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on Microeconomics |
| By: | Masanori Kobayashi |
| Abstract: | We study a multi-step persuasion problem involving a Bayesian sender and a non-Bayesian receiver. When the receiver deviates from Bayesian updating, the sender may benefit from -- or be harmed by -- gradually revealing information over time. We show that under divisible updating rules (Cripps, 2018), delaying information provision does not affect the sender's ex-ante value. Focusing on the $\alpha$--$\beta$ rule of Grether (1980), we derive the necessary and sufficient conditions under which the sender is strictly better or worse off under a two-step persuasion scheme. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.12328 |
| By: | Bouvard, Matthieu; Jullien, Bruno |
| Abstract: | We consider the price-cap regulation of a monopolistic network operator when the regulator has limited commitment. Operating the network requires xed investments and the regulator has the opportunity to unilaterally revise the price cap at random times. When the regulator maximizes consumer surplus, he has an incentive to lower the price cap once the operator's xed investments are sunk. This hold-up problem gives rise to two types of ineciencies. In one type of equilibrium, the operator breaks even but strategically under-invests to induce the regulator to maintain the price cap. In another type of equilibrium the operator makes strictly positive prots and periods of high investment and high prices are followed by periods of low prices and capacity decline. Overall, the model suggests that the regulator's lack of commitment limits the deployment of network infrastructures. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130871 |
| By: | Tuval Danenberg |
| Abstract: | We study belief polarization among Bayesian agents observing public information about a multidimensional state. Baliga et al. (2013) show that divergence in the sense of first-order stochastic dominance is impossible for one dimensional beliefs, but we find that in multidimensional settings it can occur for all marginal beliefs, even with infinitely many signals. At the same time, we extend their impossibility result: divergence in the sense of multidimensional stochastic dominance is impossible. For an intermediate stochastic order, polarization may arise only in the short-run. We provide necessary and sufficient conditions on signal structures for persistent polarization and discuss implications for polarization in actions. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.02513 |
| By: | Enache, Andreea; Rhodes, Andrew |
| Abstract: | Many platforms have used a Price Parity Clause (PPC) to prevent sellers charging lower prices on other sales channels. PPCs are often considered anti-competitive and have been banned in some jurisdictions. We provide a novel rationale—centered on how PPCs affect platforms’ data acquisition—for why a complete ban on PPCs may harm buyers and sellers. |
| Keywords: | Price Parity Clauses; Platforms; Data; Product Discovery |
| JEL: | D43 D83 L13 L42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130889 |
| By: | Nocke, Volker; Rhodes, Andrew |
| Abstract: | We develop a framework to study horizontal mergers when the parties can propose remedies to an antitrust authority. Remedies are modeled as asset divestitures, which make the firm receiving the assets more efficient at the expense of the merged firm. We consider both the case where the merger affects a single market and where it affects multiple markets. Solving for the merging firms’ optimal proposal, we investigate when it involves remedies—and if so, which assets should be divested, and to whom, and how this depends on market characteristics such as the level of competitiveness. |
| Keywords: | Antitrust; horizontal mergers; structural remedies; divestitures; data |
| JEL: | L13 L40 D43 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130888 |
| By: | Sumit Goel; Jeffrey Zeidel |
| Abstract: | We study $k$-price auctions in a complete information environment and characterize all pure-strategy Nash equilibrium outcomes. In a setting with $n$ agents having ordered valuations, we show that any agent, except those with the lowest $k-2$ valuations, can win in equilibrium. As a consequence, worst-case welfare increases monotonically as we go from $k=2$ (second-price auction) to $k=n$ (lowest-price auction), with the first-price auction achieving the highest worst-case welfare. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.05738 |
| By: | Georgy Lukyanov; Mark Izgarshev |
| Abstract: | A benevolent advisor observes a project's complexity and posts a pass - fail threshold before the agent chooses effort. The project succeeds only if ability and effort together clear complexity. We compare two informational regimes. In the naive regime, the threshold is treated as non-informative; in the sophisticated regime, the threshold is a signal and the agent updates beliefs. We characterize equilibrium threshold policies and show that the optimal threshold rises with complexity under mild regularity. We then give primitives-based sufficient conditions that guarantee separating, pooling, or semi-separating outcomes. In a benchmark with uniform ability, exponential complexity, and power costs, we provide explicit parameter regions that partition the space by equilibrium type; a standard refinement eliminates most pooling. The results yield transparent comparative statics and welfare comparisons across regimes. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20540 |
| By: | Xiaoyu Cheng |
