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on Microeconomics |
| By: | Tirole, Jean; Moisson, Paul-Henri; Dubois, Pierre |
| Abstract: | It is puzzling that cooperatives, which stand for the interests of their users, do not occupy more space in the market for corporate forms. This paper unveils a new impediment to their formation. It shows that equilibrium free-riding handicaps cooperatives in their competition with alternative institutions, notably the for-profits. The irrelevance of cooperatives is a remarkably robust result. The paper then analyzes desirable government interventions in the corporate market. |
| Keywords: | Cooperatives; free-riding; competing corporate forms |
| JEL: | D23 D71 D8 L22 |
| Date: | 2023–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128186&r=mic |
| By: | Olivier Compte |
| Abstract: | Motivated by the idea that lack of experience is a source of errors but that experience should reduce them, we model agents' behavior using a stochastic choice model, leaving endogenous the accuracy of their choice. In some games, increased accuracy is conducive to unstable best-response dynamics. We define the barrier to learning as the minimum level of noise which keeps the best-response dynamic stable. Using logit Quantal Response, this defines a limitQR Equilibrium. We apply the concept to centipede, travelers' dilemma, and 11-20 money-request games and to first-price and all-pay auctions, and discuss the role of strategy restrictions in reducing or amplifying barriers to learning. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.16904&r=mic |
| By: | Gentry, Matthew; Pesendorfer, Martin |
| Abstract: | A single-product retailer faces bargain hunting consumers whose willingness to pay incorporates sensations of gain and loss driven by differences between the observed price and prices they rationally expect in the spirit of Koszegi and Rabin (2006). We examine the Bayesian Nash equilibrium (non-commitment) pricing solution in which (i) the retailer maximizes profit given consumers' beliefs and (ii) consumers' beliefs are consistent with the retailer's choice. We show two novel results: First, a pure-strategy, uniform-price, equilibrium does not exist when consumers are bargain hunters who value gains more than losses. Second, in this case there exists a mixed strategy equilibrium and all mixed strategy equilibria involve the same retailer profit. The equilibrium retailer profit is (weakly) lower than in the absence of reference effects. |
| Keywords: | bargain hunting; pricing; reference effects |
| JEL: | J1 |
| Date: | 2021–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:111591&r=mic |
| By: | Ricardo Alonso; Gerard Padró I Miquel |
| Abstract: | We propose a general equilibrium model where two special interest groups (SIGs) compete to influence public opinion. Citizens with heterogeneous priors over a binary state of the world receive reports drawn from a continuous message space by a variety of sources. The two opposite SIGs attempt to push their own agenda (one SIG to persuade citizens towards one state of the world, the other towards the alternative state of the world) by capturing the messages these sources convey. We characterize the equilibrium level of capture of each source by competing SIGs as well as the equilibrium level of information transmission. We show that capture increases the prevalence of the ex ante most informative messages. As a consequence, rational citizens discount such informative reports. Opposite capturing efforts do not cancel each other and result in a loss of social learning. We show that efforts to capture an information source are strategic substitutes: citizens' skepticism of messages favoring the view of the SIG that is expected to capture that source dampen the incentives of the opposite SIG. Strategic substitution exacerbates horizontal differentiation so the information landscape becomes more polarized. We finally show that increased demand for information when SIGs want to fire up the base can exacerbate differentiation, increase capture, and reduce information transmission in equilibrium. |
| JEL: | D72 D80 D83 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31414&r=mic |
| By: | Pablo Schenone |
| Abstract: | The weak axiom of revealed preference (WARP) ensures that the revealed preference (i) is a preference relation (i.e., it is complete and transitive) and (ii) rationalizes the choices. However, when WARP fails, either one of these two properties is violated, but it is unclear which one it is. We provide an alternative characterization of WARP by showing that WARP is equivalent to the conjunction of two axioms each of which separately guarantees (i) and (ii). |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.11923&r=mic |
| By: | Philippe Jehiel (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, UCL - University College of London [London]); Erik Mohlin (Lund University [Lund], Institute for Futures Studies) |
| Abstract: | We develop a framework for categorization in games, applicable both to multistage games of complete information and static games of incomplete information. Players use categories to form coarse beliefs about their opponents' behavior. Players best-respond given these beliefs, as in analogy-based expectations equilibria. Categories are related to previously used strategies via the requirements that categories contain a sufficient amount of observations and exhibit sufficient withincategory similarity, in line with the bias-variance trade-off. When applied to classic games including the chainstore game and adverse selection games our framework yields less unintuitive predictions than those arising with standard solution concepts. |
