nep-mic New Economics Papers
on Microeconomics
Issue of 2024‒02‒12
nine papers chosen by
Jing-Yuan Chiou, National Taipei University

  1. Anonymous and Strategy-Proof Voting under Subjective Expected Utility Preferences By Eric Bahel
  2. Search Engine Competition By Daniel Garcia
  3. A Difficulty in Characterising Mixed Nash Equilibria in a Strategic Market Game By Bailey, Ralph W.; Kozlovskaya, Maria; Ray, Indrajit
  4. Receiver-Oriented Cheap Talk Design By Itai Arieli; Ivan Geffner; Moshe Tennenholtz
  5. Negatively dependent optimal risk sharing By Jean-Gabriel Lauzier; Liyuan Lin; Ruodu Wang
  6. Temporary exclusion in repeated contests By Yaron Azrieli
  7. Game Mining: How to Make Money from those about to Play a Game By James W. Bono; David H. Wolpert
  8. On the price of diversity for multiwinner elections under (weakly) separable scoring rules By Mostapha Diss; Clinton Gabon Gassi; Eric Kamwa
  9. Strange Bedfellows: How the Need for Good Governance Shapes Budgetary Control of Bureaucracy By Patty, John; Turner, Ian R

  1. By: Eric Bahel
    Abstract: We study three axioms in the model of constrained social choice under uncertainty where (i) agents have subjective expected utility preferences over acts and (ii) different states of nature have (possibly) different sets of available outcomes. Anonymity says that agents' names or labels should never play a role in the mechanism used to select the social act. Strategy-proofness requires that reporting one's true preferences be a (weakly) dominant strategy for each agent in the associated direct revelation game. Range unanimity essentially says that a feasible act must be selected by society whenever it is reported as every voter's favorite act within the range of the mechanism. We first show that every social choice function satisfying these three axioms can be factored as a product of voting rules that are either constant or binary (always yielding one of two pre-specified outcomes in each state). We describe four basic types of binary factors: three of these types are novel to this literature and exploit the voters' subjective beliefs. Our characterization result then states that a social choice function is anonymous, strategy-proof and range-unanimous if and only if every binary factor (in its canonical factorization) is of one of these four basic types.
    Date: 2024–01
  2. By: Daniel Garcia
    Abstract: This paper studies a model of search engine competition with endogenous obfuscation. Platforms may differ in the quality of their search algorithms. I study the impact of this heterogeneity in consumer surplus, seller profits and platform revenue. I show that the dominant platform will typically induce higher prices but that consumers may benefit from asymmetries. I also show that enabling sellers to price-discriminate across platforms is pro-competitive. I then embed the static model in a dynamic setup, whereby past market shares lead to a better search algorithm. The dynamic consideration is pro-competitive but initial asymmetries are persistent.
    Keywords: search engine, platform competition, consumer search
    JEL: D43 D83 L13 M37
    Date: 2023
  3. By: Bailey, Ralph W. (Department of Economics, University of Birmingham); Kozlovskaya, Maria (Economics, Finance and Entrepreneurship Department, Aston Business School); Ray, Indrajit (Cardiff Business School)
    Abstract: We analyse the conditions for a strategy profile to be an equilibrium in a specific buy and sell strategic market game, with two goods, using best responses of a player against random bids from the opponents. The difficulty in characterising mixed Nash equilbria is that the expected utility is not quasiconcave in strategies. We still prove that any mixed strategy Nash equilibrium profile in which every player faces only two random bids is trivial, that is, is a convex combination of some pure strategy Nash equilibria; moreover, we show that the outcome (the price and the allocations) is deterministic in such an equilibrium.
    Keywords: Mixed bids ; Mixed strategy Nash equilibrium ; strategic market games JEL codes: C72
    Date: 2023
  4. By: Itai Arieli; Ivan Geffner; Moshe Tennenholtz
    Abstract: This paper considers the dynamics of cheap talk interactions between a sender and receiver, departing from conventional models by focusing on the receiver's perspective. We study two models, one with transparent motives and another one in which the receiver can \emph{filter} the information that is accessible by the sender. We give a geometric characterization of the best receiver equilibrium under transparent motives and prove that the receiver does not benefit from filtering information in this case. However, in general, we show that the receiver can strictly benefit from filtering and provide efficient algorithms for computing optimal equilibria. This innovative analysis aligns with user-based platforms where receivers (users) control information accessible to senders (sellers). Our findings provide insights into communication dynamics, leveling the sender's inherent advantage, and offering strategic interaction predictions.
    Date: 2024–01
  5. By: Jean-Gabriel Lauzier; Liyuan Lin; Ruodu Wang
    Abstract: We analyze the problem of optimally sharing risk using allocations that exhibit counter-monotonicity, the most extreme form of negative dependence. Counter-monotonic allocations take the form of either "winner-takes-all" lotteries or "loser-loses-all" lotteries, and we respectively refer to these (normalized) cases as jackpot or scapegoat allocations. Our main theorem, the counter-monotonic improvement theorem, states that for a given set of random variables that are either all bounded from below or all bounded from above, one can always find a set of counter-monotonic random variables such that each component is greater or equal than its counterpart in the convex order. We show that Pareto optimal allocations, if they exist, must be jackpot allocations when all agents are risk seeking. We essentially obtain the opposite when all agents have discontinuous Bernoulli utility functions, as scapegoat allocations maximize the probability of being above the discontinuity threshold. We also consider the case of rank-dependent expected utility (RDU) agents and find conditions which guarantee that RDU agents prefer jackpot allocations. We provide an application for the mining of cryptocurrencies and show that in contrast to risk-averse miners, RDU miners with small computing power never join a mining pool. Finally, we characterize the competitive equilibria with risk-seeking agents, providing a first and second fundamental theorem of welfare economics where all equilibrium allocations are jackpot allocations.
