|
on Microeconomics |
| By: | Daniil Larionov; Hien Pham; Takuro Yamashita; Shuguang Zhu |
| 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. |
| Keywords: | Mechanism Desgin, Implementation, First Best, Information Acquisition |
| JEL: | D82 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_377&r=mic |
| By: | Carl-Christian Groh; Marcel Preuss |
| Keywords: | Search, Information Exchange, Antitrust, Price Discrimination We study information sharing between competing sellers in markets where consumers sample sellers sequentially. Sellers can disclose to their rival when they encounter a buyer. Providing this information, which we call search disclosure, can enable all forms of search history-based price discrimination. Yet, firms only conduct search disclosure in equilibrium if search costs are low or price revisions are infeasible. The kind of search disclosure that can emerge in equilibrium leads to price discrimination that reduces consumer surplus and total welfare. However, if firms were mandated to use search disclosure at all times, consumer surplus would be higher. |
| JEL: | D18 D83 L13 L86 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_384&r=mic |
| By: | Hitoshi Matsushima (Department of Economics, University of Tokyo) |
| Abstract: | We investigate the implementation of social choice functions with asymmetric information concerning the state from an epistemological perspective. Although agents are either selfish or honest, they do not expect other participants to be honest. However, an honest agent may exist not among participants but in their higher-order beliefs. We assume that “all agents are selfish†never happens to be common knowledge. We show a positive result in general asymmetric information environments, demonstrating that with a minor restriction on signal correlation called information diversity, any incentive-compatible social choice function, whether ethical or nonethical, is uniquely implementable in the Bayesian Nash equilibrium. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf549&r=mic |
| By: | Pavel Ilinov; Andrei Matveenko; Maxim Senkov; Egor Starkov |
| Keywords: | delegation, rational inattention, heterogeneous beliefs, discrete choice |
| JEL: | D82 D83 D91 M51 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_370&r=mic |
| By: | Carl-Christian Groh |
| Keywords: | search, information exchange, antitrust, price discrimination approach, German Competition Act, 19a designations, competition law I study the relationship between data and market power in a duopoly model of price discrimination with search frictions. One firm receives a signal about the valuation of any arriving consumer while its rival receives no information. A share of consumers, referred to as searchers, have equal valuation for the good of either firm and optimally choose which firms to visit. The remaining consumers are captive. In equilibrium, a large majority of searchers will only visit the firm with data. The market share of the firm with data converges to one as the share of searchers in the market goes to one, regardless of the signal structure. Reductions of search frictions induce higher market concentration. The establishment of a right to data portability can address the competitive imbalances caused by data advantages. |
| JEL: | D18 D83 L13 L86 |
| Date: | 2022–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_383&r=mic |
| By: | Jeanne Hagenbach (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Frédéric Koessler (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: | We consider a single psychological agent whose utility depends on his action, the state of the world, and the belief he holds about that state. The agent is initially informed about the state and decides whether to memorize it, otherwise he has no recall. We model the memorization process by a multi-self game in which the privately-informed first self voluntarily discloses information to the second self, who has identical preferences and acts upon the disclosed information. We show that, for broad categories of psychological utility functions, there exists an equilibrium in which every state is voluntarily memorized. In contrast, if there are exogenous failures in the memorization process, the agent always memorizes states selectively. In this case, we characterize the partially informative equilibria for common classes of psychological utilities. |
| Keywords: | Multi-self games, Disclosure games, Imperfect recall, Selective memory, Motivated beliefs, Psychological games, Anticipatory utility |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03672216&r=mic |
| By: | Gisèle Umbhauer |
| Abstract: | We study the hammer-nail game, a game played in the French TV show “Fort Boyard”, by transforming this game into a Nim game with incomplete information. In this game, two players are in front of a nail slightly driven into a wooden support. Both have a hammer and in turn hit the nail. The winner is the first player able to fully drive the nail into the support. A player is of strength f if he is able, with one swing of the hammer, to drive the nail at most f millimeters into the support. We study the perfect Bayesian Nash equilibria of this game with incomplete information on the players’strength, and we also look at the equilibrium behavior when strength is combined with dexterity. |
| Keywords: | Nim game, incomplete information, subgame perfect Nash equilibrium, perfect Bayesian equilibrium, Fort Boyard. |
| JEL: | C72 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2023-05&r=mic |
| By: | Elias Carroni (University of Bologna Author-Name: Leonardo Madio; University of Padova Author-Name: Shiva Shekhar; Tilburg University) |
