nep-mic New Economics Papers
on Microeconomics
Issue of 2024‒01‒15
ten papers chosen by
Jing-Yuan Chiou, National Taipei University

  1. Ex-Ante Design of Persuasion Games By Eric Gao; Daniel Luo
  2. Selecting a Winner with External Referees By Francis Bloch; Bhaskar Dutta; Marcin Dziubinski
  3. Old rockers By Antonio Villar
  4. The Politics of Bargaining as a Group By Vincent Anesi; Peter Buisseret
  5. Two is enough: a flip on Bertrand through positive network effects By Renato Soeiro; Alberto Pinto
  6. Tullock Contest with Desert Concerns By Francesco Fallucchi; Francesco Trevisan
  7. Media Mergers in Nested Markets By Martimort, David; Sand-Zantman, Wilfried
  8. Non-obvious manipulability and efficiency in package assignment problems with money for agents with income effects and hard budget constraints By SHINOZAKI, Hiroki
  9. Homophily and Specialization in Networks By Patrick Allmis; Luca Paolo Merlino
  10. A Rank-Dependent Theory for Decision under Risk and Ambiguity By Roger J. A. Laeven; Mitja Stadje

  1. By: Eric Gao; Daniel Luo
    Abstract: How does receiver commitment affect incentives for information revelation in Bayesian persuasion? We study many-sender persuasion games where a single receiver commits to a posterior-dependent action profile, or allocation, before senders design the informational environment. We develop a novel revelation-like principle for ex-ante mechanism design settings where sender reports are Blackwell experiments and use it to characterize the set of implementable allocations in our model. We show global incentive constraints are pinned down by ``worst-case'' punishments at finitely many posterior beliefs, whose values are independent of the allocation. Moreover, the receiver will generically benefit from the ability to randomize over deterministic outcomes when solving for the constrained optimal allocation, in contrast to standard mechanism design models. Finally, we apply our results to analyze efficiency in multi-good allocation problems, full surplus extraction in auctions with allocation externalities, and optimal audit design, highlighting the role that monotone mechanisms play in these settings.
    Date: 2023–12
  2. By: Francis Bloch (University Paris and Paris School of Economics); Bhaskar Dutta (University of Warwick and Ashoka University); Marcin Dziubinski (Institute of Informatics, University of Warsaw)
    Abstract: We consider a problem of mechanism design without money, where a planner selects a winner among a set of agents with binary types and receives outside signals (like the report of external referees). We show that there is a gap between the optimal Dominant Strategy Incentive Compatible (DSIC) mechanism and the optimal Bayesian Incentive Compatible (BIC) mechanism. In the optimal BIC mechanism, the planner can leverage the outside signal to elicit information about agents' types. BIC mechanisms are lexicographic mechanisms, where the planner first shortlists agents who receive high reports from the referees and then uses agents' reports to break ties among agents in the shortlist. We compare the \self-evaluation" mechanism with a "peer evaluation" mechanism where agents evaluate other agents, and show that for the same signal precision, the self- evaluation mechanism outperforms the peer evaluation mechanism. We show that optimal Ex Post Incentive Compatible (EPIC) mechanisms give the planner an intermediate value between the optimal DSIC and BIC mechanisms.
    Keywords: Mechanism design without money; Peer selection; Bayesian incentive compatibility; Dominant strategy incentive compatibility; Ex post incentive compatibility
    Date: 2023–04–20
  3. By: Antonio Villar (Department of Economics, Universidad Pablo de Olavide)
    Abstract: This paper discusses three classic social evaluation procedures in a very general scenario: the majority rule, the Borda count, and the Condorcet criterion. We do so assuming no structure on individual preferences and providing a very easy way of identifying and comparing those evaluation protocols. Our informational inputs are the individual pairwise comparisons of alternatives and the informational outputs can be social pairwise comparisons or social orderings. The majority rule is obtained as the only pairwise social evaluation that satisfies informational efficiency, anonymity, monotonicity, and symmetry (a variant of the classical result by May). Arrow’s impossibility theorem appears as a corollary of this result. Borda and Condorcet evaluation functions are obtained along the same lines when we require the evaluation to be a social ordering. Both social evaluation functions can be regarded as applying the same principle over different domains (individual pairwise comparisons or social pairwise comparisons).
    Keywords: Aggregation of preferences, majority rule, Borda count, Condorcet criterion.
    JEL: D60 D70
    Date: 2023
  4. By: Vincent Anesi; Peter Buisseret
    Abstract: We develop a dynamic model in which a group collectively bargains with an external party. At each date the group makes an offer to the external party (the ‘agent’) in exchange for a concession. Group members hold heterogeneous preferences over agreements and are uncertain about the agent’s resolve. We show that all group members favor more aggressive proposals than they would if they were negotiating alone. By eliciting more information about the agent’s resolve, these offers reduce the group members’ uncertainty about the agent’s preferences and therefore reduce the group’s internal conflicts over its negotiating strategy. To mitigate the consequent risk that negotiations fail, decisive group members successively give up their influence over proposals: starting from any initially democratic decision process, the group eventually consolidates its entire negotiation authority into the hands of a single member.
    Keywords: adverse selection, collective choice, political economy, dictatorship, bargaining
