nep-mic New Economics Papers
on Microeconomics
Issue of 2023‒07‒10
fourteen papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Information provision in hybrid platforms By Marco Magnani; Federico Navarra
  2. Moral motivations in sequential buyer-seller interactions with adverse selection By José Ignacio Rivero Wildemauwe
  3. Non-Common Priors, Incentives, and Promotions: The Role of Learning By Matthias Fahn; Nicolas Klein
  4. Robust Data Regulation By Jose Higueras
  5. Privacy Regulation and Quality-Enhancing Innovation By Yassine Lefouili; Leonardo Madio
  6. Cautious Belief and Iterated Admissibility By Emiliano Catonini; Nicodemo De Vito
  7. Managing Government Hierarchy: Electoral Turnover and Intra-Governmental Cooperation By Li, Christopher M.; Sasso, Greg; Turner, Ian R
  8. Repeated Contests with Draws By Franke, Jörg; Metzger, Lars P.
  9. Social unacceptability for simple voting procedures By Ahmad Awde; Mostapha Diss; Eric Kamwa; Julien Yves Rolland; Abdelmonaim Tlidi
  10. Matching Unskilled/Skilled Workers to Firms Facing Budget Constraints By Ahmadzadeh, Amirreza; Kamali-Shahdadi, Behrang
  11. Coarse Information Design By Qianjun Lyu; Wing Suen; Yimeng Zhang
  12. Licensing a product innovation from an external innovator to a Stackelberg duopoly By Antelo, Manel; Bru, Lluís
  13. Fair and efficient allocations when preferences are single-dipped By Dietzenbacher, Bas; Tamura, Yuki
  14. Revealed preferences for dynamically inconsistent models By Federico Echenique; Gerelt Tserenjigmid

  1. By: Marco Magnani (University of Padova and ARERA); Federico Navarra (University of Padova)
    Abstract: We study the incentives of a monopolistic hybrid platform in sharing its superior market information with the third-party seller hosted on its marketplace. After observing platform information-sharing policy, the seller competes in prices with the platform over a horizontally differentiated good. Despite platform duality, an equilibrium in which the platform shares information with the seller occurs. We highlight how the platform has incentives to share information either for relaxing price-competition or for increasing the volume of transactions. Platform incentives to share information are strongest for intermediate degrees of product differentiation. Information provision results in consumer surplus extraction such that the total welfare is reduced. Although entering as a seller and providing market information is profitable, when analysing platform entry as the acquisition of one of the sellers we may observe equilibria in which the platform either sticks to agency or does not provide information since this would increase the entry cost.
    Keywords: hybrid platforms, information provision, data sharing, vertical integration.
    Date: 2023–05
  2. By: José Ignacio Rivero Wildemauwe (Université de Cergy-Pontoise, THEMA)
    Abstract: I study a bilateral trade setting with asymmetric information, where one side has all the bargaining power and makes a take-it-or-leave-it price offer. Both agents hold a certain degree of Kantian morality and thus care about what would have happened had their actions been adopted by their counterpart. In order to capture this, I implement a Veil-of-Ignorance approach, whereby players are uncertain about their role and are thus forced to submit strategies for both the case where they are the Buyer and the Seller. More precisely, in the first stage, both agents propose the price at which they would be willing to buy, while in a second stage they decide whether they would accept to sell at the offered price. Buyer and Seller roles are randomly assigned in the last stage. I consider adverse selection by assuming that the Seller is fully informed about the product’s quality, while the Buyer can only form an expectation about it. I show that when the degree of morality is low, the expected quality necessary to produce efficient equilibria is lower than that required by purely selfish agents and, moreover, it is decreasing in the intensity of the moral concern. I also find a threshold degree of morality above which only efficient equilibria are possible for any expectation about quality. Moral preferences thus mitigate the adverse selection problem and completely eliminate it when sufficiently strong.
    Keywords: bilateral trade; sequential; asymmetric information; homo moralis; Veil of Ignorance.
