
on Microeconomics 
By:  Mathias Dewatripont; Jean Tirole 
Abstract:  Scholars and civil society have argued that competition erodes supplier morality. This paper establishes a robust irrelevance result, whereby intense market competition does not crowd out consequentialist ethics; it thereby issues a strong warning against the wholesale moral condemnation of markets and procompetitive institutions. Intense competition, while not altering the behavior of profitable suppliers, however may reduce the standards of highly ethical suppliers or notforprofits, raising the potential need to protect the latter in the marketplace. 
Keywords:  Competition, consequentialism, replacement logic, nonprofits, corporate social responsability, race to the ethical bottom 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:eca:wpaper:2013/365277&r=mic 
By:  Wojciech Charemza; Michał Lewandowski; Łukasz Woźny 
Abstract:  Over the last few years, ranking lists of academic journals have become one of the key indicators for evaluating individual researchers, departments and universities. How to optimally design such rankings? What can we learn from commonly used journal ranking lists? To answer these questions, we propose a simple model of optimal rewards for publication in academic journals. Based on a principalagent model with researchers' hidden abilities, we characterize the secondbest journal reward system, where all available journals are assigned to one of several categories or ranks. We provide a tractable example that has a closedform solution and allows numerical applications. Finally, we show how to calibrate the distribution of researchers' ability levels from the observed journal ranking schemes. 
Keywords:  journal rankings, publication reward mechanisms, optimal categorization, journal quality 
JEL:  I23 D61 O31 
Date:  2023–09 
URL:  http://d.repec.org/n?u=RePEc:sgh:kaewps:2023092&r=mic 
By:  Jens Gudmundsson; Jens Leth Hougaard; Juan D. MorenoTernero; Lars Peter {\O}sterdal 
Abstract:  We study the design of optimal incentives in sequential processes. To do so, we consider a basic and fundamental model in which an agent initiates a valuecreating sequential process through costly investment with random success. If unsuccessful, the process stops. If successful, a new agent thereafter faces a similar investment decision, and so forth. For any outcome of the process, the total value is distributed among the agents using a reward rule. Reward rules thus induce a game among the agents. By design, the reward rule may lead to an asymmetric game, yet we are able to show equilibrium existence with optimal symmetric equilibria. We characterize optimal reward rules that yield the highest possible welfare created by the process, and the highest possible expected payoff for the initiator of the process. Our findings show that simple reward rules invoking shortrun incentives are sufficient to meet longrun objectives. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.12494&r=mic 
By:  Masanori Hatada (Graduate School of Economics, Kyoto University) 
Abstract:  This study investigates the effect of hiring a monitor to observe an agent's behavior in situations where a principal can use subjective measures of his performance. We assume there is a possibility of collusion between the agent and the monitor, i.e., the agent can promise the monitor a monetary payment and get the monitor to make a false report. We derive the optimal contracts in the principalagent model and the optimal collusionproof contracts in the principalmonitoragent model and compare them. The analysis shows that the optimal collusionproof contracts with the monitor can reduce the agent's rent and burnt money that occur in the optimal contract without the monitor to zero. Furthermore, we also find that, under the optimal collusionproof contracts, the amount paid to the monitor is never greater than the above payment reductions. Thus, hiring a monitor benefits the principal despite the possibility of collusion, which implies that monitors play vital roles in contracts with subjective evaluations. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:kyo:wpaper:1099&r=mic 
By:  Reimer, Julia; Doganoglu, Toker 
JEL:  D42 L12 L13 L40 L81 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:zbw:vfsc23:277683&r=mic 
By:  Murat C. Mungan (Texas A&M University School of Law); Marie Obidzinski (Université Paris Panthéon Assas, CRED, Paris, France); Yves Oytana (Université de FrancheComté, CRESE, Besançon, France) 
Abstract:  Legal procedures used to determine liability tradeoff type1 errors (e.g., false convictions) against type2 errors (e.g., false acquittals). After noting that people's relative preferences for type1 errors (compared to type2 errors) appear to be negatively correlated with technological advancements, we study how the accuracy of evidence collection methods may affect the tradeoff between these two errors. Counterintuitively, we find that under some conditions greater accuracy may result in a higher probability of type1 error (or type2 error) maximizing deterrence. Then, assuming both errors are decreasing in accuracy, we characterize the type1 error that emerges under electoral pressures (when the median voter's preferences are implemented): convictions occur more often than is socially optimal, but less often than is necessary to maximize deterrence. Moreover, as the harm from crime increases, the median voter becomes less tolerant of type1 errors as the legal system's accuracy increases. We also show that, because the median voter is less averse towards type1 errors than the average citizen, an increase in accuracy may reduce welfare. 
