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on Microeconomics |
| By: | Larionov, Daniil; Pham, Hien; Yamashita, Takuro; Zhu, Shuguang |
| Abstract: | We study mechanism design with flexible but costly information acquisition. There is a principal and four or more agents, sharing a common prior over the set of payoff-relevant states. The principal proposes a mechanism to the agents who can then acquire information about the state of the world by privately designing a signal device. As long as it is costless for each agent to acquire a signal that is independent from the state, we show that there exists a mechanism which allows the principal to implement any social choice rule at zero information acquisition cost to the agents. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:22064&r=mic |
| By: | Kemal Kivanc Akoz (Faculty of Economic Sciences, HSE University); Arseniy Samsonov (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics) |
| Abstract: | How transparent are informational institutions if their founders have to agree on the design? We analyze a model where several agents bargain over persuasion of a single receiver. We characterize the existence of anagreement that is beneficial for all agents relative to some fixed benchmark information structure, when the preferences of agents are state-independent, and provide sufficient conditions for general preferences. We further show that a beneficial agreement exists if, for every coalition of a fixed size, there is a belief that generates enough surplus for its members. Next, we concentrate on agent-partitional environments, where for each agent there is a state where the informed decision of the receiver benefits her the most. In these environments, we define endorsement rules that fully reveal all such agent-states. Endorsement rules are Pareto efficient when providing information at all agent-states generates enough surplus, and they correspond to a Nash Bargaining solution when the environment is also symmetric. We provide two political economic applications of our model. In a running example, we discuss the implication of our model to bargaining of authoritarian elites over media policy. The last section applies the model to an electoral campaign in a multiparty democracy. |
| Keywords: | Persuasion; Bargaining solution; Efficiency |
| JEL: | C71 D82 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:azp:qsmswp:2301&r=mic |
| By: | Emmanuelle Gabillon (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Regret is a negative and counterfactual emotion that occurs when a decision maker believes her past decision, if changed, would achieve a better outcome. Regret is intrinsically related to the comparison of the chosen alternative outcome with the foregone alternative outcomes. The result of this comparison is influenced by the decision maker's information about the foregone alternative outcomes (feedback structure). In this paper, we use Gabillon (2020)'s model, which generalizes regret theory to any feedback structure. We show that a regretful decision maker exhibits information aversion. The anticipation of learning about the payoffs of the foregone alternatives decreases her expected utility. We use the concept of statistical sufficiency in order to classify the feedback structures according to their informational content. We show that the less informative the feedback structure is, the higher the utility of a regretful decision maker. |
| Keywords: | Regret, Emotion, Information |
| Date: | 2022–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03898012&r=mic |
| By: | Yixuan Shi |
| Abstract: | We study a dynamic volunteering dilemma game in which two players choose to volunteer or wait given there have not been any volunteering actions in the past. The players can be procrastinators and the benefits of volunteering arrive later than the costs. We fully characterise the stationary Strotz-Pollak equilibria. When the cost of volunteering is suf- ficiently small or agents’ present-bias parameters are sufficiently close, there always exists an equilibrium in which both players randomise. This equilibrium features stochastic delay and the delay is exacerbated if one or both agents become more present-biased. However, if the agents differ significantly in their present-bias parameters, this difference may act as a ‘natural’ coordination device and the unique stationary equilibrium predicts that only the less severe procrastinator volunteers, this may result in an even quicker provision compared with the case of two exponential discounters. |
| Keywords: | Dynamic Volunteer’s dilemma, Present bias, Hyperbolic discounting, Strotz-Pollak equilibrium; Time inconsistency; |
| JEL: | D82 D83 H26 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2022-17&r=mic |
| By: | Ayca Kaya (University of Miami); Santanu Roy (Southern Methodist University) |
| Abstract: | We analyze the effect of transparency of past trading volumes in markets where an informed long-lived seller can repeatedly trade with short-lived uninformed buyers. Transparency allows buyers to observe previously sold quantities. In markets with intra-period monopsony (single buyer each period), transparency reduces welfare if the ex-ante expected quality is low, but improves welfare if the expected quality is high. The effect is reversed in markets with intra-period competition (multiple buyers each period). This discrepancy in the efficiency implications of transparency is explained by how buyer competition affects the seller's ability to capture rents, which, in turn, influences market screening. |
| Keywords: | Repeated sales, adverse selection, transparency, competition, market efficiency |