    JEL: D03 D82 D91 C78
    Date: 2023
  3. By: Matthias Fahn; Nicolas Klein
    Abstract: We analyze a repeated principal-agent setting in which the principal cares about the agent’s verifiable effort as well as an extra profit that can be generated only if the agent is talented. The agent is overconfident about his talent and updates beliefs using Bayes’ rule. An exploitation contract in which the agent is only compensated for his effort if the extra profit materializes maximizes the principal’s profits. In this optimal contract, the agent's principal-expected compensation decreases over time and learning exacerbates his exploitation, unless he has been revealed to be talented. Therefore, the principal’s profits may increase with failures, and the agent may only be employed if his perceived talent is sufficiently low. As an application of these results, we analyse a firm’s optimal promotion policy, and show that promotion to a new job may optimally be based on the agent being successful in a previous job, even if the agent's talent across jobs is entirely uncorrelated. This provides a novel explanation for the so-called “Peter Principle”, for which Benson et al., 2019 have recently provided evidence in a setting with verifiable performance and highly confident workers.
    Keywords: overconfidence, experimentation, dynamic incentives, Peter Principle
    JEL: C73 D83 D86 D91 M51
    Date: 2023
  4. By: Jose Higueras
    Abstract: I study how to regulate firms' access to consumer data when it is used for price discrimination and the regulator possesses non-Bayesian uncertainty about the correlation structure between data and willingness to pay. Therefore, it is unclear how the monopolist will segment the market. I characterize all policies that maximize worst-case consumer surplus: the regulator allows the monopolist to access data, if the database does not reveal a minority group of consumers.
    Date: 2023–05
  5. By: Yassine Lefouili (Toulouse School of Economics); Leonardo Madio (University of Padova Author-Name: Ying Lei Toh; Federal Reserve Bank of Kansas City)
    Abstract: We analyze how a privacy regulation setting a cap on information disclosure affects quality-enhancing innovation incentives by a monopolist — who derives revenues solely from disclosing user data to third parties — and consumer surplus. If the share of privacy-concerned users is sufficiently small, privacy regulation has a negative effect on innovation and may harm users. However, if the share of privacy-concerned users is sufficiently large, privacy regulation has a positive effect on innovation. In this case, there is no trade-off between privacy and innovation and users always benefit from privacy regulation.
    Keywords: Privacy Regulation; Data Disclosure; Innovation.
    Date: 2023–04
  6. By: Emiliano Catonini; Nicodemo De Vito
    Abstract: We define notions of cautiousness and cautious belief to provide epistemic conditions for iterated admissibility in finite games. We show that iterated admissibility characterizes the behavioral implications of "cautious rationality and common cautious belief in cautious rationality" in a terminal lexicographic type structure. For arbitrary type structures, the behavioral implications of these epistemic assumptions are characterized by the solution concept of self-admissible set (Brandenburger, Friedenberg and Keisler 2008). We also show that analogous conclusions hold under alternative epistemic assumptions, in particular if cautiousness is "transparent" to the players. KEYWORDS: Epistemic game theory, iterated admissibility, weak dominance, lexicographic probability systems. JEL: C72.
    Date: 2023–05
  7. By: Li, Christopher M.; Sasso, Greg (Bocconi University); Turner, Ian R (Yale University)
    Abstract: Theories of political accountability often consider voter-politician interactions in isolation from politician-bureaucrat interactions. We study a model of electoral accountability with a governing hierarchy: voter-politician-bureaucrat. The politician and bureaucrat both produce government output valued by the voter. The voter controls the politician via election and the politician provides incentives to bureaucrats. We show that when times are conducive to high quality governance---budgets are large and players are farsighted---incorporating the politician-bureaucrat relationship leads to weaker accountability standards. However, when times are tough and budgets are small or players are myopic voters may benefit from adopting more demanding standards.
    Date: 2023–05–13
  8. By: Franke, Jörg; Metzger, Lars P.
    Abstract: We consider a simple contest game with draws where with some probability none of the contestants is selected as winner. If such an outcome occurs, then the contest is repeated in the next period unless either one of the contestants wins the prize or until a final last period is reached. Allowing for finite as well as infinite time horizons and different variations in the timing of effort decisions, the theoretical analysis of this model reveals that the dynamic contest structure has profound implications for intertemporal effort substitution and contest revenue.
