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on Microeconomics |
| By: | Corchón, Luis C.; Correa-Lopera, Guadalupe; Moreno, Bernardo |
| Abstract: | Traditional collusion models typically assume that players coordinatetheir actions actively during the competition process to influence the outcomes.In contrast, we consider a repeated interaction setting betweentwo players where collusion occurs through well-defined strategies: theplayers take turns, with one holding monopoly power while the other eitherrefrains from participating or behaves as if absent. We provide afull characterization of when taking turns constitutes a subgame perfectNash equilibrium in repeated games. By allowing players to discount timedifferently, we uncover a novel, non-monotonic condition on the discountfactor that sustains collusion. We apply our findings to three specificcontexts: contests, duopoly, and political competition. |
| Keywords: | Collusion; Political competition; Repeated games; Subgame perfect Nash equilibrium; Take-turns |
| JEL: | D43 C62 C73 D72 |
| Date: | 2025–03–25 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:46355 |
| By: | Satoru Fujishige; Zaifu Yang |
| Abstract: | We propose a novel strategy-proof dynamic auction for efficiently allocating heterogeneous indivisible commodities. The auction applies to all unimodular demand types of Baldwin and Klemperer’s necessary and sufficient condition for the existence of competitive equilibrium which accommodate a variety of complements, substitutes, gross substitutes and complements, and any other kinds. Although bidders are not assumed to be price-takers so they can act strategically, this auction induces bidders to bid truthfully, yielding efficient outcomes. Sincere bidding is shown to be an ex post perfect Nash equilibrium of the auction. The trading rules are simple, detail-free, privacy-preserving, error-tolerant, and independent of any probability distribution assumption. |
| Keywords: | Dynamic Auction Design, Equilibrium, Incentive Compatibility, Unimodular Demand Types, Indivisibility, Incomplete Information. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:yor:yorken:25/02 |
| By: | Davide Bosco; Mario Gilli; Andrea Sorrentino |
| Abstract: | In this paper we introduce incomplete information `a la global games into a deterministic two-group contest with the best-shot impact function and binary actions and we characterize the set of equilibria. Depending on whether the complete information assumption is relaxed on the value of the prize or on the cost of providing effort, we obtain different results in terms of equilibrium uniqueness: in the first case, there exist an equilibrium in (monotonic) switching strategies which could be not unique, whereas in the second one there exists a unique equilibrium in (monotonic) switching-strategies. Then, we discuss the presence of the group-size paradox for both classes of games.The results are thus extended to the case of M groups, and the properties of Bayes-Nash equilibria for these classes of games are investigated. Finally, we show a limit-uniqueness and a noise independent selection result. |
| Keywords: | Group contests, incomplete information, global games. |
| JEL: | D74 D71 C72 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:548 |
| By: | Burkhard C. Schipper; Tina Danting Zhang (Department of Economics, University of California Davis) |
| Abstract: | We study dynamic decentralized two-sided matching in which players may encounter unanticipated experiences. As they become aware of these experiences, they may change their preferences over players on the other side of the market. Consequently, they may get ``divorced'' and rematch again with other agents, which may lead to further unanticipated experiences etc. A matching is stable if there is absence of pairwise common belief in blocking. Stable matchings can be destabilized by unanticipated experiences. Yet, we show that there exist self-confirming outcomes that are stable and do not lead to further unanticipated experiences. We introduce a natural decentralized matching process that, at each period assigns probability 1 - epsilon to the satisfaction of a mutual optimal blocking pair (if it exists) and picks any optimal blocking pair otherwise. The parameter epsilon is interpreted as a friction of the matching market. We show that for any decentralized matching process, frictions are necessary for convergence to stability even without unawareness. Our process converges to self-confirming stable outcomes. Further, we allow for bilateral communication/flirting that changes the awareness and say that a matching is flirt-proof stable if there is absence of communication leading to pairwise common belief in blocking. We show that our natural decentralized matching process converges to flirt-proof self-confirming outcomes. |
| Keywords: | decentralized matching, unawareness, transformative experiences, endogenous preferences, disclosure |
| JEL: | D83 C70 |
| Date: | 2025–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:cda:wpaper:371 |
| By: | Thami, Prakriti (Department of Economics, Lund University) |
| Abstract: | This paper studies the impact of truth-telling preferences on aggregate consumer welfare within a priority pricing (PP) mechanism. Traditional models assume individuals always misrepresent private information to maximize payoffs, yet recent evidence suggests there may be an innate preference for truth-telling. By incorporating these preferences into a theoretical framework, I show that PP enhances welfare over uniform pricing only when the probability of non-truthful individuals surpasses a critical threshold, suggesting that PP may benefit populations with low truth-telling tendencies but reduce welfare when this tendency is high. To empirically test this, I conducted an online experiment, finding that while PP incentivized truth-telling, its impact did not vary significantly across groups with differing truth-telling tendencies. Instead, participants’ beliefs about others' truthfulness emerged as key in shaping behavior. These findings underscore that PP’s welfare-enhancing potential depends not only on incentives created by the pricing structure but also on the population's truth-telling tendencies and beliefs, offering valuable insight for designing effective pricing mechanisms. |
| Keywords: | priority pricing; consumer welfare; truth-telling behavior; incentive-compatible pricing |
| JEL: | D47 D61 D82 D90 |
| Date: | 2025–03–25 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lunewp:2025_003 |