| JEL: | D82 C73 D61 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:2205&r=mic |
| By: | Stanca Lorenzo (Department of Economics, Social Studies, Applied Mathematics and Statistics (ESOMAS) and Collegio Carlo Alberto, University of Torino, Italy;) |
| Abstract: | A major concern with Bayesian decision making under uncertainty is the use of a single probability measure to quantify all relevant uncertainty. This paper studies prior robustness as a form of continuity of the value of a decision problem. It is shown that this notion of robustness is characterized by a form of stable choice over a sequence of perturbed decision problems, in which the available acts are perturbed in a precise fashion. Subsequently, a choice-based measure of prior robustness is introduced and applied to portfolio choice and climate mitigation. |
| Keywords: | Risk, Uncertainty, Robustness, Ambiguity, Robust Statistics, Prior Selection. |
| JEL: | C52 C61 D81 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:tur:wpapnw:079&r=mic |
| By: | Enrique Andreu (Compass Lexecon); Damien Neven (IHEID, Graduate Institute of International and Development Studies, Geneva); Salvatore Piccolo (Bergamo University) |
| Abstract: | We characterize the degree of price discretion that competing principals award their agents in a framework where agents are informed about demand and seek to pass on their unveriÂ…able distribution costs to consumers at the principalsÂ’ expense. Principals learn demand probabilistically and may exchange this information on a reciprocal basis. While equilibria with full price delegation never exist, partial delegation equilibria exist with and without information sharing and feature binding price caps (list prices) that prevent agents from passing on their distribution costs to consumers. Yet, these equilibria are more likely to occur with than without information sharing. Moreover, while principals exchange information when products are sufficiently differentiated and downstream distribution costs are not too low, expected prices are unambiguously lower with than without information sharing. These results have potential implications for recent and ongoing antitrust investigations and damage claims in prominent sectors both in the US and the EU. |
| Keywords: | Competing Principals; Delegates Sales; Discretion; Information Sharing; List Prices |
| JEL: | L42 L50 L81 |
| Date: | 2022–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp29-2022&r=mic |
| By: | David Spector (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - 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, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - 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) |
| Abstract: | Many collusive agreements involve the exchange of self-reported sales data between competitors, which use them to monitor compliance with a target market share allocation. Such communication may facilitate collusion even if it is unverifiable cheap talk and the underlying information becomes publicly available with a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocation mechanisms after unexpected swings, limiting the recourse to price wars. Such communication may allow firms to earn profits that could not be earned in any collusive, symmetric pure-strategy equilibrium without communication. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:halshs-03760756&r=mic |
| By: | Daniel Graydon Stephenson (Department of Economics, VCU School of Business) |
| Abstract: | This paper studies Blotto contests with divisible complementary prizes. Each agent distributes a fixed budget over multiple battlefields. Each battlefield has a single prize which is divided among the competi- tors in proportion to a power function of the corresponding investment levels. Prizes exhibit constant sub-unitary elasticity of substitution. Such contests are shown to have pure strategy Nash equilibria under arbitrarily sensitive battlefield success functions. In contrast, conven- tional Blotto and Tullock contests have no pure strategy Nash equi- libria under sufficiently sensitive battlefield success functions. These results suggest that divisible complementary prizes can help stabilize the distribution of resources in strategic conflicts. |
| JEL: | C70 C62 D74 Q34 |
| URL: | http://d.repec.org/n?u=RePEc:vcu:wpaper:2303&r=mic |
| By: | Gerard Llobet (CEPR); Damien Neven (IHEID, Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | At which stage in the production chain should patent licensing takes place? In this paper we show that under realistic circumstances a patent holder would be better off by licensing downstream. This occurs when the licensing revenue can depend on the downstream value of the product either directly or through the use of ad-valorem royalties. We show that the results are similar when, instead, we assume that the downstream licensee is less informed about the validity of the patent. In most cases, downstream licensing increases allocative efficiency. However, it might reduce the incentives to invest by the manufacturers and thereby reduce welfare. We characterize the circumstances under which a conflict arises between the stage at which patent holders prefer to license their technology and the stage at which it is optimal from a social standpoint that licensing takes place. |
| Keywords: | Royalty Neutrality; Standard Setting Organizations; Patent Licensing; R&D Investment. |
| JEL: | L15 L24 O31 O24 |
| Date: | 2022–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp30-2022&r=mic |
| By: | Qing Hu (Kushiro Public University of Economics); Dan Li (School of Management, Xi’an Polytechnic University); Tomomichi Mizuno (Graduate School of Economics, Kobe University) |