Keywords:  K4 
Date:  2023–12 
URL:  http://d.repec.org/n?u=RePEc:afd:wpaper:2303&r=mic 
By:  Ian Ball; Xin Gao 
Abstract:  A principal delegates decisions to a biased agent. Payoffs depend on a state that the principal cannot observe. Initially, the agent does not observe the state, but he can acquire information about it at a cost. We characterize the principal's optimal delegation set. This set features a cap on high decisions and a gap around the agent's ex ante favorite decision. It may even induce expost Paretodominated decisions. Under certain conditions on the cost of information acquisition, we show that the principal prefers delegating to an agent with a small bias than to an unbiased agent. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.11526&r=mic 
By:  Yangfan Zhou 
Abstract:  I study collective dynamic information acquisition. Players determine when to end sequential sampling via a collective choice rule. My analysis focuses on the case of two players, but extends to many players. With two players, collective stopping is determined either unilaterally or unanimously. I develop a methodology to characterize equilibrium outcomes using an ex ante perspective on posterior distributions. Under unilateral stopping, each player chooses a meanpreserving contraction of the other's posterior distribution; under unanimous stopping, they choose meanpreserving spreads. Equilibrium outcomes can be determined via concavification. Players learn Pareto inefficiently: too little under unilateral stopping, while too much under unanimous stopping; these learning inefficiencies are amplified when players' preferences become less aligned. I demonstrate the value of my methodological approach in three applications: committee search, dynamic persuasion, and competition in persuasion. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.05758&r=mic 
By:  Chao Huang 
Abstract:  This paper studies multilateral matching in which any set of agents can negotiate contracts. We assume scale economies in the sense that an agent substitutes some contracts with some new contracts only if the newly signed contracts involve a weakly larger set of partners. We show that a weakly setwise stable outcome exists in a market with scale economies and a setwise stable outcome exists under a stronger scale economies condition. Our conditions apply to environments in which more partners bring advantages, and allow agents to bargain over contracts signed by them. 
Date:  2023–10 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2310.19479&r=mic 
By:  Hans Gersbach; Akaki Mamageishvili; Fikri Pitsuwan 
Abstract:  A common economic process is crowdsearch, wherein a group of agents is invited to search for a valuable physical or virtual object, e.g. creating and patenting an invention, solving an open scientific problem, or identifying vulnerabilities in software. We study a binary model of crowdsearch in which agents have different abilities to find the object. We characterize the types of equilibria and identify which type of crowd maximizes the likelihood of finding the object. Sometimes, however, an unlimited crowd is not sufficient to guarantee that the object is found. It even can happen that inviting more agents lowers the probability of finding the object. We characterize the optimal prize and show that offering only one prize (winnertakesall) maximizes the probability of finding the object but is not necessarily optimal for the crowdsearch designer. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.08532&r=mic 
By:  Natalie Collina; Aaron Roth; Han Shao 
Abstract:  We study a repeated Principal Agent problem between a long lived Principal and Agent pair in a prior free setting. In our setting, the sequence of realized states of nature may be adversarially chosen, the Agent is nonmyopic, and the Principal aims for a strong form of policy regret. Following Camara, Hartline, and Johnson, we model the Agent's longrun behavior with behavioral assumptions that relax the common prior assumption (for example, that the Agent has no swap regret). Within this framework, we revisit the mechanism proposed by Camara et al., which informally uses calibrated forecasts of the unknown states of nature in place of a common prior. We give two main improvements. First, we give a mechanism that has an exponentially improved dependence (in terms of both running time and regret bounds) on the number of distinct states of nature. To do this, we show that our mechanism does not require truly calibrated forecasts, but rather forecasts that are unbiased subject to only a polynomially sized collection of events  which can be produced with polynomial overhead. Second, in several important special cases  including the focal linear contracting setting  we show how to remove strong ``Alignment'' assumptions (which informally require that nearties are always broken in favor of the Principal) by specifically deploying ``stable'' policies that do not have any near ties that are payoff relevant to the Principal. Taken together, our new mechanism makes the compelling framework proposed by Camara et al. much more powerful, now able to be realized over polynomially sized state spaces, and while requiring only mild assumptions on Agent behavior. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.07754&r=mic 
