
on Microeconomics 
By:  Martimort, David; Arve, Malin 
Abstract:  We consider a procurement auction for the provision of a basic service to which an addon must later be appended. Potential providers are symmetric, have private information on their cost for the basic service and the winning firm must also implement the addon. To finance costreducing activities related to the addon, this firm may need extra funding by outside financiers. Nonverifiable effort in reducing these costs creates a moral hazard problem which makes the firm’s payoff function for the second period concave in returns over the relevant range. This concavity has two effects: It makes it more attractive to backload payments to facilitate information revelation and uncertainty on the cost of the addon introduces a background risk which requires a risk premium. In this context, we characterize the optimal intertemporal structure of payments to the winning firm, equilibrium bidding behavior and reserve prices in the firstprice auction with bidders. 
Keywords:  Auctions; procurement; financial constraints; dynamic mechanism design, asymmetric information; uncertainty; endogenous risk aversion. 
Date:  2023–09–18 
URL:  http://d.repec.org/n?u=RePEc:tse:wpaper:128474&r=mic 
By:  Ian Ball; Deniz Kattwinkel 
Abstract:  Quota mechanisms are commonly used to elicit private information when agents face multiple decisions and monetary transfers are infeasible. As the number of decisions grows large, quotas asymptotically implement the same set of social choice functions as do separate mechanisms with transfers. We analyze the robustness of quota mechanisms. To set the correct quota, the designer must have precise knowledge of the environment. We show that, without transfers, only trivial social choice rules can be implemented in a priorindependent way. We obtain a tight bound on the decision error that results when the quota does not match the true type distribution. Finally, we show that in a multiagent setting, quotas are robust to agents' beliefs about each other. Crucially, quotas make the distribution of reports common knowledge. 
Date:  2023–09 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2309.07363&r=mic 
By:  Sven Neth 
Abstract:  Is more information always better? Or are there some situations in which more information can make us worse off? Good (1966) argues that expected utility maximizers should always accept more information if the information is costfree and relevant. But Good's argument presupposes that you are certain you will update by conditionalization. If we relax this assumption and allow agents to be uncertain about updating, these agents can be rationally required to reject free and relevant information. Since there are good reasons to be uncertain about updating, rationality can require you to prefer ignorance. 
Date:  2023–09 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2309.12374&r=mic 
By:  R. Pablo Arribillaga; Agustin G. Bonifacio 
Abstract:  In the problem of allocating a single nondisposable commodity among agents whose preferences are singlepeaked, we study a weakening of strategyproofness called not obvious manipulability (NOM). If agents are cognitively limited, then NOM is sufficient to describe their strategic behavior. We characterize a large family of ownpeakonly rules that satisfy efficiency, NOM, and a minimal fairness condition. We call these rules "simple". In economies with excess demand, simple rules fully satiate agents whose peak amount is less than or equal to equal division and assign, to each remaining agent, an amount between equal division and his peak. In economies with excess supply, simple rules are defined symmetrically. We also show that the singleplateaued domain is maximal for the characterizing properties of simple rules. Therefore, even though replacing strategyproofness with NOM greatly expands the family of admissible rules, the maximal domain of preferences involved remains basically unaltered. 
Date:  2023–09 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2309.06546&r=mic 
By:  Hörner, Johannes; Renault, Jérôme 
Abstract:  We adapt the methods from Abreu, Pearce and Stacchetti (1990) to ﬁnitely repeated games with imperfect public monitoring. Under a combination of (a slight strengthening of) the assumptions of Benoıˆt and Krishna (1985) and those of Fudenberg, Levine and Maskin (1994), a folk theorem follows. Three counterexamples show that our assumptions are tight. 
Keywords:  Repeated games 
JEL:  C72 C73 
Date:  2023–09 
URL:  http://d.repec.org/n?u=RePEc:tse:wpaper:128536&r=mic 
By:  De Meza, David; Reito, Francesco 
Abstract:  Price dispersion is shown to arise when demand is stochastic, exante identical competitive firms set price prior to the realization of uncertainty and exante identical buyers cannot switch sellers if rationed. 
Keywords:  stochastic demand; price dispersion; rationing; waster 
JEL:  D61 D81 H23 
Date:  2021–11–01 
URL:  http://d.repec.org/n?u=RePEc:ehl:lserod:111897&r=mic 
By:  Kazuya Yamamoto 
Abstract:  The decisiveset and pivotalvoter approaches have been used for proving Arrow's impossibility theorem. Proofs by these approaches consider only subsets of all possible social welfare functions and examine parts of the domain of these functions. Hence, both ideas are not effective to prove the theorem. This study presents a proof using a proof calculus in logic. A valid deductive inference between the premises, the axioms and conditions of the theorem, and the conclusion, dictatorship, guarantees that every profile of all possible social welfare functions is examined, thereby the theorem is established. 