| Abstract: | We investigate a supply chain comprising a manufacturer engaged in advertising and two retailers who compete with differentiated products. We examine the endogenous choice between competing on quantity or price for the retailers. Our analysis reveals that, depending on the level of product substitutability, the range of possible outcomes is varied and includes Cournot, Bertrand, and Cournot-Bertrand under informative advertising. This result contradicts the established understanding that firms tend to engage in Cournot competition as their dominant strategy. Furthermore, we find that under persuasive advertising, Cournot or Bertrand outcomes may be optimal, but Cournot-Bertrand never arises as an equilibrium. |
| Keywords: | Exporting; endogenous competition mode, advertising, vertical relationship |
| JEL: | D43 L13 M21 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:2301&r=mic |
| By: | Luca Sandrini (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics) |
| Abstract: | This article shows that the usual result of full adoption of a superior technology induced by pure royalty licensing may not hold when firms have different production technologies. By modeling a licensing game with an external innovator offering per-unit royalty contracts to downstream firms, this article shows that full adoption of the innovation occurs only if i) the new technology is sufficiently more efficient than the best one available in the market or ii) if the firms have similar efficiency levels. Moreover, I disentangle two distinct forces that influence the innovator's choice: a price effect (PE) and a market share effect (MSE). The former highlight the asymmetry in willingness to pay for the new technology. The inefficient firms, which benefit the most from the cost-reducing innovation, are willing to pay a higher price than their efficient rivals to become licensees. The latter illustrates the innovator's aim to maximize the volume of royalties collected by licensing to many firms. When PE dominates MSE, the patent holder sets a higher royalty rate and attracts fewer, less efficient firms. Otherwise, if MSE dominates, the patent holder lowers the royalty rate and attracts more firms to reach as many consumers as possible. From a policy perspective, I show that royalty licensing improves consumer surplus and that the positive effect increases with the number of licensees. |
| Keywords: | Innovation; Licensing; Royalties; Price Effect; Market Share Effect |
| JEL: | L13 L24 O31 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:azp:qsmswp:2302&r=mic |
| By: | Michel Grabisch (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Benjamin Monet; Vassili Vergopoulos |
| Abstract: | This paper studies decision-making in the face of two stochastically independent sources of uncertainty. It characterizes axiomatically a Subjective Expected Utility representation of preferences where subjective beliefs consist of a product probability measure. The two key axioms in this characterization both involve some behavioral notions of stochastic independence. Our result can be understood as a purely subjective version of the Anscombe and Aumann (1963) theorem that avoids the controversial use of exogenous probabilities by appealing to stochastic independence. We also obtain an extension to Choquet Expected Utility representations. |
| Keywords: | subjective probability, expected utility, stochastic independence, subjective independence, capacity, Choquet expectation. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-03901731&r=mic |
| By: | Claire Chambolle (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Clémence Christin (UNICAEN - Université de Caen Normandie - NU - Normandie Université); Hugo Molina (ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This article presents recent advances in the analysis of buyer-seller networks, with a particular focus on the role of buyer power on exclusion. We first examine simple vertical structures and highlight that either upstream or downstream firms may have incentives to engage in exclusionary practices to counteract or leverage buyer power. We then review current work attempting to revisit this issue in "interlocking relationships". Based on an ongoing research project, we show that the same exclusion mechanism arises when retail substitution is soft. |
| Keywords: | Vertical relationships, Buyer power, Distribution network, Exclusion |
| Date: | 2022–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03902118&r=mic |
| By: | Apolte, Thomas |
| Abstract: | According to a number of democratization hypotheses, the (old) elite of a so far non-democratic regime can have incentives to democratize voluntarily. We add to this literature the hypothesis that an old elite refrains from democratizing unless it can rely on the newly established democratic constitution to be self-enforcing. We develop a model that identifies a number of politico-institutional traits which are decisive for a future democracy to be self-enforcing and which, in turn, represent the preconditions for an old elite to democratize. Given considerable path dependencies in the evolution of politico-institutional structures, some of the new democracies' politico-institutional traits are inevitably inherited from their respective pre-democratic history. If, in this light, the shift of an inherited politico-institutional structure to a self-enforcing democracy is too large, the old elite refrains from democratizing in the first place. This explains why many countries' old elites voluntarily democratized while others did not. |
| Keywords: | Democratization; Political Elite; Self-enforcing Democracy |
| JEL: | D72 D74 P48 |
| Date: | 2023–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116028&r=mic |