By:  Gal Danino; Moran Koren; Omer Madmon 
Abstract:  It is unclear how to restructure ownership when an asset is privately held, and there is uncertainty about the owners' subjective valuations. When ownership is divided equally between two owners, a commonly used mechanism is called a BMBY mechanism. This mechanism works as follows: each owner can initiate a BMBY by naming her price. Once an owner declares a price, the other chooses to sell his holdings or buy the shares of the initiator at the given price. This mechanism is simple and tractable; however, it does not elicit actual owner valuations, does not guarantee an efficient allocation, and, most importantly, is limited to an equal partnership of two owners. In this paper, we extend this rationale to a multiowner setting. Our proposed mechanism elicits owner valuations truthfully. Additionally, our proposed mechanism exhibits several desirable traits: it is easy to implement, budget balanced, robust to collusion (weakly group strategyproof), individually rational, and expost efficient. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.06780&r=mic 
By:  Jeffrey Mensch; Komal Malik 
Abstract:  We analyze a problem of revealed preference given statedependent stochastic choice data in which the payoff to a decision maker (DM) only depends on their beliefs about posterior means. Often, the DM must also learn about or pay attention to the state; in applied work on this subject, a convenient assumption is that the costs of such learning are linearly dependent in the distribution over posterior means. We provide testable conditions to identify whether this assumption holds. This allows for the use of information design techniques to solve the DM's problem. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.09496&r=mic 
By:  Richard McLean; Ichiro Obara; Andrew Postlewaite 
Abstract:  Cooperation through repetition is an important theme in game theory. In this regard, various celebrated ``folk theorems'' have been proposed for repeated games in increasingly more complex environments. There has, however, been insufficient attention paid to the robustness of a large set of equilibria that is needed for such folk theorems. Starting with perfect public equilibrium as our starting point, we study uniformly strict equilibria in repeated games with private monitoring and direct communication (cheap talk). We characterize the limit equilibrium payoff set and identify the conditions for the folk theorem to hold with uniformly strict equilibrium. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.12242&r=mic 
By:  Davide Radi; Laura Gardini 
Abstract:  The global dynamics is investigated for a duopoly game where the perfect foresight hypothesis is relaxed and firms are worstcase maximizers. Overlooking the degree of product substitutability as well as the sensitivity of price to quantity, the unique and globally stable CournotNash equilibrium of the completeinformation duopoly game, loses stability when firms are not aware if they are playing a duopoly game, as it is, or an oligopoly game with more than two competitors. This finding resembles Theocharis' condition for the stability of the CournotNash equilibrium in oligopolies without uncertainty. As opposed to completeinformation oligopoly games, coexisting attractors, disconnected basins of attractions and chaotic dynamics emerge when the CournotNash equilibrium loses stability. This difference in the global dynamics is due to the nonlinearities introduced by the worstcase approach to uncertainty, which mirror in bimodal bestreply functions. Conducted with techniques that require a symmetric setting of the game, the investigation of the dynamics reveals that a chaotic regime prevents firms from being ambiguity averse, that is, firms are worstcase maximizers only in the quantityexpectation space. Therefore, chaotic dynamics are the result and at the same time the source of profit uncertainty. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.11366&r=mic 
