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on Microeconomics |
| By: | Shunsuke Matsuno (Columbia Business School, Columbia University, U.S.A. and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN) |
| Abstract: | Some organizations are characterized by a conformity culture, where followers are expected to conform to the leadership's behavior. In contrast, other organizations exhibit an anticonformity culture. What drives the variation in conformity culture across organizations? This paper develops a model of leadership and (anti)conformity culture in organizations with dispersed information. The optimal culture trades off coordination gains against informational losses. I show that with strategic complementarity, conformity is optimal; whereas with strategic substitutability, anticonformity is optimal. By showing how culture coordinates agents in organizations with dispersed knowledge–much like the price system coordinates agents in decentralized markets (Hayek, 1945)–I contribute to the theory of organizations centered on corporate culture (Kreps, 1990). Comparative statics of optimal culture sheds light on the origins of cultural variation across organizations from an informational perspective. |
| Keywords: | Leadership; Corporate culture; Conformity; Coordination games |
| JEL: | D23 D82 M14 M21 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2025-15 |
| By: | Elena Panova (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Thibault Laurent (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This paper examines how the structure of communication networks influences learning and social welfare when participants have different prior opinions and face uncertainty about an external state. We analyze a game in which players form links to exchange opinions on the state and reduce their uncertainty. The players hold imperfectly correlated subjective priors on the state. Therefore, their opinions transmit their private signals with frictions, termed interpretation noise. Network clustering facilitates learning by eliminating this interpretation noise. Therefore, the egalitarian efficient network is: a complete component if the interpretation noise is sufficiently high, and a flower otherwise. This network constitutes a Nash equilibrium. These findings establish a link between a key feature of social networks (clustering) and the quality of learning through network communication, offering a potential explanation for the prevalence of clustering in real-world social networks. |
| Keywords: | Network formation, Clustering, Differentiated priors |
| Date: | 2025–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05096724 |
| By: | Hans Gersbach |
| Abstract: | This paper introduces a simple democratic procedure. In a first stage, all members of a polity decide whether to apply for proposal-making or later vote on proposals made in the second stage. This procedure is called Propose or Vote (PoV). With appropriate default points and majority voting over two randomly selected proposals, the PoV procedure can implement the Condorcet winner with only one round of voting if a Condorcet winner exists. We explore ways to establish uniqueness, alternative voting procedures over the selected alternatives, and the application to elections. In the latter case, agents can decide whether to stand for election to an office or to vote on the set of candidates. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.05998 |
| By: | Spyros Galanis |
| Abstract: | No trade theorems examine conditions under which agents cannot agree to disagree on the value of a security which pays according to some state of nature, thus preventing any mutual agreement to trade. A large literature has examined conditions which imply no trade, such as relaxing the common prior and common knowledge assumptions, as well as allowing for agents who are boundedly rational or ambiguity averse. We contribute to this literature by examining conditions on the private information of agents that reveals, or verifies, the true value of the security. We argue that these conditions can offer insights in three different settings: insider trading, the connection of low liquidity in markets with no trade, and trading using public blockchains and oracles. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.04944 |
| By: | Sara Biancini; David Ettinger |
| Abstract: | We consider a framework in which both a principal and an agent care about a social mission, such as addressing social or environmental concerns. The agent requires financing and must satisfy a budget constraint. Under incomplete information, in addition to the usual quantity distortions for inefficient agents, the principal also distorts the mission upward for efficient agents and downward for inefficient ones. In our context, the existence of hidden types may improve total welfare compared to complete information, as screening incentivizes the principal to propose a contract with a higher mission to reduce the rent of more efficient types. Our results apply to social enterprises and triple bottom line environments, contributing to the theoretical understanding of the impact of non-financial incentives on optimal contracting. |
| Keywords: | impact investment, mission motivation, incentives, social enterprises, corporate social responsibility |
| JEL: | D21 L21 L31 D82 M14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11923 |
| By: | Robert M. Hunt; Konstantinos Serfes; Yin Zhang |
| Abstract: | In a two-sided model of the payment card market, we introduce a specific form of elastic demand (constant elasticity), merchant market power, ad valorem fees, and cash as an alternative. We derive the “credit card tax, ” consisting of an endogenously determined interchange fee and any rewards paid. We characterize how this tax influences prices, profits, and welfare. We also examine how these relationships vary under different assumptions about the elasticity of demand, merchant market power, and differentiation between cash and credit. Under the assumptions of our model, by endogenizing the credit card tax, we show that capping interchange fees benefits all consumers by lowering these taxes, even if rewards decrease. |
| Keywords: | credit cards; two sided networks; merchant competition; interchange fees; regulation |
