nep-mic New Economics Papers
on Microeconomics
Issue of 2023‒02‒06
eleven papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Ideological Consistency and Valence By Enriqueta Aragonès; Dimitrios Xefteris
  2. Strategy-proof and envy-free random assignment By Basteck, Christian; Ehlers, Lars H.
  3. An Iterative Approach to Rationalizable Implementation By R Jain; V Korpela; M Lombardi
  4. On the Relationship between Robust and Rationalizable Implementation By R Jain; M Lombardi
  5. Information Cascades and Threshold Implementation: Theory and An Application to Crowdfunding By Lin William Cong; Yizhou Xiao
  6. Suspecting Collusion By Ceesay, Muhammed
  7. Overbidding and underbidding in package allocation problems By Marina Núñez; Francisco Robles
  8. Intermediate Condorcet Winners and Losers By Salvador Barberà; Walter Bossert
  9. istance in Beliefs and Individually-Consistent Sequential Equilibrium. By Gisèle Umbhauer; Arnaud Wolff
  10. Dark Money and Voter Learning By Schnakenberg, Keith; Schumock, Collin; Turner, Ian R
  11. Multiproduct Cost Passthrough: Edgeworth's Paradox Revisited By armstrong, mark; Vickers, John

  1. By: Enriqueta Aragonès; Dimitrios Xefteris
    Abstract: We study electoral competition between two win-motivated candidates, considering that voters care both about the valence and the ideological consistency of the competing candidates. When valence asymmetries are not too large we find a unique pure strategy Nash equilibrium in which (i) platform polarization (i.e. the distance between the candidates’ policy proposals) is solely determined by the strength of preferences for consistency, and (ii) the expected policy outcome may move to the right as the valence of the leftist candidate increases. When valence differences are large, a mixed equilibrium emerges: the high-valence left-wing candidate chooses a moderate right policy and the low-valence right-wing candidate responds, usually, with an extreme right position and, occasionally, with a moderate left one. Our analysis provides novel insights regarding candidates’ flip-flopping incentives, and parties’ motives to nominate low-quality candidates.
    Keywords: valence, ideology, consistency, flip-flopping, electoral competition, mixed equilibrium
    JEL: D72
    Date: 2022–12
  2. By: Basteck, Christian; Ehlers, Lars H.
    Abstract: We study the random assignment of indivisible objects among a set of agents with strict preferences. We show that there exists no mechanism which is unanimous, strategy-proof and envy-free. Weakening the first requirement to q-unanimity - i.e., when every agent ranks a different object at the top, then each agent shall receive his most-preferred object with probability of at least q - we show that a mechanism satisfying strategy-proofness, envy-freeness and ex-post weak non-wastefulness can be q-unanimous only for q È 2/n (where n is the number of agents). To demonstrate that this bound is tight, we introduce a new mechanism, Random-Dictatorship-cum-Equal-Division (RDcED), and show that it achieves this maximal bound when all objects are acceptable. In addition, for three agents, RDcED is characterized by the first three properties and ex-post weak efficiency. If objects may be unacceptable, strategy-proofness and envy-freeness are jointly incompatible even with ex-post weak non-wastefulness.
    Keywords: random assignment, strategy-proofness, envy-freeness, q-unanimity
    JEL: D63 D70
    Date: 2022
  3. By: R Jain (Institute of Economics, Academia Sinica, Taipei, Taiwan); V Korpela (Turku School of Economics, Finland); M Lombardi (University of Liverpool Management School)
    Abstract: We study rationalizable implementation of social choice functions. Iterative Monotonicity is both necessary and sufficient for implementation when there are two or more players.
    Keywords: : Implementation, monotonicity, Tarski’s fixed point theorem, rationalizability.
    JEL: C79 D82
    Date: 2021–07
  4. By: R Jain (Institute of Economics, Academia Sinica, Taipei, Taiwan); M Lombardi (University of Liverpool Management School)
    Abstract: We introduce a notion of rationalizable implementation for social choice functions, termed s-rationalizable implementation, and show that it is equivalent to robust implementation.
    Keywords: : Robust Implementation, Rationalizable Implementation, Social Choice Functions, Interim Best Response Property.
    JEL: C79 D82
    Date: 2021–11
  5. By: Lin William Cong; Yizhou Xiao
    Abstract: Economic interactions, such as crowdfunding, often involve sequential actions, observational learning, and contingent project implementation. We incorporate all-or-nothing thresholds in a canonical model of information cascades. Early supporters effectively delegate their decisions to a "gatekeeper, " resulting in uni-directional cascades without herding on rejections. Project proposers consequently can charge higher prices. Proposal feasibility, project selection, and information aggregation all improve, even when agents can wait. Equilibrium outcomes depend on the crowd size, and project implementation and information aggregation achieve efficiency in the large-crowd limit. Our key insights remain robust under thresholds in dollar amounts, alternative equilibrium selection, among other model extensions.
    JEL: D81 D83 G12 G14
    Date: 2023–01
  6. By: Ceesay, Muhammed
    Abstract: How much does it hurt seller revenue if some bidders know that others are colluding? Using a simple model of first and second price Independent Private Value auctions with uniformly distributed values where a single bidder knows privately of the existence of collusion by others, we show that this knowledge leads him to bid shading (weakly) in the first price auction compared to what he would have bid otherwise. This in turn yields the result that the second price auction dominates the first price auction in terms of seller revenue. This contrasts results from the literature showing that under our framework, when bidding is done while the presence of colluding bidders is common knowledge, the first price auction dominates the second price auction.
