract with multiple agents. We reconsider the issue of non-existence of an equilibrium as first raised by Myerson (1982). In the context of his example, we establish the existence of a perfect Bayesian equilibrium. We clarify that Myerson (1982)’s non-existence result is an implication of the additional requirement he imposes, that each principal selects his preferred continuation equilibrium in the agents’ game.
    Keywords: Competing Mechanisms; Equilibrium Existence
    JEL: D82
    Date: 2022–09–27
  5. By: Benjamin Davies
    Abstract: An expert tells an advisee whether to take an action that may be good or bad. He may provide a condition under which to take the action. This condition predicts whether the action is good if and only if the expert is competent. Providing the condition exposes the expert to reputational risk by allowing the advisee to learn about his competence. He trades off the accuracy benefit and reputational risk induced by providing the condition. He prefers not to provide it -- i.e., to give "simple advice" -- when his payoff is sufficiently concave in the posterior belief about his competence.
    Date: 2022–09
  6. By: Sushil Bikhchandani; Debasis Mishra
    Abstract: We show that the mechanism design problem for a monopolist selling multiple heterogeneous objects with ex ante symmetric values for the buyer is equivalent to the mechanism design problem for a monopolist selling identical objects with decreasing marginal values. We apply this equivalence result to (a) give new sufficient conditions under which an optimal mechanism is revenue monotone in both the models; (b) derive new results on optimal deterministic mechanisms in the heterogeneous objects model; and (c) show that a uniform price mechanism is robustly optimal in the identical objects model when the monopolist knows the average of the marginal distributions of the units.
    Date: 2022–09
  7. By: Qiuyu Lu; Noriaki Matsushima
    Abstract: We discuss the effect of personalized pricing on profits and welfare in a Hotelling model in which consumers can simultaneously purchase from both firms. As the additional gain from the second purchase increases, personalized pricing is more likely to harm (resp., benefit) consumers (resp., firms). If the additional gain is intermediate, personalized pricing improves consumer welfare and firms' profits, contrasting with the standard result: personalized pricing benefits consumers but harms firms. When firms can choose one of the pricing policies: uniform or personalized, both choose uniform (resp., personalized) pricing under some parameters (resp., in any case); multiple equilibria can co-exist.
    Date: 2022–10
  8. By: Noriaki Matsushima; Shohei Yoshida
    Abstract: We consider a downstream oligopoly model with one dominant and several fringe retailers who purchase a manufacturing product from a monopoly supplier. We examine how contract type influences the relationship between the dominant retailer's bargaining power and the equilibrium retail price. If the contracts between the supplier and fringe retailers are contingent on the bargaining outcome between the supplier and the dominant retailer, the bargaining power does not affect the retail price. In contrast, if contracts with fringe retailers are not contingent, the relationship between bargaining power and retail price can be either positive or negative.
    Date: 2022–10
  9. By: Atay, Ata; Mauleon, Ana (Université catholique de Louvain, LIDAM/CORE, Belgium); Schopohl, Simon; Vannetelbosch, Vincent (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: Individuals are embedded in a network of relationships and they can be victims, bystanders, or perpetrators of bullying and harassment. Each individual decides non-cooperatively how much effort to exert in preventing misbehavior. Each indi- vidual’s optimal effort depends on the contextual effect, the social multiplier effect and the social conformity effect. We characterize the Nash equilibrium and we derive an inter-centrality measure for finding the key player who once isolated increases the most the aggregate effort. An individual is more likely to be the key player if she is influencing many other individuals, she is exerting a low effort because of her characteristics, and her neighbors are strongly influenced by her. The key player policy increases substantially the aggregate effort and the targeted player should never be selected randomly. The key player is likely to remain the key player in presence of social workers except if she is becoming much less influential due to her closeness to social workers. Finally, we consider alternative policies (e.g. training bystanders for helping victims) and compare them to the policy of isolating the key player.
    Keywords: Social networks ; bullying ; harassment ; peer effects ; key player ; conformity ; #MeToo
    JEL: A14 C72 D85 Z13
    Date: 2022–05–23
  10. By: Ron Berman (The Wharton School, University of Pennsylvania, 3730 Walnut Street, Philadelphia, PA 19104); Aniko Oery (Yale School of Management, 165 Whitney Avenue, New Haven, CT 06511); Xudong Zheng (Department of Economics, Johns Hopkins University, 3400 North Charles Street, Baltimore, MD 21218)
    Abstract: We analyze influencer marketing and advertising campaigns that can facilitate learning about uncertain qualities of products, while making consumers aware of them. We establish conditions for when influencer marketing, which lets consumers learn from other followers, is preferred to advertising, that does not enable such information sharing. Influencers facilitate learning when they are consistent in their post quality and have homogeneous followers relative to the degree of targeting of advertising campaigns. Whether efficient learning increases profits depends on the quality uncertainty of the product, e.g., whether the brand is established or unknown. For established brands, we find that many micro-influencers are more profitable than a targeted ad campaign, while for unknown brands, either macro-influencers with many followers or micro-influencers are more profitable. We also show that influencer campaigns tend to either "go viral" or "go bust", highlighting the value of ex-post promotional coupons. Additionally, for niche products we find that the heterogeneity of the follower base affects learning efficiency the most, while for mass products, the creativity of the influencer is the more important factor.
    Keywords: Influencer marketing; social learning; online advertising; word of mouth
    JEL: M31 M37 D83
    Date: 2022–09
  11. By: Juan Ortner (Boston University); Sylvain Chassang (New York University); Jun Nakabayashi (Kindai University); Kei Kawai (U.C. Berkeley)
    Abstract: We propose an equilibrium theory of data-driven antitrust oversight in which regulators launch investigations on the basis of suspicious bidding patterns and cartels can adapt to the statistical screens used by regulators. We emphasize the use of asymptotically safe tests, i.e. tests that are passed with probability approaching one by competitive firms, regardless of the underlying economic environment. Our main result establishes that screening for collusion with safe tests is a robust improvement over laissez-faire. Safe tests do not create new collusive equilibria, and do not hurt competitive industries. In addition, safe tests can have strict bite, including unraveling all collusive equilibria in some settings. We provide evidence that cartel adaptation to regulatory oversight is a real concern.
    Keywords: collusion, auctions, procurement, antitrust
    JEL: D44 D43
  12. By: Denis Bouyssou (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique); M Remzi Sanver (LAMSADE - Laboratoire d'analyse et modélisation de systèmes pour l'aide à la décision - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We propose simple models aiming at explaining the formation of stereotypes. A stereotype is an overall judgement brought by an observer over a group of individuals or objects. For each member of the group, we suppose that we observe a characteristic that belongs to a denumerable set. The formation of a stereotype about the group is governed by a perception function. Our basic model consists in decomposing a perception function into three steps: (i) characteristics are recoded numerically so that higher numbers mean a higher support for the stereotype, (ii) this vector of numbers is consistently aggregated into a single number, and (iii) this number is compared to a threshold and the stereotype is accepted if the threshold is exceeded. We characterize perception functions that can be explained using such a model. We then study various extensions of our basic model.
    Keywords: Stereotype,Perception function,Mental process
    Date: 2022

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