| JEL: | L13 L40 G28 E42 |
| Date: | 2025–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:100061 |
| By: | Halil I. Bayrak; Martin Bichler |
| Abstract: | Mechanism design with inspection has received increasing attention due to its applications in the field. For example, large warehouses have started to auction scarce capacity. This capacity shall be allocated in a way that maximizes the seller's revenue. In such mechanism design problems, the seller can inspect the true value of a buyer and his realized sales in the next period without cost. Prior work on mechanism design with deferred inspection is based on the assumption of a common prior distribution. We design a mechanism with a deferred inspection that is (distributionally) robustly optimal either when the ambiguity-averse mechanism designer wants to maximize her worst-case expected payoff or when she wants to minimize her worst-case expected regret. It is a relatively simple mechanism with a concave allocation and linear payment rules. We also propose another robustly optimal mechanism that has the same concave allocation function but extracts the maximal payment from all the types of the agent, which can have a strictly higher expected payoff under non-worst-case distributions compared to the robustly optimal mechanism with the linear payment rule. We show that multi-bidder monotonous mechanisms might not exist. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.04767 |
| By: | Xiaotie Deng; Ningyuan Li; Weian Li; Qi Qi |
| Abstract: | This paper investigates a two-stage game-theoretical model with multiple parallel rank-order contests. In this model, each contest designer sets up a contest and determines the prize structure within a fixed budget in the first stage. Contestants choose which contest to participate in and exert costly effort to compete against other participants in the second stage. First, we fully characterize the symmetric Bayesian Nash equilibrium in the subgame of contestants, accounting for both contest selection and effort exertion, under any given prize structures. Notably, we find that, regardless of whether contestants know the number of participants in their chosen contest, the equilibrium remains unchanged in expectation. Next, we analyze the designers' strategies under two types of objective functions based on effort and participation, respectively. For a broad range of effort-based objectives, we demonstrate that the winner-takes-all prize structure-optimal in the single-contest setting-remains a dominant strategy for all designers. For the participation objective, which maximizes the number of participants surpassing a skill threshold, we show that the optimal prize structure is always a simple contest. Furthermore, the equilibrium among designers is computationally tractable when they share a common threshold. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.08342 |
| By: | Soumen Banerjee; Yi-Chun Chen; Yifei Sun |
| Abstract: | Implementation theory has made significant advances in characterizing which social choice functions can be implemented in Nash equilibrium, but these results typically assume sophisticated strategic reasoning by agents. However, evidence exists to show that agents frequently cannot perform such reasoning. In this paper, we present a finite mechanism which fully implements Maskin-monotonic social choice functions as the outcome of the unique correlated equilibrium of the induced game. Due to the results in Hart and MasColell (2000), this yields that even when agents use a simple adaptive heuristic like regret minimization rather than computing equilibrium strategies, the designer can expect to implement the SCF correctly. We demonstrate the mechanism's effectiveness through simulations in a bilateral trade environment, where agents using regret matching converge to the desired outcomes despite having no knowledge of others' preferences or the equilibrium structure. The mechanism does not use integer games or modulo games. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.03528 |
| By: | Jurek Preker |
| Abstract: | We introduce a novel equilibrium concept that incorporates Knightian uncertainty into the cursed equilibrium (Eyster and Rabin, 2005). This concept is then applied to a two-player game in which agents can engage in trade or refuse to do so. While the Bayesian Nash equilibrium predicts that trade never happens, players do trade in a cursed equilibrium. The inclusion of uncertainty enhances this effect for cursed and uncertainty averse players. This contrasts general findings that uncertainty reduces trade but is consistent with behavior that has been observed in experiments. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.10663 |
| By: | Eric Gao |
| Abstract: | I study how a startup with uncertainty over product quality and no knowledge of the underlying diffusion network optimally chooses initial seeds. To ensure widespread adoption when the product is good while minimizing negative perceptions when it is bad, the optimal number of initial seeds should grow logarithmically with network size. When there are agents of different types that govern their connectivity, it is asymptotically optimal to seed agents of a single type: the type that minimizes the marginal cost per probability of making the product go viral. These results rationalize startup behavior in practice. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.10340 |
| By: | Paweł Doligalski; Piotr Dworczak; Mohammad Akbarpour; Scott Duke Kominers* |
| Abstract: | Policymakers often distort goods markets to effect redistribution—for example, via price controls, differential taxation, or in-kind transfers. We investigate the optimality of such policies alongside the (optimally-designed) income tax. In our framework, agents differ in both their ability to generate income and their consumption preferences, and a planner maximizes a social welfare function subject to incentive and resource constraints. We uncover a generalization of the Atkinson-Stiglitz theorem by showing that goods markets should be undistorted if the heterogeneous consumption tastes (i) do not affect the marginal utility of disposable income, (ii) do not enter into the social welfare weights and (iii) are statistically independent of ability. We also show, however, that market interventions play a role in the optimal resolution of the equity-efficiency trade-off if any of the three assumptions is relaxed. In a special case of our model with linear utilities, binary ability, and continuous willingness to pay for a single good, we characterize the globally optimal mechanism and show that it may feature meanstested consumption subsidies, in-kind transfers, and differential commodity taxation |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:25/787 |
