
on Microeconomics 
By:  Yohan Pelosse (Humanities and Social Sciences, Swansea University) 
Abstract:  This paper explores a sequential contest where the secondmover can, at some cost, invests in a more or less precise signal on the leader’s action before making his own move. We show that this signaling structure a la Weibull et al. (2007) guarantees the existence of a mixedstrategy perfect Bayesian equilibrium that fully preserves the value of commitment. We also prove that the profits of the firstmover in this type of equilibrium are always higher than in the subgame perfect equilibriumof the standard sequential contest. 
Date:  2024–02–21 
URL:  http://d.repec.org/n?u=RePEc:swn:wpaper:202402&r=mic 
By:  Bernhardt, Dan (Department of Economics, University of Illinois and Department of Economics, University of Warwick); Stefan Krasa, Stefan (Department of Economics, University of Illinois); Squintani, Francesco (Department of Economics, University of Warwick) 
Abstract:  We develop a model of strategic voting in a spatial setting with multiple candidates when voters have both expressive and instrumental concerns. The model endogenizes the strategic coordination of voters, yet is flexible enough to allow the analysis of political platform competition by policymotivated candidates. We characterize all strategic voting equilibria in a threecandidate setting. Highlighting the utility of our approach, we analyze a setting with two mainstream and a spoiler candidate, showing that the spoiler can gain from entering, even though she has no chance of winning the election and reduces the winning probability of her preferred mainstream candidate 
Date:  2024 
URL:  http://d.repec.org/n?u=RePEc:wrk:warwec:1489&r=mic 
By:  Itai Arieli; Yakov Babichenko; Omer Madmon; Moshe Tennenholtz 
Abstract:  We consider a model of thirddegree price discrimination, in which the seller has a valuation for the product which is unknown to the market designer, who aims to maximize the buyers' surplus by revealing information regarding the buyer's valuation to the seller. Our main result shows that the regret is bounded by $U^*(0)/e$, where $U^*(0)$ is the optimal buyer surplus in the case where the seller has zero valuation for the product. This bound is attained by randomly drawing a seller valuation and applying the segmentation of Bergemann et al. (2015) with respect to the drawn valuation. We show that the $U^*(0)/e$ bound is tight in the case of binary buyer valuation. 
Date:  2024–01 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2401.16942&r=mic 
By:  Ashwin Kambhampati 
Abstract:  A principal provides nondiscriminatory incentives for independent and identical agents. The principal cannot observe the agents' actions, nor does she know the entire set of actions available to them. It is shown, very generally, that any worstcase optimal contract is nonaffine in performances. In addition, each agent's pay must depend on the performance of another. In the case of two agents and binary output, existence of a worstcase optimal contract is established and it is proven that any such contract exhibits joint performance evaluation  each agent's pay is strictly increasing in the performance of the other. The analysis identifies a fundamentally new channel leading to the optimality of nonlinear teambased incentive pay. 
Date:  2024–01 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2401.16542&r=mic 
By:  Kirill S. Evdokimov 
Abstract:  An agendasetter repeatedly proposes a spatial policy to voters until some proposal is accepted. Voters have distinct but correlated preferences and receive private signals about the common state. I investigate whether the agendasetter retains the power to screen voters as players become perfectly patient and private signals become perfectly precise. I show that the extent of this power depends on the relative precision of private signals and the conflict of preferences among voters, confirming the crucial role of committee setting and singlepeaked preferences. When the private signals have equal precision, the agendasetter can achieve the fullinformation benchmark. When one voter receives an asymptotically more precise signal, the agendasetter's power to screen depends on preference diversity. These results imply that the lack of commitment to a single proposal can benefit the agendasetter. Surprisingly, an increase in the voting threshold can allow the agendasetter to extract more surplus. 
Date:  2024–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2402.06495&r=mic 
By:  Natalie Kessler; Iman van Lelyveld; Ellen van der Woerd 
Abstract:  We rationalize exclusive portfolio dealing in a novel threeperiod partial equilibrium framework populated by a representative, riskneutral seller and a small number of ex ante identical brokerdealers. Endowed with independent, uncertain demand for a representative asset, the brokerdealers may compete in prices for exclusivity. If no exclusivity is granted, due to either the lack or seller rejection of offers, the seller enters a secondprice auction with a zeroloss reserve price. While seller profits are constant under exclusivity (Bertrand Paradox), auction profits increase in the number of brokerdealers. Therefore, exclusivity arises in equilibrium only for a seller with at most two brokerdealers, reducing the trade frequency by onethird. The results are robust to endogenizing the number of brokerdealers and to allowing for the ex post asymmetry in asset demand. Exclusivity, however, does not arise when the auction features a selleroptimal reserve price. We motivate and conclude with an application to the security lending market. 