    JEL: D02 D71 D78 D82 L22
    Date: 2023
  5. By: Renato Soeiro; Alberto Pinto
    Abstract: We discuss price competition when positive network effects are the only other factor in consumption choices. We show that partitioning consumers into two groups creates a rich enough interaction structure to induce negative marginal demand and produce pure price equilibria where both firms profit. The crucial condition is one group has centripetal influence while the other has centrifugal influence. The result is contrary to when positive network effects depend on a single aggregate variable and challenges the prevalent assumption that demand must be micro-founded on a distribution of consumer characteristics with specific properties, highlighting the importance of interaction structures in shaping market outcomes.
    Date: 2023–12
  6. By: Francesco Fallucchi (Department of Economics, University of Bergamo); Francesco Trevisan (Department of Economics, Ca' Foscari University of Venice)
    Abstract: We study the Tullock contest model with desert concerns (Gill and Stone (2010)). In a contest with n possibly heterogeneous players and convex effort costs, we establish the conditions necessary for a unique Nash equilibrium in pure strategies. Subsequently, we analyze the impact of desert concerns on players' spending behavior, probability of winning, and rent dissipation.
    Keywords: rent-seeking, contest, asymmetry, desire to win, loss aversion
    JEL: D31 D72 D91
    Date: 2023
  7. By: Martimort, David; Sand-Zantman, Wilfried
    Abstract: We analyze the effect of media mergers in a model that stresses, on the one hand, the fact that media are two-sided platforms willing to attract advertisers and viewers and, on the other hand, that strong competitors have emerged to challenge traditional media on both sides. We show that a merger has two conflicting effects on traditional media’s incentives to invest in quality programs and to exploit their market power. When competition is primarily between traditional media, a Business-Stealing Effect dominates, and the merger is detrimental to advertisers and viewers. When the competition is mainly between the traditional media and their new competitors, an Ecosystem Effect dominates, and the merger benefits advertisers and viewers. We extend this setting to discuss the role of financial constraints that might limit investments in the quality of programs and show that the same effects are at play.
    Keywords: Media; competition; merger
    JEL: L82 L22 G34
    Date: 2023–12–05
  8. By: SHINOZAKI, Hiroki
    Abstract: We study a problem of assigning packages of objects to agents with money. We allow agents to have utility functions that exhibit income effects or face hard budget constraints. It is already known that one of income effects and hard budget constraints lead to the non-existence of a rule satisfying strategy-proofness, efficiency, individual rationality, and no subsidy (Dobzinski et al., 2012; Kazumura and Serizawa, 2016; Baisa; 2020, Malik and Mishra, 2021, etc.). Given such negative results, we search for rules satisfying non-obvious manipulability (Troyan and Morrill, 2020), an incentive property weaker than strategy-proofness, together with the other three properties. First, we identify a necessary and sufficient condition for a rule satisfying efficiency, individual rationality, and no subsidy to be non-obviously manipulable. By using the first result, we show that a slight modification of a (truncated) pay as bid rule satisfies non-obvious manipulability, efficiency, individual rationality, and no subsidy.
    Keywords: Non-obvious manipulations, Efficiency, Strategy-proofness, Non-quasi-linear utilities, Hard budget constraints, Package auctions
    JEL: D44 D47 D71 D82
    Date: 2023–12
  9. By: Patrick Allmis; Luca Paolo Merlino
    Abstract: In this paper, players contribute to two local public goods for which they have different tastes and sponsor costly links to enjoy the provision of others. In equilibrium, either there are several contributors specialized in public good provision or only two contributors who are not entirely specialized. Higher linking costs have a non-monotonic impact on welfare and polarization, as they affect who specializes in public good provision. When the available budget is small, subsidies should be given to players who already specialize in public good provision; otherwise, they should target only one player who specializes in public good provision.
    Date: 2023–12
  10. By: Roger J. A. Laeven; Mitja Stadje
    Abstract: This paper axiomatizes, in a two-stage setup, a new theory for decision under risk and ambiguity. The axiomatized preference relation $\succeq$ on the space $\tilde{V}$ of random variables induces an ambiguity index $c$ on the space $\Delta$ of probabilities, a probability weighting function $\psi$, generating the measure $\nu_{\psi}$ by transforming an objective probability measure, and a utility function $\phi$, such that, for all $\tilde{v}, \tilde{u}\in\tilde{V}$, \begin{align*} \tilde{v}\succeq\tilde{u} \Leftrightarrow \min_{Q \in \Delta} \left\{\mathbb{E}_Q\left[\int\phi\left(\tilde{v}^{\centerdot}\right)\, \mathrm{d}\nu_{\psi}\right]+c(Q)\right\} \geq \min_{Q \in \Delta} \left\{\mathbb{E}_Q\left[\int\phi\left(\tilde{u}^{\centerdot}\right)\, \mathrm{d}\nu_{\psi}\right]+c(Q)\right\}. \end{align*} Our theory extends the rank-dependent utility model of Quiggin (1982) for decision under risk to risk and ambiguity, reduces to the variational preferences model when $\psi$ is the identity, and is dual to variational preferences when $\phi$ is affine in the same way as the theory of Yaari (1987) is dual to expected utility. As a special case, we obtain a preference axiomatization of a decision theory that is a rank-dependent generalization of the popular maxmin expected utility theory. We characterize ambiguity aversion in our theory.
    Date: 2023–12

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