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on Microeconomics |
| By: | Maarten C.W. Janssen (University of Vienna); Santanu Roy (Southern Methodist University) |
| Abstract: | In a market where buyers and sellers are uncertain about whether others are informed about the quality of an asset, inefficiency in trading arises due to incomplete learning. An uninformed seller will want to learn the asset's quality from the buyers' bids and may be willing to sell at low, but not at intermediate bids. Buyers may have incentives to pool their bids to prevent this type of learning. We outline conditions under which potential gains from trade cannot be realized in states where all traders are symmetrically informed or symmetrically uninformed. |
| Keywords: | Information Uncertainty, Asymmetric Information; Product Quality; Market Breakdown. |
| JEL: | L13 L15 D82 D43 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:2306&r=mic |
| By: | Ross Hyman; Deb Otis; Seamus Allen; Greg Dennis |
| Abstract: | We present the concept of ordered majority rule, a property of Instant Runoff Voting, and compare it to the familiar concept of pairwise majority rule of Condorcet methods. Ordered majority rule establishes a social order among the candidates such that that relative order between any two candidates is determined by voters who do not prefer another major candidate. It ensures the election of a candidate from the majority party or coalition while preventing an antagonistic opposition party or coalition from influencing which candidate that may be. We show how IRV is the only voting method to satisfy ordered majority rule, for a self-consistently determined distinction between major and minor candidates, and that ordered majority rule is incompatible with the properties of Condorcet compliance, independence of irrelevant alternatives, and monotonicity. Finally, we present some arguments as to why ordered majority rule may be preferable to pairwise majority rule, using the 2022 Alaska special congressional election as a case study. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.08430&r=mic |
| By: | Van Der Straeten, Karine; Yamashita, Takuro |
| Abstract: | Voters’ voting decisions crucially depend on their information. Thus, it is an important question how much / what kind of information they should know, as a normative guidance of the optimal extent of transparency. We consider a simple two-alternative majority voting environment, and study the optimal information disclosure policy by a utilitarian social planner. Although full transparency is sometimes (informally) argued as ideal, we show that full transparency is often strictly suboptimal. This is related to the well-known potential mis-match between what a majority wants and what is socially optimal. Under certain conditions, in order to alleviate this mismatch, the op-timal policy discloses just the “anonymized” information about the value of the alternatives to the voters, placing them effectively behind a partial “veil of ignorance”. |
| Date: | 2023–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128424&r=mic |
| By: | Giampaolo Bonomi |
| Abstract: | We study how disagreement influences the productive performance of a group in a simple repeated game with alternative production technologies and positive externalities. Players can disagree, i.e. hold different views about the characteristics and quality of the technologies. This disagreement has two main characteristics. First, different views lead to different technology and effort choices -- "optimistic" views justify higher effort than "skeptical" views. Second, views are resilient -- changed only if falsified by surprising evidence. When only one production technology is available, disagreement over its productivity (i) incentivizes the optimistic agent to work harder than when matched with a like-minded player; (ii) can reduce the effort of the skeptic agent. The first force lies at the core of what we call the "disagreement dividend." We show that if externalities are sufficiently strong, a team of like-minded optimists is outperformed -- in terms of expected output -- by a disagreeing team. Next, we find that when different production technologies are available, disagreement over which technology works best always drives up all players' efforts: each agent believes that their preferred approach is the most successful and tries harder to obtain the early successes that would convince others to adopt it. As a result, average group production always increases if the technologies are similar according to the true production process. Our main results are driven by players' incentives to persuade others to change their minds. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.06607&r=mic |
| By: | Masahiro Yoshida (Faculty of Political Science and Economics, Waseda University) |
| Abstract: | A monopolist often exploits a hard deadline to raise their commitment power. I explore whether a group of buyers can employ a soft deadline to counter the monopoly. Using a simple durable goods monopolist model under a deadline, I show that the buyers’ imperfect commitment to an earlier exit may elicit a compromise from the monopolist and generate the buyers’ premium. The soft deadline partially restores the self-competition dynamics of Coase conjecture, which is previously constrained by the hard deadline. Only one soft deadline breaks the conventional link between the time horizon (or durability of goods) and monopoly power. |
| Keywords: | bargaining; durable goods monopoly; commitment; Coase conjecture; dead-line effect |
| JEL: | C78 C91 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2305&r=mic |