    Keywords: Contest theory, repeated contest, dynamic contest, contest with draws
    JEL: C72 C73 D72
    Date: 2023
  9. By: Ahmad Awde (FEMTO-ST - Franche-Comté Électronique Mécanique, Thermique et Optique - Sciences et Technologies (UMR 6174) - UTBM - Université de Technologie de Belfort-Montbeliard - ENSMM - Ecole Nationale Supérieure de Mécanique et des Microtechniques - CNRS - Centre National de la Recherche Scientifique - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE]); Mostapha Diss (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE]); Eric Kamwa (LC2S - Laboratoire caribéen de sciences sociales - CNRS - Centre National de la Recherche Scientifique - UA - Université des Antilles); Julien Yves Rolland (LMB - Laboratoire de Mathématiques de Besançon (UMR 6623) - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE]); Abdelmonaim Tlidi (MAE2D - Laboratory MAE2D, University of Abdelmalek Essaadi)
    Abstract: A candidate is said to be socially acceptable if the number of voters who rank her among the most preferred half of the candidates is at least as large as the number of voters who rank her among the least preferred half (Mahajne and Volij, 2018). For every voting profile, there always exists at least one socially acceptable candidate. This candidate may not be elected by some well-known voting rules, which may even lead in some cases to the election of a socially unacceptable candidate, the latter being a candidate such that the number of voters who rank her among the most preferred half of the candidates is strictly less than the number of voters who rank her among the least preferred half. In this paper, our contribution is twofold. First, since the existence of a socially unacceptable candidate is not always guaranteed, we determine the probabilities of the existence of such a candidate. Then, we evaluate how often the Plurality rule, the Negative Plurality rule, the Borda rule and their two-round versions can elect a socially unacceptable candidate. We perform our calculations under both the Impartial Culture and the Impartial Anonymous Culture,
    Keywords: Voting, Social Unacceptability, Scoring Rules, Probability
    Date: 2023–05–05
  10. By: Ahmadzadeh, Amirreza; Kamali-Shahdadi, Behrang
    Abstract: We study a matching model in which firms face budget constraints. If the pro-duction function only depends on a firm’s technology, a weak stable matching always exists; furthermore, when a strong stable matching does not exist, there is a nearby budget vector for firms such that a strong stable matching exists for the problem with perturbed budgets. If the production function is multiplicative, one can reach a strong stable matching by changing the budget of firms such that the total budget remains the same and each firm’s budget change is bounded by the value of at most one worker for that firm.
    Keywords: Matching Theory; Market Design; Labor Market
    JEL: D47 C78 C71
    Date: 2023–06–12
  11. By: Qianjun Lyu; Wing Suen; Yimeng Zhang
    Abstract: We study an information design problem with continuous state and discrete signal space. We find that the designer's interim value function affects the solution only through its curvature. There is a dual relation between the prior distribution and the marginal value function. Under convex value functions, the optimal information structure is interval-partitional. Moreover, in logconcave environments, a center of scrutiny emerges and information becomes coarser for states farther from it. We locate the scrutiny center and provide comparative statics on information structure with respect to prior distributions and value functions. The analysis can be extended to S-shaped value functions.
    Date: 2023–05
  12. By: Antelo, Manel; Bru, Lluís
    Abstract: We study the licensing of a product innovation from an external innovator in a duopoly of firms that compete sequentially with each other through quantities or prices. We find that the innovation is only licensed to a single firm, regardless of market competition. However, both the licensee and contractual terms under quantity competition differ from those under price competition. In the first case, the innovation is licensed to the market-leading firm through a non-distorting contract, and in the second case, to the market-following firm by means of a two-part tariff (distorting) contract involving a per-unit royalty.
    Keywords: Product innovation, licensing, Stackelberg duopoly, quantity competition, price competition
    JEL: D43 D45
    Date: 2023
  13. By: Dietzenbacher, Bas (RS: GSBE other - not theme-related research, QE Math. Economics & Game Theory); Tamura, Yuki
    Abstract: One unit of an infinitely divisible and non-disposable commodity has to be allocated among a group of agents with single-dipped preferences. We combine Pareto optimality with equal treatment of equals, the equal division lower bound, the equal division core, envy-freeness, and group envy-freeness. For each of these fairness requirements, we provide a necessary and sufficient condition for compatibility with Pareto optimality and we characterize all corresponding allocations for each preference profile.
    JEL: D63 D71
    Date: 2023–06–19
  14. By: Federico Echenique; Gerelt Tserenjigmid
    Abstract: We study the testable implications of models of dynamically inconsistent choices when planned choices are unobservable, and thus only "on path" data is available. First, we discuss the approach in Blow, Browning and Crawford (2021), who characterize first-order rationalizability of the model of quasi-hyperbolic discounting. We show that the first-order approach does not guarantee rationalizability by means of the quasi-hyperbolic model. This motivates consideration of an abstract model of intertemporal choice, under which we provide a characterization of different behavioral models -- including the naive and sophisticated paradigms of dynamically inconsistent choice.
    Date: 2023–05

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