    Date: 2024–01
  6. By: Yaron Azrieli
    Abstract: Consider a large population of agents who repeatedly compete for awards, as in the case of researchers who can annually apply for grants from a science foundation. A key objective for the principal is to efficiently allocate resources to the highest quality applications, but the review process is often inherently noisy. Imperfect selection of winners may encourage low quality applications, which in turn forces the designer to commit more resources to the reviewing process and can further increase the misallocation. We study \emph{temporary exclusion} as a potential solution to these problems. With exclusion, an agent is ineligible to apply in the current period if they were rejected (or if they applied) in the previous period. Such policy introduces intertemporal incentives to the participation decision and encourages self-selection. We characterize the steady-state equilibria of this dynamic game and compare the outcomes to the benchmark case without exclusion. In particular, we show that whenever the benefit from winning is large, exclusion leads to fewer low quality applications and higher welfare for agents.
    Date: 2024–01
  7. By: James W. Bono; David H. Wolpert
    Abstract: It is known that a player in a noncooperative game can benefit by publicly restricting his possible moves before play begins. We show that, more generally, a player may benefit by publicly committing to pay an external party an amount that is contingent on the game's outcome. We explore what happens when external parties -- who we call ``game miners'' -- discover this fact and seek to profit from it by entering an outcome-contingent contract with the players. We analyze various structured bargaining games between miners and players for determining such an outcome-contingent contract. These bargaining games include playing the players against one another, as well as allowing the players to pay the miner(s) for exclusivity and first-mover advantage. We establish restrictions on the strategic settings in which a game miner can profit and bounds on the game miner's profit. We also find that game miners can lead to both efficient and inefficient equilibria.
    Date: 2024–01
  8. By: Mostapha Diss (Université de Franche-Comté, CRESE, UR3190, F-25000 Besançon, France); Clinton Gabon Gassi (Université de Franche-Comté, CRESE, UR3190, F-25000 Besançon, France); Eric Kamwa (Université des Antilles, LC2S, UMR CNRS 8053, Martinique, France)
    Abstract: We consider a model of multi-winner elections, where each voter expresses a linear preference over a finite set of alternatives. Based on voters’ preferences, the primary goal is to select a subset of admissible alternatives, forming what is referred to as a committee. We explore (weakly) separable committee scoring rules, the voting mechanisms that assess each alternative individually using a scoring vector and select the top k alternatives, where k represents the committee’s size. Furthermore, we operate under the assumption that alternatives are categorized based on specific attributes. Within each attribute category, there exists a targeted minimum number of alternatives that the selected committee should encompass, emphasizing the necessity for diversity. In this context, we assess the cost associated with imposing such a diversity constraint on the voting process. This assessment is conducted through two methodologies, referred to as the “price of diversity” and the “individual price of diversity”. We set the upper bounds for both prices across all (weakly) separable committee scoring rules. Additionally, we show how the maximum price of diver- sity can be used to discriminate between different voting rules in this context. Ultimately, we illustrate that concentrating on the candidates’ performance yields a more accurate estimation of the price of diversity compared to a focus on the enforced diversity constraint.
    Keywords: Group decisions and negotiations, voting, multiwinner elections, scoring rules, price of diversity
    JEL: D71 D72
    Date: 2024–01
  9. By: Patty, John; Turner, Ian R (Yale University)
    Abstract: Legislators can benefit from delegation to executive agencies, but they have limited tools to hold these agencies accountable. One key tool is 'power of the purse': control of the agency's appropriations. We present a theory that incorporates heterogeneous legislator preferences over bureaucratic activity, legislative budgetary control, and endogenous bureaucratic policy discretion to understand legislative incentives when appropriating funds to bureaucratic agencies. Our theory provides several insights: first, legislators' induced preferences over budgets are only partially determined by their policy preferences. Second, in some cases a legislator opposed to the direction that the agency will take policy nevertheless supports increased funding for that agency, which we refer to as the legislator facing cross-pressure. Finally, "strange bedfellows" coalitions emerge in which legislators with competing policy preferences may nonetheless agree on their most-desired budget level for the agency.
    Date: 2024–01–11

This nep-mic issue is ©2024 by Jing-Yuan Chiou. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.