| By: | René Van Den Brink (Department of Economics and Tinbergen Institute, VU University, Amsterdam, The Netherlands); Agnieszka Rusinowska (Centre d'Economie de la Sorbonne, CNRS, Université Paris 1 Panthéon-Sorbonne, Paris School of Economics) |
| Abstract: | This paper aims to connect the social network literature on centrality measures with the economic literature on von Neumann-Morgenstern expected utility functions using cooperative game theory. The social network literature studies various concepts of network centrality, such as degree, betweenness, connectedness, and so on. This resulted in a great number of network centrality measures, each measuring centrality in a different way. In this paper, we aim to explore which centrality measures can be supported as von Neumann-Morgenstern expected utility functions, reflecting preferences over different network positions in different networks. Besides standard axioms on lotteries and preference relations, we consider neutrality to ordinary risk. We show that this leads to a class of centrality measures that is fully determined by the degrees (i.e. the numbers of neighbours) of the positions in a network. Although this allows for externalities, in the sense that the preferences of a position might depend on the way how other positions are connected, these externalities can be taken into account only by considering the degrees of the network positions. Besides bilateral networks, we extend our result to general cooperative TU-games to give a utility foundation of a class of TU-game solutions containing the Shapley value |
| Keywords: | weighted network; degree; centrality measure; externalities; neutrality to ordinary risk; expected utility function |
| JEL: | D85 D81 C02 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:23012&r=mic |
| By: | Donato Masciandaro |
| Abstract: | Politicians can be more or less active in pursuing financial-literacy policies. This paper explores the role of financial-literacy policy in modifying the financial-trust endowment of a given population taking the political cost-benefit analysis into account. As, in any period, each incumbent government can design and implement its own financial-literacy policy and as financial-literacy deficits are more likely in a period of financial innovation, we assume that constituencies more or less in favour of such policies are present in a given country. If this is the case, we can show that, in a democracy with political competition, the level of activism in implementing financial-literacy policies is positively associated with financial-instability risks, literacy benefits, and illiteracy costs. Moreover, preferences and constraints motivate the politician in charge. More specifically, a more longer time horizons, lower psychological attitudes towards the status quo, and a higher probability of re-election can increase financial-literacy efforts. |
| Keywords: | financial literacy, financial trust, fintech, financial crisis, loss aversion, political competition |
| JEL: | D72 G28 G53 H10 K00 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp23206&r=mic |
| By: | Markus K. Brunnermeier; Jonathan Payne |
| Abstract: | This paper studies strategic decision making by a private currency ledger operator, which faces competition from public money and/or other ledgers. A monopoly ledger operator can incentivize contract enforcement across the financial sector by threatening exclusion, but it can also impose markups through its pricing power. Currency competition limits rent extraction, but also makes coordinated contract enforcement more fragile. The emergent market structure bundles the provision of ledger and platform trading technologies. Regulation to ensure platform cooperation on contract enforcement and competition on markup setting is effective so long as agents can easily switch between platforms. |
| JEL: | E4 E42 E5 E50 E59 F39 G21 G23 L10 L13 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31561&r=mic |
| By: | Benjamin Heymann; Alexandre Gilotte; R\'emi Chan-Renous |
| Abstract: | We consider a repeated auction where the buyer's utility for an item depends on the time that elapsed since his last purchase. We present an algorithm to build the optimal bidding policy, and then, because optimal might be impractical, we discuss the cost for the buyer of limiting himself to shading policies. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.01755&r=mic |
| By: | Chinmay Sonar; Subhash Suri; Jie Xue |
| Abstract: | In the committee selection problem, the goal is to choose a subset of size $k$ from a set of candidates $C$ that collectively gives the best representation to a set of voters. We consider this problem in Euclidean $d$-space where each voter/candidate is a point and voters' preferences are implicitly represented by Euclidean distances to candidates. We explore fault-tolerance in committee selection and study the following three variants: (1) given a committee and a set of $f$ failing candidates, find their optimal replacement; (2) compute the worst-case replacement score for a given committee under failure of $f$ candidates; and (3) design a committee with the best replacement score under worst-case failures. The score of a committee is determined using the well-known (min-max) Chamberlin-Courant rule: minimize the maximum distance between any voter and its closest candidate in the committee. Our main results include the following: (1) in one dimension, all three problems can be solved in polynomial time; (2) in dimension $d \geq 2$, all three problems are NP-hard; and (3) all three problems admit a constant-factor approximation in any fixed dimension, and the optimal committee problem has an FPT bicriterion approximation. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2308.07268&r=mic |