| By: | Echenique, Federico; Núñez, Matías |
| Abstract: | We describe a sequential mechanism that fully implements the set of efficient outcomes in environments with quasi-linear utilities. The mechanism asks agents to take turns in defining prices for each outcome, with a final player choosing an outcome for all: Price and Choose. The choice triggers a sequence of payments from each agent to the preceding agent. We present several extensions. First, payoff inequalities may be reduced by endogenizing the order of play. Second, our results extend to a model without quasi-linear utility, to a setting with an outside option, robustness to max-min behavior, and caps on prices. (JEL C72, D11, D44, D71, D82) |
| Keywords: | Economics, Applied Economics, Economic Theory, Banking, finance and investment, Applied economics, Economic theory |
| Date: | 2025–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:econwp:qt5dw4g7k5 |
| By: | Lisa Heidelmeier; Marco Sahm |
| Abstract: | We investigate the impact of an environmental award in a Bertrand duopoly with green consumers considering a three-stage game. First, the regulator designs the environmental contest. Second, firms choose their green investments, and the winner of the contest is awarded. Third, firms compete in prices, and consumption takes place. We illustrate that the award not only incentivizes green investments and may thus reduce environmental externalities. As consumers perceive the product of the awarded firm to be of superior quality, it also gives rise to vertical product differentiation. This induces market power, and thus anti-competitive effects: Rents shift from consumers to producers, and consumer surplus may decrease, particularly if marginal investment costs in green technologies are high compared to the strength of environmental damage. |
| Keywords: | Bertrand competition, contests, environmental award, green consumer, product differentiation |
| JEL: | D43 H23 L13 L51 Q52 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11879 |
| By: | Tsuritani, Ryosuke |
| Abstract: | Since unlisted firms’ shares are not publicly traded, common ownership only affects listed firms and has no direct impact on unlisted ones. We investigate the welfare implications of this asymmetry between listed and unlisted upstream suppliers of perfectly complementary inputs. This study considers a vertically related market with S perfectly complementary inputs, in which L sole listed upstream suppliers and S-L sole unlisted upstream suppliers sell each input through linear wholesale prices to the two listed downstream manufacturers that compete à la Cournot. We find that the input price of each listed supplier is higher than that of each unlisted supplier only when the number of listed suppliers is small. The key factor contributing to this result is the price sensitivity of listed suppliers. We also find that an optimal rate of common ownership may exist for consumers and society, depending on the proportion of listed suppliers in the supply chain. |
| Keywords: | Common ownership; Vertical market; Perfectly complementary inputs; Listed suppliers; Unlisted suppliers |
| JEL: | L13 L21 L42 |
| Date: | 2025–06–13 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125003 |
| By: | Xu Wang; Samy Wu Fung; Levon Nurbekyan |
| Abstract: | We develop a simple yet efficient Lagrangian method for computing equilibrium prices in a mean-field game price-formation model. We prove that equilibrium prices are optimal in terms of a suitable criterion and derive a primal-dual gradient-based algorithm for computing them. One of the highlights of our computational framework is the efficient, simple, and flexible implementation of the algorithm using modern automatic differentiation techniques. Our implementation is modular and admits a seamless extension to high-dimensional settings with more complex dynamics, costs, and equilibrium conditions. Additionally, automatic differentiation enables a versatile algorithm that requires only coding the cost functions of agents. It automatically handles the gradients of the costs, thereby eliminating the need to manually form the adjoint equations. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.04169 |
| By: | Yuri Faenza; Aapeli Vuorinen |
| Abstract: | Many centralized mechanisms for two-sided matching markets that enjoy strong theoretical properties assume that the planner solicits full information on the preferences of each participating agent. In particular, they expect that participants compile and communicate their complete preference lists over agents from the other side of the market. However, real-world markets are often very large and agents cannot always be expected to even produce a ranking of all options on the other side. It is therefore important to understand the impact of incomplete or truncated lists on the quality of the resultant matching. In this paper, we focus on the Serial Dictatorship mechanism in a model where each agent of the proposing side (students) has a random preference list of length $d$, sampled independently and uniformly at random from $n$ schools, each of which has one seat. Our main result shows that if the students primarily care about being matched to any school of their list (as opposed to ending up unmatched), then all students in position $i\leq n$ will prefer markets with longer lists, when $n$ is large enough. Schools on the other hand will always prefer longer lists in our model. We moreover investigate the impact of $d$ on the rank of the school that a student gets matched to. Our main result suggests that markets that are well-approximated by our hypothesis and where the demand of schools does not exceed supply should be designed with preference lists as long as reasonable, since longer lists would favor all agents. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.06217 |