|
on Microeconomics |
| By: | Martin Peitz; Susumu Sato |
| Abstract: | We propose a tractable model of asymmetric platform oligopoly with logit demand in which users from two distinct groups are subject to within-group and cross-group network effects and decide which platform to join. We characterize the equilibrium when platforms manage user access by setting participation fees for each user group. We explore the effects of platform entry, a change of incumbent platforms’ quality under free entry, and the degree of compatibility. We show how the analysis can be extended to partial user participation. |
| Keywords: | oligopoly theory, aggregative games, network effects, two-sided markets, two-sided single-homing, entry |
| JEL: | L13 L41 D43 |
| Date: | 2023–05 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_428v3 |
| By: | Carmelo Rodríguez-Ã lvarez (Instituto Complutense de Análisis Económico (ICAE), Universidad Complutense de Madrid (Spain).) |
| Abstract: | We examine social choice correspondences (SCCs) -mappings from preference profiles to sets of alternatives- that satisfy strategy-proofness and unanimity when individuals are endowed with single-peaked preferences over alternatives, preferences over sets are consistent with Expected Utility Theory, uniform prior probabilities, and Bayesian Updating. Leveraging the relation between SCCs and probabilistic decision schemes -mappings from preference profiles to lotteries over alternatives- we extend the results by Ingalagavi and Sadhukhan (2023, Journal of Mathematical Economics 109, 102912). In one-dimensional spaces of alternatives, only the union of two single-valued strategy-proof SCCs satisfy strategy-proofness and unanimity. In multi-dimensional convex spaces of alternatives, only unions of up to two dictatorships satisfy both properties. |
| Keywords: | Strategy-Proofness; Single-Peaked Preferences; Social Choice Correspondences. |
| JEL: | C71 C78 D71 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ucm:doicae:2402 |
| By: | Jan Knoepfle |
| Abstract: | This paper studies information transmission from multiple senders who compete for the attention of a decision maker. Each sender is partially informed about the state of the world and decides how to reveal her information over time to maximise attention. A decision maker wants to learn about the state but faces an attention cost. We derive a condition on the informational environment and the decision problem that guarantees that all information from the senders can be transmitted to the decision maker in equilibrium. A simple class of information processes implements full transmission across general environments. The attention each sender receives is proportional to the residual value of her information. In the case of conditionally iid-informed senders, in the limit as the number of senders grows large, the receiver learns the state exactly and immediately (at no attention cost). |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.18595 |
| By: | Daron Acemoglu; Daniel Huttenlocher; Asuman Ozdaglar; James Siderius |
| Abstract: | We present a model where social media platforms offer plans that intermix entertaining content with digital advertising (“ads”). Users derive utility from entertainment and learn about their valuation for a product from ads. While some users are fully rational, others naïvely perceive digital ads as more informative than they actually are. We characterize the profit-maximizing business model of the platform and show that welfare is lower when the platform monetizes through advertising instead of subscription both for naïfs (because they are targeted by intense digital advertising, which makes them over-optimistic about product quality and over-purchase the product) and for sophisticates (because the inflated demand from naïfs increases the firm’s price). This negative welfare effect is intensified when the platform can offer mixed business models that separate the naïve and sophisticated users into different plans. Our results are robust to firm-level and platform-level competition, because digital ads soften competition between both firms and platforms. We also show how digital ad taxes can improve welfare. |
| JEL: | D43 D83 L13 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33017 |
| By: | Ritesh Jain; Michele Lombardi; Antonio Penta |
| Abstract: | We put forward a notion of implementation for Social Choice Functions (SCF) that is robust with respect to the solution concept used to model agents’ strategic interaction. Formally, we define implementation in Interim Correlated Rationalizability and its Refinements (ICRR implementation) as implementation in Interim Correlated Rationalizability (ICR), with the extra requirement that it be achieved by a mechanism in which all selections from ICR have the best-reply property. We provide a tight characterization in terms of a novel notion of monotonicity, Iterative Interim Monotonicity (IIM). Our condition relates the possibility of ICRR-implementation with a specific way in which the SCF is constrained by agents’ preference reversals. We provide several alternative formulations of IIM, that clarify both its connection with various parts of the literature (such as Oury and Tercieux (2012)’s Interim Rationalizable Monotonicity, and others), and the source of IIM’s ability to overcome several limitations of the previous conditions in the literature. |
