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on Microeconomics |
| By: | Martimort, David; Pouyet, Jérôme |
| Abstract: | Pay-TV firms compete both downstream to attract viewers and upstream to acquire broadcasting rights. Because profits inherited from downstream competition satisfy a convexity property, allocating rights to the dominant firm maximizes the industry profit. Such an exclusive allocation of rights emerges as a robust equilibrium outcome but may fail to maximize welfare. We analyze whether a ban on resale and a ban on package bidding may improve welfare. These corrective policies have no impact on the final allocation but lead to profit redistribution along the value chain. |
| Keywords: | Broadcasting rights; Upstream and downstream competition; Exclusivity |
| JEL: | L13 L42 |
| Date: | 2024–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129026&r=mic |
| By: | Yi-Hsuan Lin; Fernando Payró Chew |
| Abstract: | This paper models an agent that ranks actions with uncertain payoffs after observing a signal that could have been generated by multiple objective information structures. Under the assumption that the agent’s preferences conform to the multiple priors model (Gilboa and Schmeidler (1989)), we show that a simple behavioral axiom characterizes a generalization of Bayesian Updating. Our axiom requires that whenever all possible sources of information agree that it is more ’likely’ for an action with uncertain payoffs to be better than one with certain payoffs, the agent prefers the former. We also provide axiomatizations for several special cases. Finally, we consider the situation where the informational content of a signal is purely subjective. We characterize the existence of a subjective set of information structures under full Bayesian updating for two extreme cases: (i) No ex-ante state ambiguity, and (ii) No signal ambiguity. |
| Keywords: | updating, ambiguity, imprecise information, MaxMin |
| JEL: | D11 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1424&r=mic |
| By: | Heski Bar-Isaac; Justin P. Johnson; Volker Nocke |
| Abstract: | It is often argued that startups are acquired for the sole purpose of hiring specialized talent. We show that the goal of such acquihires might be to shut down the most relevant labor market competitor. This grants the acquirer monopsony power over specialized talent. As a consequence, acquihiring may harm employees and be socially inefficient. We explore the robustness of these effects, allowing for private benefits associated with working at a startup, varying bargaining protocols, multiple employees with and without complementarities, and private information. |
| Keywords: | Acquihiring, acquisitions, monopsony power, specialized labor markets, competition policy |
| JEL: | J42 L13 M12 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_500&r=mic |
| By: | Camilo J. Sirguiado; Juan Pablo Torres-Martinez |
| Abstract: | In two-sided one-to-one matching markets, when agents have the ability to declare potential partners as unacceptable, no stable mechanism is strategy-proof (Roth, 1982), no Pareto efficient and individually rational mechanism is strategy proof, and each side of the market has a single stable mechanism that is strategy-proof for its members (Alcalde and Barberà , 1994). These seminal results may no longer be valid when agents have no outside options and the mechanism designer knows it. Under these assumptions, Roth’s impossibility theorem holds if and only if there are at least three agents on each side of the market, Alcalde and Barberà 's impossibility theorem never holds, and Alcalde and Barberà 's uniqueness result only holds for the short side, if there is one. Additionally, among the many stable mechanisms that are strategy-proof for the long side of the market, there is one that is Pareto-superior for the short side. Interestingly, this optimal mechanism does not coincide with any version of deferred acceptance unless the short side has only two agents. All these results can be extended to scenarios in which a part of the population has outside options. Furthermore, when all agents on one side of the market have outside options, Alcalde and Barberà 's uniqueness result holds if and only if at most one agent on the other side may not declare any potential partner unacceptable. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:udc:wpaper:wp553&r=mic |
| By: | Shaofei Jiang |
| Abstract: | I study a model of costly Bayesian persuasion by a privately and partially informed sender who conducts a public experiment. The cost of running an experiment is the expected reduction of a weighted log-likelihood ratio function of the sender's belief. This is microfounded by a Wald's sequential sampling problem where good news and bad news cost differently. I focus on equilibria that satisfy the D1 criterion. The equilibrium outcome depends on the relative costs of drawing good and bad news in the experiment. If bad news is more costly, there exists a unique separating equilibrium, and the receiver unambiguously benefits from the sender's private information. If good news is more costly, the single-crossing property fails. There may exist pooling and partial pooling equilibria, and in some equilibria, the receiver strictly suffers from sender private information. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.14087&r=mic |
| By: | Joseph Y. Halpern; Evan Piermont |