| Keywords: | Bounded rationality, Categorization, Bias-variance trade-off, Adverse selection, Chainstore paradox |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-04154272&r=mic |
| By: | Itai Arieli (Technion - Israel Institute of Technology); Ivan Geffner (Technion - Israel Institute of Technology); Moshe Tennenholtz (Technion - Israel Institute of Technology) |
| Abstract: | In an information aggregation game, a set of senders interact with a receiver through a mediator. Each sender observes the state of the world and communicates a message to the mediator, who recommends an action to the receiver based on the messages received. The payoff of the senders and of the receiver depend on both the state of the world and the action selected by the receiver. This setting extends the celebrated cheap talk model in two aspects: there are many senders (as opposed to just one) and there is a mediator. From a practical perspective, this setting captures platforms in which strategic experts advice is aggregated in service of action recommendations to the user. We aim at finding an optimal mediator/platform that maximizes the users' welfare given highly resilient incentive compatibility requirements on the equilibrium selected: we want the platform to be incentive compatible for the receiver/user when selecting the recommended action, and we want it to be resilient against group deviations by the senders/experts. We provide highly positive answers to this challenge, manifested through efficient algorithms. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.05054&r=mic |
| By: | Krishnamurthy Iyer; Haifeng Xu; You Zu |
| Abstract: | We consider a dynamic Bayesian persuasion setting where a single long-lived sender persuades a stream of ``short-lived'' agents (receivers) by sharing information about a payoff-relevant state. The state transitions are Markovian and the sender seeks to maximize the long-run average reward by committing to a (possibly history-dependent) signaling mechanism. While most previous studies of Markov persuasion consider exogenous agent beliefs that are independent of the chain, we study a more natural variant with endogenous agent beliefs that depend on the chain's realized history. A key challenge to analyze such settings is to model the agents' partial knowledge about the history information. We analyze a Markov persuasion process (MPP) under various information models that differ in the amount of information the receivers have about the history of the process. Specifically, we formulate a general partial-information model where each receiver observes the history with an $\ell$ period lag. Our technical contribution start with analyzing two benchmark models, i.e., the full-history information model and the no-history information model. We establish an ordering of the sender's payoff as a function of the informativeness of agent's information model (with no-history as the least informative), and develop efficient algorithms to compute optimal solutions for these two benchmarks. For general $\ell$, we present the technical challenges in finding an optimal signaling mechanism, where even determining the right dependency on the history becomes difficult. To bypass the difficulties, we use a robustness framework to design a "simple" \emph{history-independent} signaling mechanism that approximately achieves optimal payoff when $\ell$ is reasonably large. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.03181&r=mic |
| By: | Anja Prummer; Francesco Nava |
| Abstract: | A principal allocates a single good to one of several agents whose values are privately and independently distributed, employing an optimal mechanism. The principal shapes the distribution of the agents' values within general classes of constraints. Divisive product designs, which are either highly favored or met with indifference, can simultaneously enhance surplus and diminish information rents by making agents' values more readily discernible. However, such designs also reduce competition among agents. Divisive designs are optimal under various design constraints, as the main drivers of revenue lie in increasing surplus and minimizing information rents, while competition plays a secondary role. |
| Keywords: | Value Design, Mechanism Design, Differentiation |
| JEL: | D82 D46 L15 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2023-05&r=mic |
| By: | Saurabh Amin; Patrick Jaillet; Haripriya Pulyassary; Manxi Wu |
| Abstract: | We study a market mechanism that sets edge prices to incentivize strategic agents to organize trips that efficiently share limited network capacity. This market allows agents to form groups to share trips, make decisions on departure times and route choices, and make payments to cover edge prices and other costs. We develop a new approach to analyze the existence and computation of market equilibrium, building on theories of combinatorial auctions and dynamic network flows. Our approach tackles the challenges in market equilibrium characterization arising from: (a) integer and network constraints on the dynamic flow of trips in sharing limited edge capacity; (b) heterogeneous and private preferences of strategic agents. We provide sufficient conditions on the network topology and agents' preferences that ensure the existence and polynomial-time computation of market equilibrium. We identify a particular market equilibrium that achieves maximum utilities for all agents, and is equivalent to the outcome of the classical Vickery Clark Grove mechanism. Finally, we extend our results to general networks with multiple populations and apply them to compute dynamic tolls for efficient carpooling in San Francisco Bay Area. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2307.03994&r=mic |