Keywords:  Exclusive Dealing; Intermediated Markets; Competition; Market Efficiency 
JEL:  G14 G24 D43 D86 
Date:  2024–02 
URL:  http://d.repec.org/n?u=RePEc:dnb:dnbwpp:802&r=mic 
By:  Benedikt V. Meylahn; Arnoud V. den Boer; Michel Mandjes 
Abstract:  We study the interpersonal trust of a population of agents, asking whether chance may decide if a population ends up in a high trust or low trust state. We model this by a discrete time, random matching stochastic coordination game. Agents are endowed with an exponential smoothing learning rule about the behaviour of their neighbours. We find that, with probability one in the long run the whole population either always cooperates or always defects. By simulation we study the impact of the distributions of the payoffs in the game and of the exponential smoothing learning (memory of the agents). We find, that as the agent memory increases or as the size of the population increases, the actual dynamics start to resemble the expectation of the process. We conclude that it is indeed possible that different populations may converge upon high or low trust between its citizens simply by chance, though the game parameters (context of the society) may be quite telling. 
Date:  2024–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2402.03894&r=mic 
By:  Di Corato, Luca; Moretto, Michele 
Abstract:  We consider a longterm contractual relationship in which a buyer procures a fixed quantity of a product from a supplier and then sells it on the market. The production cost is private information and evolves randomly over time. The solution to this dynamic principalagent problem involves a periodic twopart payment. The fixed part of the payment depends on the initial supplier’s cost type while the other is contingent on the current cost type. A notable feature is that, by using the information about the initial cost type, the buyer can reduce the burden of information rents paid for the revelation of the future cost type. We show that the distortion, resulting from information asymmetry, remains constant over time and decreases with the initial type. Lastly, we show that our analysis immediately applies also when input prices are private information and evolve randomly over time. 
Keywords:  Demand and Price Analysis, Industrial Organization, Productivity Analysis 
Date:  2024–02–23 
URL:  http://d.repec.org/n?u=RePEc:ags:feemwp:340040&r=mic 
By:  Anders Bredahl Kock; David Preinerstorfer 
Abstract:  A decision maker typically (i) incorporates training data to learn about the relative effectiveness of the treatments, and (ii) chooses an implementation mechanism that implies an "optimal" predicted outcome distribution according to some target functional. Nevertheless, a discriminationaware decision maker may not be satisfied achieving said optimality at the cost of heavily discriminating against subgroups of the population, in the sense that the outcome distribution in a subgroup deviates strongly from the overall optimal outcome distribution. We study a framework that allows the decision maker to penalize for such deviations, while allowing for a wide range of target functionals and discrimination measures to be employed. We establish regret and consistency guarantees for empirical success policies with datadriven tuning parameters, and provide numerical results. Furthermore, we briefly illustrate the methods in two empirical settings. 
Date:  2024–01 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2401.17909&r=mic 
By:  Marco Reuter 
Abstract:  I study an entrepreneur’s incentives to build a decentralized platform using a blockchain. The entrepreneur can either build the platform using a regular company and retain control of the platform, or build the platform using a blockchain and surrender control of the platform. In either case, the platform’s users experience a lockedin effect. I show that a decentralized implementation of the platform is both (i) more profitable for the entrepreneur and (ii) a Pareto improvement, if and only if the size of the lockedin effect exceeds some threshold. Further, progressive decentralization through airdrops can be optimal. 
Keywords:  blockchain; smart contracts; decentralization; cryptocurrency; commitment; platforms 
Date:  2024–02–09 
URL:  http://d.repec.org/n?u=RePEc:imf:imfwpa:2024/028&r=mic 
By:  Wisarut Suwanprasert 
Abstract:  I develop a theoretical framework to study gains from trade and optimal tariffs in the presence of behavioral biases. I introduce a sufficient statistic, called â€œbehavioral wedge, â€ that generalizes the model to capture various types of behavioral biases, including utility misperceptions and inattention. First, I explore how behavioral biases influence gains from trade, demonstrating potential welfare losses from trade for behavioral agents. Second, I characterize optimal tariffs and behavioral nudges in the presence of behavioral biases. I show that small open economies can leverage trade policy to mitigate the welfare losses from behavioral biases, whereas larger economies might use nudges to manipulate the worldâ€™s terms of trade. Finally, I discuss the role of behavioral biases in shaping public support for the 2018 Chinaâ€“United States trade war and Brexit. 