| Abstract: | We show that it is possible to understand and identify a decision maker's subjective causal judgements by observing her preferences over interventions. Following Pearl [2000], we represent causality using causal models (also called structural equations models), where the world is described by a collection of variables, related by equations. We show that if a preference relation over interventions satisfies certain axioms (related to standard axioms regarding counterfactuals), then we can define (i) a causal model, (ii) a probability capturing the decision-maker's uncertainty regarding the external factors in the world and (iii) a utility on outcomes such that each intervention is associated with an expected utility and such that intervention $A$ is preferred to $B$ iff the expected utility of $A$ is greater than that of $B$. In addition, we characterize when the causal model is unique. Thus, our results allow a modeler to test the hypothesis that a decision maker's preferences are consistent with some causal model and to identify causal judgements from observed behavior. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.10937&r=mic |
| By: | Daniel Krähmer (Universität Bonn) |
| Abstract: | The paper studies the canonical hold-up problem with one-sided investment by the buyer and full ex post bargaining power by the seller. The buyer can covertly choose any distribution of valuations at a cost and privately observes her valuation. The main result shows that in contrast to the well-understood case with linear costs, if investment costs are strictly convex in the buyer’s valuation distribution, the buyer’s equilibrium utility is strictly positive and to tal welfare is strictly higher than in the benchmark when valuations are public information, thus alleviating the hold-up problem. In fact, when costs are mean-based or display decreasing risk, the hold-up problem may disappear completely. Moreover, the buyer’s equilibrium utility and total welfare might be non-monotone in costs. The paper utilizes an equilibrium characterization in terms of the Gateaux derivative of the cost function. |
| Keywords: | Information Design, Hold-Up Problem, Unobservable Information |
| JEL: | C61 D42 D82 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:278&r=mic |
| By: | Dirk Bergemann; Tibor Heumann; Michael C. Wang |
| Abstract: | We analyze the welfare impact of a monopolist able to segment a multiproduct market and offer differentiated price menus within each segment. We characterize a family of extremal distributions such that all achievable welfare outcomes can be reached by selecting segments from within these distributions. This family of distributions arises as the solution to the consumer maximizing distribution of values for multigood markets. With these results, we analyze the effect of segmentation on consumer surplus and prices in both interior and extremal markets, including conditions under which there exists a segmentation benefiting all consumers. Finally, we present an efficient algorithm for computing segmentations. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.12366&r=mic |
| By: | Marco Scarsini; Eran Shmaya |
| Abstract: | We consider an M/M/1 queueing model where customers can strategically decide whether to join the queue or balk and when to renege. We characterize the class of queueing regimes such that, for any parameters of the model, the socially efficient behavior is an equilibrium outcome. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.13812&r=mic |
| By: | Ville Korpela; Michele Lombardi; Riccardo D. Saulle |
| Abstract: | We fully identify the class of social choice functions that are implementable in von Neumann Morgenstern (vNM) stable sets (von Neumann and Morgenstern, 1944) by a rights structure. A rights structure formalizes the idea of power distribution in a society. Following the so-called Harsanyi’s critique (Harsanyi, 1974), we also study the implementation of social choice correspondences in strict vNM stable sets |
| Keywords: | vNM Stable Set, Implementation, Rights Structures |
| JEL: | C71 D02 D71 D82 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:liv:livedp:202313&r=mic |
| By: | Samson Alva; Eun Jeong Heo; Vikram Manjunath |
| Abstract: | We study ordinal rules for allocating indivisible goods via lottery. Ordinality requires a rule to consider only how agents rank degenerate lotteries and may be necessitated by cognitive, informational, or as we show, incentive constraints. The limited responsiveness of ordinal rules to agents' preferences means that they can only satisfy welfare properties based on first order stochastic dominance, which is incomplete. We define a new efficiency concept for ordinal rules. While ordinality and efficiency together are incompatible with the usual notions of fairness and somewhat limit randomization, they does leave room for a rich class of rules. We demonstrate this through a characterization of all ordinal, efficient, strategy-proof, non-bossy, boundedly invariant, and neutral rules. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.11899&r=mic |
| By: | Marie Obidzinski (Université Paris Panthéon Assas, CRED UR 7321, 75005 Paris, France); Yves Oytana (CRESE UR3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France) |
| Abstract: | We characterize the socially optimal liability sharing rule in a situation where a manufacturer develops an artificial intelligence (AI) system that is then used by a human operator (or user). First, the manufacturer invests to increase the autonomy of the AI (i.e., the set of situations that the AI can handle without human intervention) and sets a selling price. The user then decides whether or not to buy the AI. Since the autonomy of the AI remains limited, the human operator must sometimes intervene even when the AI is in use. Our main assumption is that users are subject to behavioral inattention. Behavioral inattention reduces the effectiveness of user intervention and increases the expected harm. Only some users are aware of their own attentional limits. Under the assumption that AI outperforms users, we show that policymakers may face a trade-off when choosing how to allocate liability between the manufacturer and the user. Indeed, the manufacturer may underinvest in the autonomy of the AI. If this is the case, the policymaker can incentivize the latter to invest more by increasing his share of liability. On the other hand, increasing the liability of the manufacturer may come at the cost of slowing down the diffusion of AI technology. |