    Keywords: Almost-All-Inclusive Ring, Informational Structures
    JEL: D44
    Date: 2023
  7. By: Marina Núñez (Universitat de Barcelona and Barcelona Economic Analysis Team (BEAT)); Francisco Robles (ABC Economics)
    Abstract: We study the problem of allocating packages of different objects to a group of bidders. A rule is overbidding-proof if no bidder has incentives to bid above his actual valuations. We prove that if an efficient rule is overbidding-proof, then each winning bidder pays a price between his winning bid and what he would pay in a Vickrey auction for the same package. In counterpart, the set of rules that satisfy underbidding-proofness always charge a price below the corresponding Vickrey price. A new characterization of the Vickrey allocation rule is provided with a weak form of strategy-proofness. The Vickrey rule is the only rule that satisfies efficiency, individual rationality, overbidding-proofness and underbidding-proofness. Our results are also valid on the domains of monotonic valuations and of single-minded bidders. Finally, a rule is introduced that is overbidding proof and its payoffs are bidder-optimal in the core of the auction game according the reported valuations.
    Keywords: Strategy-proofness, overbidding, Vickrey allocation rule.
    JEL: D44 D47
    Date: 2023
  8. By: Salvador Barberà; Walter Bossert
    Abstract: The conditions of strong Condorcet winner consistency and strong Condorcet loser consistency are, in essence, universally accepted. However, there are many situations in which they are silent. The weak counterparts of these properties suffer from the fatal flaw that a weak Condorcet winner can be a weak Condorcet loser at the same time. We propose a new notion of Condorcet-type winners and losers that is intermediate in strength between these two extremes. A feasible candidate is an intermediate Condorcet winner if this candidate wins against or ties with each other feasible candidate in a pairwise contest, with at least one instance of a win. Likewise, a feasible candidate is an intermediate Condorcet loser if the candidate loses against or ties with each other feasible candidate, with at least one instance of a loss. Our intermediate variants of Condorcet winner consistency and Condorcet loser consistency share the intuitive appeal of strong Condorcet winner consistency and strong Condorcet loser consistency, and they do not lead to the counterintuitive conclusions of the consistency conditions defined in terms of weak Condorcet winners and losers. We provide a thorough examination of the properties of our proposal and compare it to earlier attempts to modify the traditional Condorcet conditions. Journal of Economic Literature Classification Nos.: D71, D72, D63. Keywords. Social choice; Voting; Condorcet consistency; Single-peakedness.
    Keywords: Social Choice, voting, Condorcet consistency, single-peakedness
    JEL: D71 D72 D63
    Date: 2023–01
  9. By: Gisèle Umbhauer; Arnaud Wolff
    Abstract: The concept of Individually-Consistent Sequential-Equilibrium broadens the concept of Sequential Equilibrium by allowing players to have different beliefs on potential deviations. This heterogeneity spontaneously gives rise to a notion of distance between beliefs. Yet, studying distance between beliefs in a strategic context reveals to be intricate. Announced beliefs may be different from revealed beliefs and the meaning of distance depends on the role assigned to beliefs. If out-of-equilibrium beliefs help getting a larger payoff at equilibrium, then we might need to reconsider the traditional definition of sequential rationality: more than just requiring that players behave optimally at every information set given their beliefs and the strategies played by others players, we might additionally require that there does not exist another perturbation scheme that is individually-consistent and which provides higher payoffs to the players.
    Keywords: AGM-Consistency, Distance in Beliefs, Heterogeneous Beliefs, Individually-Consistent-Sequential Equilibrium, Revealed Beliefs.
    JEL: C72
    Date: 2022
  10. By: Schnakenberg, Keith; Schumock, Collin; Turner, Ian R (Yale University)
    Abstract: We provide a model of dark money in elections. An ideologically extreme donor with private information about candidate ideology and quality can advertise on behalf of a candidate. Advertising reveals information about candidate quality to voters, who can learn from either donor-funded or neutral advertising. Voters update negatively about candidate ideology when ads are known to be donor-funded. Dark money suppresses source information and allows donors to advertise candidate quality while simultaneously concealing the ideological motivations behind ad funding. However, dark money leads voters to become skeptical of all advertising, which can disadvantage donors.
    Date: 2023–01–07
  11. By: armstrong, mark; Vickers, John
    Abstract: Edgeworth's paradox of taxation occurs when an increase in the unit cost of a product causes a multiproduct monopolist to reduce prices. We give simple illustrations of the paradox, including how it can arise with uniform pricing. We then give a general analysis of the case of linear marginal cost and demand conditions, and characterize which matrices of cost passthrough terms are consistent with profit maximization. When the firm supplies at least one pair of substitute products we show how Edgeworth's paradox always occurs with a suitable choice of cost function. We then establish a connection between Ramsey pricing and the paradox in a form relating to consumer surplus, and use it to find further examples where consumer surplus increases with cost.
    Keywords: Multiproduct pricing; Edgeworth's paradox of taxation; cost passthrough; Ramsey pricing
    JEL: D42 H22 L12
    Date: 2023–01

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