| JEL: | C79 D82 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1461 |
| By: | Alex A. T. Rathke |
| Abstract: | We propose a knowledge operator based on the agent's possibility correspondence which preserves her non-trivial unawareness within the standard state-space model. Our approach may provide a solution to the classical impossibility result that 'an unaware agent must be aware of everything'. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.09818 |
| By: | José Ignacio Heresi (Facultad de Economía y Negocios, Universidad Alberto Hurtado, Santiago Chile.); Yassine Lefouili (Toulouse School of Economics, University of Toulouse Capitole, 1, Esplanade de l'Université, 31080 Toulouse, Cedex 06, France.) |
| Abstract: | We study how an app store's decision about its ad-valorem fee affects the business models chosen by app developers. We derive optimal choices for the app store and their effects on industry profits, consumers, and total welfare. Surprisingly, the platform's optimal ad-valorem fee may be lower than the socially optimal one. Our findings provide insights into recent antitrust disputes and regulatory debates. |
| Keywords: | business model, ad-valorem fee, platform, app store. |
| JEL: | D21 L21 L40 L50 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2404 |
| By: | Dae-Hyun Yoo; Caterina Giannetti |
| Abstract: | This paper presents a principal-agent model for aligning artificial intelligence (AI) behaviors with human ethical objectives. In this framework, the end-user acts as the principal, offering a contract to the system developer (the agent) that specifies desired ethical alignment levels for the AI system. This incentivizes the developer to align the AI’s objectives with ethical considerations, fostering trust and collaboration. When ethical alignment is unobservable and the developer is risk-neutral, the optimal contract achieves the same alignment and expected utilities as when it is observable. For observable alignment levels, a fixed reward is uniquely optimal for strictly risk-averse developers, while for risk-neutral developers, a fixed reward is one of several optimal options. Our findings demonstrate that even a basic principal-agent model can enhance the understanding of how to balance responsibility between users and developers in the pursuit of ethical AI. Users seeking higher ethical alignment must compensate developers appropriately, and they also share responsibility for ethical AI by adhering to design specifications and regulations. |
| Keywords: | AI Ethics, Ethical Alignment, Principal-Agent Model, Contract Theory, Responsibility Allocation, Economic Incentives |
| JEL: | D82 D86 O33 |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:pie:dsedps:2024/313 |
| By: | Squintani, Francesco (University of Warwick) |
| Abstract: | This paper brings together two major research streams in economic theory : information transmission in networks and strategic communication. The model embeds persuasion games of strategic disclosure by Milgrom (1981) into the communication network framework by Jackson and Wolinsky (1996). I find that the unique optimal network is a line in which players are ordered according to their bliss points. This ordered line is also pairwise-stable. This …nding stands in sharp contrast to previous results in network studies, that identify stars as the optimal and pairwise-stable networks when communication is non-strategic and subject to technological constraints. While stars are the most centralized minimally-connected networks, the line is the most decentralized one. These results may be especially relevant to political economy applications, such as networks of policymakers, interest groups, or judges |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1520 |
| By: | Salonia, Enrico Mattia |
| Abstract: | Revealed preference theory equates choices with preferences over the consequences these choices induce. Nevertheless, if a decision criterion prescribes an act for reasons unrelated to its consequences, the inference drawn regarding preferences can be misleading. I study the behaviour of non-consequentialist individuals who have preferences for universalisation. They choose the action that, in a counterfactual scenario where it is also chosen by everyone else, leads to their preferred consequences. I develop a model for individuals who value their choices in light of the counterfactual consequences they induce. Choices are interpreted as revealing a preference for counterfactual consequences. I impose axioms to single out the most prominent models of universalisation, compare them, highlight and arguably overcome their limitations. I propose a unifying model of universalisation inspired by the equal sacrifice principle. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129835 |