| Keywords: | liability rules, artificial intelligence, inattention |
| JEL: | K4 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:crb:wpaper:2024-08&r=mic |
| By: | Benjamin Davies |
| Abstract: | A long-lived Bayesian agent observes costly signals of a time-varying state. He chooses the signals' precisions sequentially, balancing their costs and marginal informativeness. I compare the optimal myopic and forward-looking precisions when the state follows a Brownian motion. I also compare the myopic precisions induced by other Gaussian processes. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.03607&r=mic |
| By: | Luis Guijarro; Vicent Pla; Jose Ramon Vidal |
| Abstract: | We analyze the effects of enforcing vs. exempting access ISP from net neutrality regulations when platforms are present and operate two-sided pricing in their business models. This study is conducted in a scenario where users and Content Providers (CPs) have access to the internet by means of their serving ISPs and to a platform that intermediates and matches users and CPs, among other service offerings. Our hypothesis is that platform two-sided pricing interacts in a relevant manner with the access ISP, which may be allowed (an hypothetical non-neutrality scenario) or not (the current neutrality regulation status) to apply two-sided pricing on its service business model. We preliminarily conclude that the platforms are extracting surplus from the CPs under the current net neutrality regime for the ISP, and that the platforms would not be able to do so under the counter-factual situation where the ISPs could apply two-sided prices. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.14791&r=mic |
| By: | Joseph E. Stiglitz; Andrew Kosenko |
| Abstract: | We survey aspects of the intellectual development of the economics of information from the 1970s to today. We focus here on models where information is communicated indirectly through actions. Basic results, such as the failure of the fundamental theorems of welfare economics, the non-existence of competitive equilibrium, and the dependence of the nature of the equilibrium, when it exists, on both what information is available, and how information can be acquired, have been shown to be robust. Markets create asymmetries of information, even when initially none existed. While the earliest literature paid scarce attention to misinformation, subsequently it has been shown that governments can improve welfare, if disinformation is present, through fraud laws and disclosure requirements. Moreover, robust mechanism design enables agents and governments to better achieve their objectives, taking into account information asymmetries. On the other hand, market reforms that ignored their informational consequences may have lowered welfare. Surveying both theory and applications, we review the main insights of these literatures, and highlight key messages using nontechnical language. |
| JEL: | D82 D86 D9 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32049&r=mic |
| By: | Foarta, Dana; Ting, Michael M. |
| Abstract: | This paper develops a dynamic theory of the interaction of organizational capacity and its institutional context. Higher capacity enables organizations to deliver projects efficiently, while institutional barriers allow opposing interests to reallocate project payoffs at the cost of delays. Projects that are small and distributionally unequal are vulnerable to revisions. Project designers avoid revisions by equalizing distributive benefits or inflating project scales to increase the cost of revisions. We show that "matched" levels of capacity and institutional barriers minimize welfare. Organizational systems with high capacity and low institutional barriers, or low capacity and high institutional barriers, generate more efficient outcomes. |
| Keywords: | Organizational Capacity, Revisions, Power Transitions, Project Delays, Project Design |
| JEL: | D73 D82 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cbscwp:281758&r=mic |
| By: | Antoine Mandel; Van-Quy Nguyen; Bach Dong-Xuan |
| Abstract: | We provide a strategic model of the formation of production networks that subsumes the standard general equilibrium approach. The objective of firms in our setting is to choose their supply relationships so as to maximize their profit at the general equilibrium that unfolds. We show that this objective is equivalent to the maximization by the firms of their eigenvector centrality in the production network. As is common in network formation games based on centrality, there are multiple Nash equilibria in our setting. We have investigated the characteristics and the social efficiency of these equilibria in a stylized version of our model representing international trade networks. We show that the impact of network structure on social welfare is firstly determined by a trade-off between costs of increasing process complexity and positive spillovers on productivity induced by the diversification of the input mix. We further analyze a variant of our model that accounts for the risks of disruption of supply relationships. In this setting, we characterize how social welfare depends on the structure of the production network, the spatial distribution of risks, and the process of shock aggregation in supply chains. We finally show that simple trade policies characterized by sets of links that are either prevented or catalyzed can be a powerful equilibrium selection device. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.08929&r=mic |