| Abstract: | In most platform environments, the exclusive provision of premium content from leading creators (Superstars) is employed as a strategy to boost user participation and secure a competitive edge vis-Ã -vis rivals. In this article, we study the impact of Superstar exclusive content provi- sion on platform competition and complementors’ homing decisions. Two competing platforms facilitate interactions between consumers and suppliers, of which the latter are identified by the Superstar and a fringe of complementors (e.g., independent developers, amateurs). When platform competition is intense, more consumers become affiliated with the platform favored by Superstar exclusivity. This mechanism is self-reinforcing as it generates an entry cascade of complementors and some complementors singlehome on the favored platform. We find that cross-group externalities are key in shaping market outcomes. First, exclusivity benefits complementors and might make consumers better off when cross-group externalities are large enough. Second, contrary to con- ventional wisdom, vertical integration (platform-Superstar) may make exclusivity less likely than vertical separation under reasonable conditions. Finally, we discuss implications for the strategies of platform owners, managers of Superstars and complementors, and antitrust enforcers. |
| Keywords: | exclusivity, platforms, two-sided markets, vertical integration, network externalities. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0296&r=mic |
| By: | Jon X. Eguia (Michigan State U.); Nicole Immorlica (Microsoft); Steven P. Lalley (U. Chicago); Katrina Ligett (Hebrew U.); Glen Weyl (Microsoft); Dimitrios Xefteris (U. Cyprus) |
| Abstract: | Consider the following collective choice problem: a group of budget constrained agents must choose one of several alternatives. Is there a budget balanced mechanism that: i) does not depend on the specific characteristics of the group, ii) does not require unaffordable transfers, and iii) implements utilitarianism if the agents' preferences are quasilinear and their private information? We study the following procedure: every agent can express any intensity of support or opposition to each alternative, by transferring to the rest of the agents wealth equal to the square of the intensity expressed; and the outcome is determined by the sums of the expressed intensities. We prove that as the group grows large, in every equilibrium of this quadratic-transfers mechanism, each agent's transfer converges to zero, and the probability that the efficient outcome is chosen converges to one. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.06206&r=mic |
| By: | Aranyak Mehta; Andres Perlroth |
| Abstract: | Advertisers in online ad auctions are increasingly using auto-bidding mechanisms to bid into auctions instead of directly bidding their value manually. One prominent auto-bidding format is the target cost-per-acquisition (tCPA) which maximizes the volume of conversions subject to a return-of-investment constraint. From an auction theoretic perspective however, this trend seems to go against foundational results that postulate that for profit-maximizing bidders, it is optimal to use a classic bidding system like marginal CPA (mCPA) bidding rather than using strategies like tCPA. In this paper we rationalize the adoption of such seemingly sub-optimal bidding within the canonical quasi-linear framework. The crux of the argument lies in the notion of *commitment*. We consider a multi-stage game where first the auctioneer declares the auction rules; then bidders select either the tCPA or mCPA bidding format and then, if the auctioneer lacks commitment, it can revisit the rules of the auction (e.g., may readjust reserve prices depending on the observed bids). Our main result is that so long as a bidder believes that the auctioneer lacks commitment to follow the rule of the declared auction then the bidder will make a higher profit by choosing the tCPA format over the mCPA format. We then explore the commitment consequences for the auctioneer. In a simplified version of the model where there is only one bidder, we show that the tCPA subgame admits a *credible* equilibrium while the mCPA format does not. That is, when the bidder chooses the tCPA format the auctioneer can credibly implement the auction rules announced at the beginning of the game. We also show that, under some mild conditions, the auctioneer's revenue is larger when the bidder uses the tCPA format rather than mCPA. We further quantify the value for the auctioneer to be able to commit to the declared auction rules. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.07312&r=mic |
| By: | Mohamed Belhaj (Aix-Marseille Univ, CNRS, Ecole Centrale, AMSE, Marseille, France.); Frédéric Deroïan (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.); Mathieu Faure (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.) |
| Abstract: | A set of agents is aware of the existence of an economic opportunity, and compete for the associated prize. We study incentives to communicate about the existence of this economic opportunity to uninformed agents when the winner of the prize shares it with others, through some exogenous sharing rule. Communicating about the opportunity has two conflicting effects: it increases competition, but it can also increase the likelihood of receiving a large share of the prize. We find that, for any sharing rule, there is a minimum equilibrium, which Pareto dominates all other equilibria. We also find that under bilaterally symmetric sharing, more sharing generates more communication. We then discuss these results along several extensions. |
| Keywords: | rival opportunity; sharing network; communication; investment |
| JEL: | C72 D83 D85 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2233&r=mic |
| By: | Fabio M. Manenti (Department of Economics and Management M. Fanno, University of Padova); Luca Sandrini (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics) |