| By: | Philippe Jehiel (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, UCL - University College of London [London]); Giacomo Weber (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: | Families of normal-form two-player games are categorized by players into K analogy classes applying the K-means clustering technique to the data generated by the distributions of opponent's behavior. This results in Calibrated Analogy-Based Expectation Equilibria in which strategies are analogy-based expectation equilibria given the analogy partitions and analogy partitions are derived from the strategies by the K-means clustering algorithm. We discuss various concepts formalizing this, and observe that distributions over analogy partitions are sometimes required to guarantee existence. Applications to games with linear best-responses are discussed highlighting the differences between strategic complements and strategic substitutes. |
| Keywords: | K-mean clustering, Analogy-based Expectation Equilibrium K-mean clustering |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-04154234&r=mic |
| By: | Mignot, Sarah; Tramontana, Fabio; Westerhoff, Frank H. |
| Abstract: | We develop a nonlinear duopoly model in which the heuristic expectation formation and learning behavior of two boundedly rational firms may engender complex dynamics. Most importantly, we assume that the firms employ different forecasting models to predict the behavior of their opponent. Moreover, the firms learn by leaning more strongly on forecasting models that yield more precise predictions. An eight-dimensional nonlinear map drives the dynamics of our approach. We analytically derive the conditions under which its unique steady state is locally stable and numerically study its out-of-equilibrium behavior. In doing so, we detect multiple scenarios with coexisting attractors at which the firms' behavior yields distinctively different market outcomes. |
| Keywords: | Duopoly model, heuristic expectation formation, learning behavior, nonlinear dynamics, stability and bifurcation analysis, coexisting attractors |
| JEL: | C73 D43 L12 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:187&r=mic |
| By: | Matthias Fahn; Nicolas Klein |
| Abstract: | Consider a repeated principal-agent setting with verifiable effort and an extra profit that can materialize only if the agent is talented. The agent is overconfident and updates beliefs using Bayes’ rule. The agent's principal-expected compensation decreases over time until high talent is revealed; thus he may be employed only if beliefs are sufficiently low. We apply these results to a firm's promotion policy, which may be based on success in a previous job even if jobs are uncorrelated. This provides an explanation for the "Peter Principle" in a setting with verifiable performance and highly confident workers (Benson et al., 2019). |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2023-06&r=mic |
| By: | Donatella Gatti (University Sorbonne Paris Nord, CEPN UMR-CNRS 7234); Julien Vauday (University Sorbonne Paris Nord, CEPN UMR-CNRS 7234) |
| Abstract: | While environmental values are spreading among societies, they hardly lead to effective political actions. This may be due to an overestimation of the sharing of those values among people, or to a lack of political power of environmentalists vis-Ã -vis materialist citizens. We propose a theoretical model to investigate these two channels, based on a setup a la Grossman and Helpman (1994), in which lobby is a strategy available to social groups, in order to influence the government on environmental taxes. Because societies have being historically marked by materialist habits, citizens sharing those habits face lower costs when getting organized. By considering endogenous lobby formation a la Mitra (1999), we show that, in order for environmental and materialist lobbies to coexist, the society must be mixed enough. Based on a dynamic framework a la Besley and Persson (2023), we investigate how social values change over time. Whenever lobbying by materialists prevails, a unique social equilibrium exists, featuring a stable hegemony by materialist values. If environmentalists get organized too, a second social equilibrium emerges, that is locally stable and more favorable to them. However, the threshold might be very high, above which the cultural transition effectively takes off. By calibrating the model, we study counter-acting forces allowing to improve the odds of the environmental transition, such as cultural mutations, social-signaling, and lowering organizational costs. Finally, we provide policy implications. |
| Keywords: | Collective lobby, Environmentalism, Carbon tax, Environmental policy, Social change |
| JEL: | A13 D71 D72 H23 |
| URL: | http://d.repec.org/n?u=RePEc:fae:wpaper:2023.03&r=mic |