| By: | Dylan Laplace Mermoud |
| Abstract: | This paper studies the formation of the grand coalition of a cooperative game by investigating its possible internal dynamics. Each coalition is capable of forcing all players to reconsider the current state of the game when it does not provide sufficient payoff. Different coalitions may ask for contradictory evolutions, leading to the impossibility of the grand coalition forming. In this paper, we give a characterization of the impossibility, for a given state, of finding a new state dominating the previous one such that each aggrieved coalition has a satisfactory payoff. To do so, we develop new polyhedral tools related to a new family of polyhedra, appearing in numerous situations in cooperative game theory. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.05087 |
| By: | Alessandro Dovis; Rishabh Kirpalani; Guillaume M. Sublet |
| Abstract: | How should society allocate policy-making between the legislative and the executive branches of government? We analyze a model in which biased and polarized policymakers set policy in response to shocks. We show that policy issues for which the policy-maker bias is small relative to the degree of polarization should be delegated to the legislature, while policy issues where the bias is large should be delegated to the executive. Moreover, when executive delegation is preferred, it is optimal to leave little discretion and impose a narrow mandate. This finding contrasts with conventional wisdom that executive delegation allows for greater flexibility. The main difference between the two institutional settings is the ability to restrict ex post bargaining under executive delegation. Thus, when the bias is large, executive delegation is preferred because it can effectively constrain policymakers' choices. In contrast, when the bias is small, the ability to bargain ex post allows for flexible responses to severe shocks while limiting political risk. We also study the credibility of these institutions and show that while delegating to the legislature is typically credible, executive delegation is typically not when the bias is exogenous but can be when the bias arises from time inconsistency problems. |
| JEL: | E0 E60 P0 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33034 |
| By: | Stephen F. Hamilton (Department of Economics, California Polytechnic State University); Benjamin Ouvrard (Grenoble Applied Economics Laboratory) |
| Abstract: | Fair pricing standards are used in various industries, encompassing fair trade, labor practices, and state-regulated pricing. We demonstrate that fair pricing can serve as a vertical restraint by a dominant manufacturer on its retailers to fully coordinating prices in a multi-product distribution channel with fair priced and conventional goods. We identify buyer market power by the manufacturer in the upstream market as a novel role for a manufacturer to impose a vertical restraint on retailers in the downstream market, and characterize the vertical restraint that maximizes collective rents in terms of demand-side and supply-side diversion ratios. |
| Keywords: | Fair pricing; vertical restraint; buyer market power |
| JEL: | L13 L14 L42 D43 |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:cpl:wpaper:2402 |
| By: | Ntounias, Theodoros; Schneider, Christina J; Thomson, Robert |
| Abstract: | Promissory representation is the idea that a significant part of representation consists of parties making promises to voters during election campaigns and keeping those promises if they hold enough power to do so after elections. In countries that are highly exposed to globalization, governing parties face significant challenges to fulfilling the promises they made to voters. At the same time, voters punish governing parties that fail to keep their campaign promises. This presents parties with the dilemma that while voters expect them to make ambitious promises during election campaigns, their capacity to deliver on those promises is undermined by the constraints of globalization. In response to this dilemma, parties rely on strategic ambiguity to avoid retrospective sanctioning by voters in future elections. Ambiguous campaign statements are reconcilable with a broad range of subsequent government policies and are therefore unlikely to be perceived as broken promises by voters. We analyze the use and effects of strategic ambiguity in a mixed-methods design consisting of a survey experiment and an observational study of 293 election platforms by 44 parties in six countries between 1970-2019. The findings shed new light on the widespread use of ambiguity in contemporary politics with important implications for democratic representation in a globalized world. |
| Keywords: | Social and Behavioral Sciences, elections, political campaigns, democracy, language, globalization |
| Date: | 2024–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:globco:qt0050h951 |