Date:  2023–09 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2309.06753&r=mic 
By:  Detemple, Julian; Kosfeld, Michael 
Abstract:  A key solution for public good provision is the voluntary formation of institutions that commit players to cooperate. Such institutions generate inequality if some players decide not to participate but cannot be excluded from cooperation benefits. Prior research with small groups emphasizes the role of fairness concerns with positive effects on cooperation. We show that effects do not generalize to larger groups: if group size increases, groups are less willing to form institutions generating inequality. In contrast to smaller groups, however, this does not increase the number of participating players, thereby limiting the positive impact of institution formation on cooperation. 
Keywords:  Institution formation, group size, social dilemma, social preferences 
JEL:  C92 D02 D63 H41 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:zbw:safewp:402&r=mic 
By:  Loukas Balafoutas; Helena Fornwagner; Rudolf Kerschbamer; Matthias Sutter; Maryna Tverdostup 
Abstract:  In markets for credence goods – such as health care or repair services – fraudulent behavior by better informed experts is a common problem. Our model studies how four common features shape experts’ provision behavior in credence goods markets: (i) diagnostic uncertainty of experts; (ii) insurance coverage of consumers; (iii) malpractice payments for treatment failure; and (vi) consumerregarding preferences of experts. Diagnostic imprecision unambiguously leads to less efficient provision. Insurance coverage and malpractice payments have an ambiguous effect on efficient provision. The impact of consumerregarding preferences on efficiency is positive without insurance but ambiguous in the presence of insurance. 
Keywords:  Credence goods, diagnostic uncertainty, insurance coverage, social preferences 
JEL:  D82 G22 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:inn:wpaper:202314&r=mic 
By:  Daniel Rehsmann; Béatrice Roussillon; Paul Schweinzer 
Abstract:  We model competition on a credence market governed by an imperfect label, signaling high quality, as a rankorder tournament between firms. In this market interaction, asymmetric firms jointly and competitively control the underlying quality ranking’s precision by releasing individual information. While the labels and the information they are based on can be seen as a public good guiding the consumers’ purchasing decisions, individual firms have incentives to strategically amplify or counteract the competitors’ information emission, thereby manipulating the label’s (or ranking’s) discriminatory power. Elements of the introduced theory are applicable to several (credencegood) industries which employ labels or rankings, including academic departments, books, music, and investment opportunities. 
Keywords:  labelling, credence goods, contests, product differentiation 
JEL:  C70 D70 H40 M30 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:ces:ceswps:_10632&r=mic 
By:  Fatima Khanchouche (Department of Mathematics, Laboratory of Fundamental and Numerical Mathematics, Faculty of Sciences, University of Ferhat Abbas, Setif1, Algeria); Samir Sbabou (CNRS, CREM  UNICAEN  University of Caen Normandy  NU  Normandy University, France); Hatem Smaoui (Center of Economics and Management of the Indian Ocean, University of La Réunion); Ziad Abderrahmane (CNRS, CREM  UNICAEN  University of Caen Normandy  NU  Normandy University, France and Laboratory of Computer Science and Mathematics, Ferhat Abbas University of Setif 1, Setif, Algeria) 
Abstract:  We study the class of congestion games with playerspecic payoff functions Milchtaich (1996). Focusing on a case where the number of resources is equal to two, we give a short and simple method for identifying the exact number of Nash equilibria in pure strategies. We propose an algorithmic method, first to find one or more Nash equilibria; second, to compare the optimal Nash equilibrium, in which the social cost is minimized, with the worst Nash equilibrium, in which the converse is true; third, to identify the time associated to the computations when the number of players increases. 
Keywords:  Congestions games, Nash equilibria computations, price of anarchy, price of stability. 
Date:  2023–07 
URL:  http://d.repec.org/n?u=RePEc:tut:cremwp:202308&r=mic 
By:  Aase, Knut K. (Dept. of Business and Management Science, Norwegian School of Economics) 
Abstract:  Quantitative probability in the subjective theory is assumed to be finitely additive and defined on all the subsets of an underlying state space. Functions from this space into an Euclidian nspace create a new probability space for each such function. We point out that the associated probability measures, induced by the subjective probability, on these new spaces can not be finitely additive and defined on all the subsets of Euclidian nspace, for n ≥ 3. This is a consequence of the BanachTarski paradox. In the paper we show that subjective probability theory, including Savage’s theory of choice, can be reformulated to take this, and similar objections into account. We suggest such a reformulation which, among other things, amounts to adding an axiom to Savage’s seven postulates, and then use a version of Carathéodory’s extension theorem. 
Keywords:  The BanachTarski paradox; the axiom of choice; Savage’s theory of choice; monotone continuity; countable additivity; Carathéodory’s extension theorem; syndicates; contingent claims 
JEL:  C00 C10 C25 G10 G12 G13 
Date:  2023–09–29 
URL:  http://d.repec.org/n?u=RePEc:hhs:nhhfms:2023_015&r=mic 