By:  Gerrit Bauch 
Abstract:  Communication is rarely perfect, but rather prone to error of transmission and reception. Often the origin of these errors cannot be properly quantified and is thus imprecisely known. We analyze the impact of an ambiguous noise which may alter the received message on a communication game of common interest. The noise is ambiguous in the sense that the parameters of the errorgenerating process and thus the likelihood to receive a message by mistake are Knightianly unknown. Exante and interim responses are characterized under maxmin preferences. While the sender can disregard ambiguity, the receiver reveals a dynamically inconsistent, but astonishing behavior under a quadratic loss. Their interim actions will be closer to the pooling action than their exante ones, as if facing a higher likelihood of an occurring error. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.12496&r=mic 
By:  Anna Kerkhof; Johannes Münster 
Abstract:  Media content is an important privately supplied public good. While it has been shown that contributions to a public good crowd out other contributions in many cases, the issue has not been thoroughly studied for media markets yet. We show that in a standard model of commercial media bias, qualities of media content are strategic complements, whereby investments into quality crowd in further investments and engage competitors in a race to the top. Therefore, financially strong public service media can mitigate commercial media bias: the content of commercial media can be more in line with the preferences of the audience and less advertiserfriendly in a dual (mixed public and commercial) media system than in a purely commercial media market. 
Keywords:  commercial media bias, public service media, advertising twosided markets, supermodular games, strategic complements, public goods 
JEL:  C70 H41 L13 L51 L82 
Date:  2023 
URL:  http://d.repec.org/n?u=RePEc:ces:ceswps:_10738&r=mic 
By:  Stefano Colombo; Paolo G. Garella; Noriaki Matsushima 
Abstract:  In a model of behaviorbased price discrimination (BBPD), we argue that sellers may have discretionary power to let buyers decide whether to be identified (e.g., creating an account) or remain anonymous (no account creation). The price equilibria generate a more fragmented market segmentation than under the standard BBPD. Firms might prefer a policy where they leave buyers the decision to remain or not be anonymous, breaking the standard BBPD result. Furthermore, firms can realize higher profits than under uniform pricing, contrary to the standard BBPD. Also, firms may adopt asymmetric policies concerning the account creation requirement. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:dpr:wpaper:1219&r=mic 
By:  Harvey Lederman 
Abstract:  This paper introduces the axiom of Negative Dominance, stating that if a lottery $f$ is strictly preferred to a lottery $g$, then some outcome in the support of $f$ is strictly preferred to some outcome in the support of $g$. It is shown that if preferences are incomplete on a sufficiently rich domain, then this plausible axiom, which holds for complete preferences, is incompatible with an array of otherwise plausible axioms for choice under uncertainty. In particular, in this setting, Negative Dominance conflicts with the standard Independence axiom. A novel theory, which includes Negative Dominance, and rejects Independence, is developed and shown to be consistent. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.08471&r=mic 
By:  Hiroki Nishimura; Efe A. Ok 
Abstract:  We investigate the problem of approximating an incomplete preference relation $\succsim$ on a finite set by a complete preference relation. We aim to obtain this approximation in such a way that the choices on the basis of two preferences, one incomplete, the other complete, have the smallest possible discrepancy in the aggregate. To this end, we use the topdifference metric on preferences, and define a best complete approximation of $\succsim$ as a complete preference relation nearest to $\succsim$ relative to this metric. We prove that such an approximation must be a maximal completion of $\succsim$, and that it is, in fact, any one completion of $\succsim$ with the largest index. Finally, we use these results to provide a sufficient condition for the best complete approximation of a preference to be its canonical completion. This leads to closedform solutions to the best approximation problem in the case of several incomplete preference relations of interest. 
Date:  2023–11 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2311.06641&r=mic 