| Abstract: | We model a three-stage duopolistic game where firms first simultaneously choose the technological direction of their innovation, then invest in the chosen direction, and finally, compete. Investments can be in competing or non-competing innovations and their outcome is uncertain. If successful, a firm can be imitated by the rival. Patent protection prevents imitation and is granted to non-obvious innovations. We show that compared to a regime where negligible innovations are patentable, strengthening the non-obviousness requirement for patentability can increase market efficiency. Importantly, we also show that the level of the requirement may affect the direction of firms' R&D trajectories. While in a mild patent regime firms tend to invest in competing technologies, a stricter non-obviousness requirement may induce firms to operate in different technological areas, and this increases social welfare and consumer surplus. We illustrate our general theory through a stylised model of Cournot competition with process innovations. |
| Keywords: | patents, R&D, non-obviousness, direction of innovation |
| JEL: | L13 O31 O34 |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:azp:qsmswp:2303&r=mic |
| By: | Christopher P. Chambers; Federico Echenique; Nicolas S. Lambert |
| Abstract: | We provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that is widely applicable to modern theories of choice under uncertainty. Key is to allow for a monetary environment, in which an objective notion of monotonicity is meaningful. In such environments, we show that subjective expected utility, as well as variational preferences, and other parametrizations of utilities over uncertain acts are recoverable. We also consider utility recovery in a statistical model with noise and random deviations from utility maximization. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.11492&r=mic |
| By: | Bruno Jullien (TSE-R - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Markus Reisinger; Patrick Rey |
| Abstract: | The availability of consumer data is inducing a growing number of firms to adopt more personalized pricing policies. This affects both the performance of, and the competition between, alternative distribution channels, which in turn has implications for firms' distribution strategies. We develop a formal model to examine a brand manufacturer's choice between mono distribution (selling only through its own direct channel) or dual distribution (selling through an independent retailer as well). We consider different demand patterns, covering both horizontal and vertical differentiation and different pricing regimes, with the manufacturer and retailer each charging personalized prices or a uniform price. We show that dual distribution is optimal for a large number of cases. In particular, this is always the case when the channels are horizontally differentiated, regardless of the pricing regime; moreover, if both firms charge personalized prices, a well-designed wholesale tariff allows them to extract the entire consumer surplus. These insights obtained here for the case of intrabrand competition between vertically related firms are thus in stark contrast to those obtained for interbrand competition, where personalized pricing dissipates industry profit. With vertical differentiation, dual distribution remains optimal if the manufacturer charges a uniform price. By contrast, under personalized pricing, mono distribution can be optimal when the retailer does not expand demand sufficiently. Interestingly, the industry profit may be largest in a hybrid pricing regime, in which the manufacturer forgoes the use of personalized pricing and only the retailer charges personalized prices. This paper was accepted by Joshua Gans, business strategy. |
| Date: | 2022–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03924406&r=mic |
| By: | Andrew Caplin; Daniel J. Martin; Philip Marx |
| Abstract: | The central question we address in this paper is: what can an analyst infer from choice data about what a decision maker has learned? The key constraint we impose, which is shared across models of Bayesian learning, is that any learning must be rationalizable. To implement this constraint, we introduce two conditions, one of which refines the mean preserving spread of Blackwell (1953) to take account for optimality, and the other of which generalizes the NIAC condition (Caplin and Dean 2015) and the NIAS condition (Caplin and Martin 2015) to allow for arbitrary learning. We apply our framework to show how identification of what was learned can be strengthened with additional assumptions on the form of Bayesian learning. |
| JEL: | D83 D91 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30873&r=mic |
| By: | Schlütter, Frank (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | This article investigates the incentive and ability of a platform to limit the extent of competition between the sellers it hosts. Absent contractual restrictions, a platform has an incentive to ensure competition between the sellers. This incentive can change with the introduction of so-called platform most-favored nation clauses (PMFN) that require the online sellers not to offer better conditions on other distribution channels. Such clauses can align the interests between sellers and platforms to restrict competition. I illustrate that a platform can stabilize seller collusion to its own benefit. These results offer a novel rationale to treat PMFNs with scrutiny. |
| Keywords: | Platform MFN ; digital economics ; collusion in vertically-related markets ; agency model |
| JEL: | L13 L40 L50 |
| Date: | 2022–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2022026&r=mic |
| By: | Farzad Pourbabaee; Federico Echenique |
| Abstract: | We study mechanism design for public-good provision under a noisy privacy-preserving transformation of individual agents' reported preferences. The setting is a standard binary model with transfers and quasi-linear utility. Agents report their preferences for the public good, which are randomly ``flipped, '' so that any individual report may be explained away as the outcome of noise. We study mechanisms that seek to preserve the public decisions made in the presence of noise (noise sensitivity), pursue efficiency, and mitigate the effect of noise on revenue. The paper analyzes the trade-offs between these competing considerations. |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2301.06967&r=mic |