Keywords:  Trade theory; Behavioral economics; Gains from trade; Optimal tariffs; Nudges 
JEL:  D9 F1 H2 
Date:  2024–02 
URL:  http://d.repec.org/n?u=RePEc:pui:dpaper:216&r=mic 
By:  Isaac Lara (Centro de Estudios Econ\'omicos, El Colegio de M\'exico); Sergio Rajsbaum (Instituto de Matem\'aticas, Universidad Nacional Aut\'onoma de M\'exico); Armajac Ravent\'osPujol (Departamento de Econom\'ia, Universidad Carlos III de Madrid) 
Abstract:  We present a generalization of Arrow's impossibility theorem and prove it using a combinatorial topology framework. Instead of assuming the unrestricted domain, we introduce a domain restriction called the class of polarization and diversity over triples. The domains in this class are defined by requiring profiles in which society is strongly, but not completely, polarized over how to rank triples of alternatives, as well as some profiles that violate the valuerestriction condition. To prove this result, we use the combinatorial topology approach started by Rajsbaum and Ravent\'osPujol in the ACM Symposium on Principles of Distributed Computing (PODC) 2022, which in turn is based on the algebraic topology framework started by Baryshnikov in 1993. While Rajsbaum and Ravent\'osPujol employed this approach to study Arrow's impossibility theorem and domain restrictions for the case of two voters and three alternatives, we extend it for the general case of any finite number of alternatives and voters. Although allowing for arbitrary (finite) alternatives and voters results in simplicial complexes of high dimension, our findings demonstrate that these complexes can be effectively analyzed by examining their $2$$\unicode{x2013}$skeleton, even within the context of domain restrictions at the level of the $2$$\unicode{x2013}$skeleton. 
Date:  2024–02 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:2402.06024&r=mic 
By:  Shurojit Chatterji (Singapore Management University); Atsushi Kajii (Kwansei Gakuin University) 
Abstract:  We consider a multiperiod (Tperiod) model with no uncertainty where short term bonds coexist with a long term bond. Markets are complete with just the short term bonds so that under the usual hypothesis of perfect foresight, the long term bond is redundant by no arbitrage in that it has no allocational implications. We dispense with perfect foresight, derive appropriate no arbitrage conditions and show that the presence of the long term bond has significant allocational implications. Specifically, in the model with just the short term bond, we show that a T dimensional subset of efficient allocations can arise as Walrasian equilibria whereas the dimension of efficient allocations is one less than the number of households (assumed to be much larger than T). In the model with the both types of bonds essentially all efficient allocations can arise as Walrasian equilibria; minute errors in forecasting prices can generate all income transfers that are consistent with efficiency. We argue that the beneficiaries of such unanticipated income transfers are determined not by the superiority of forecasts but rather by accident. 
Keywords:  General equilibrium; E¢ cient temporary equilibrium; Endogenous price forecasts; Redundant Assets 
JEL:  D51 D53 D61 
Date:  2024–01 
URL:  http://d.repec.org/n?u=RePEc:upd:utmpwp:048&r=mic 
By:  Anton Kolotilin (School of Economics, UNSW); Alexander Wolitzky (Department of Economics, MIT) 
Abstract:  We offer a simple analysis of the problem of choosing a statistical exper iment to optimize the induced distribution of posterior medians, or more generally qquantiles for any q ∈ (0, 1). We show that all implementable distributions of the posterior qquantile are implemented by a single experiment, the qquantile matching experiment, which pools pairs of states across the qquantile of the prior in a positively assortative manner, with weight q on the lower state in each pair. A dense subset of implementable distributions of posterior qquantiles can be uniquely implemented by perturbing the qquantile matching experiment. A linear functional is optimized over distributions of posterior qquantiles by taking the optimal selection from each set of qquantiles induced by the qquantile matching experiment. The qquantile matching experiment is the only experiment that simultaneously implements all implementable distributions of the posterior qquantile. 
Keywords:  quantiles, statistical experiments, overconfidence, gerrymandering, persuasion 
JEL:  C61 D72 D82 
Date:  2024–02 
URL:  http://d.repec.org/n?u=RePEc:swe:wpaper:202401&r=mic 