| Abstract: | Cheng (2025) establishes that in a persuasion game where both the sender and the receiver have Maxmin Expected Utility (MEU) preferences, the sender never strictly benefits from using ambiguous communication strategies over standard (non-ambiguous) ones. This note extends the analysis to environments with prior ambiguity, i.e., pre-existing ambiguity about the payoff-relevant state, and shows that, in the binary state and binary action case, the same no-gain result continues to hold. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.18603 |
| By: | Georgy Lukyanov; Darina Cheredina |
| Abstract: | We study sequential social learning when agents can sometimes pay to verify a claim and obtain hard, publicly checkable evidence. Each agent observes the public history, receives a private signal, may investigate at a cost (succeeding only when the claim is true), and can disclose or conceal any proof. Actions are binary or continuous, with a conformity pull toward the prevailing consensus. We characterize when false cascades persist and when societies self-correct. In the binary benchmark, we derive an investigation cutoff and show how its location relative to classic cascade bands governs breakability; a simple knife-edge condition guarantees that any wrong cascade at the boundary is overturned with positive probability. With continuous actions, coarse observation and conformity can recreate cascades, yet occasional disclosures collapse them. These forces yield a tractable "resilience frontier" with transparent comparative statics and policy levers. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20538 |
| By: | Georgy Lukyanov |
| Abstract: | We study social learning from multiple experts whose precision is unknown and who care about reputation. The observer both learns a persistent state and ranks experts. In a binary baseline we characterize per-period equilibria: high types are truthful; low types distort one-sidedly with closed-form mixing around the prior. Aggregation is additive in log-likelihood ratios. Light-touch design -- evaluation windows scored by strictly proper rules or small convex deviation costs -- restores strict informativeness and delivers asymptotic efficiency under design (consistent state learning and reputation identification). A Gaussian extension yields a mimicry coefficient and linear filtering. With common shocks, GLS weights are optimal and correlation slows learning. The framework fits advisory panels, policy committees, and forecasting platforms, and yields transparent comparative statics and testable implications. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.01264 |
| By: | Georgy Lukyanov; Konstantin Shamruk; Ekaterina Logina |
| Abstract: | We study a dynamic reputation model with a fixed posted price where only purchases are public. A long-lived seller chooses costly quality; each buyer observes the purchase history and a private signal. Under a Markov selection, beliefs split into two cascades - where actions are unresponsive and investment is zero - and an interior region where the seller invests. The policy is inverse-U in reputation and produces two patterns: Early Resolution (rapid absorption at the optimistic cascade) and Double Hump (two investment episodes). Higher signal precision at fixed prices enlarges cascades and can reduce investment. We compare welfare and analyze two design levers: flexible pricing, which can keep actions informative and remove cascades for patient sellers, and public outcome disclosure, which makes purchases more informative and expands investment. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20539 |
| By: | Georgy Lukyanov; Ariza Azova |
| Abstract: | We embed observational learning (BHW) in a symmetric duopoly with random arrivals and search frictions. With fixed posted prices, a mixed-strategy pricing equilibrium exists and yields price dispersion even with ex-ante identical firms. We provide closed-form cascade bands and show wrong cascades occur with positive probability for interior parameters, vanishing as signals become precise or search costs fall; absorption probabilities are invariant to the arrival rate. In equilibrium, the support of mixed prices is connected and overlapping; its width shrinks with signal precision and expands with search costs, and mean prices comove accordingly. Under Calvo price resets (Poisson opportunities), stationary dispersion and mean prices fall; when signals are sufficiently informative, wrong-cascade risk also declines. On welfare, a state-contingent Pigouvian search subsidy implements the planner's cutoff. Prominence (biased first visits) softens competition and depresses welfare; neutral prominence is ex-ante optimal. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.01263 |
| By: | Jehiel, Philippe (Paris School of Economics and University College London); Mohlin, Erik (Department of Economics, Lund University) |
| Abstract: | We develop a framework for categorization in games, applicable both to multi-stage games of complete information and static games of incomplete information. Players use categories to form coarse beliefs about their opponents' behavior. Players best-respond given these beliefs, as in analogy-based expectations equilibria. Categories are related to strategies via the requirements that categories contain a sufficient amount of observations and exhibit sufficient within-category similarity, in line with the bias-variance trade-off. We apply our framework to classic games including the chainstore game and adverse selection games, thereby suggesting novel predictions for these applications. |
| Keywords: | Bounded rationality; Categorization; Bias-variance trade-off; Adverse selection; Chainstore parado |
| JEL: | C70 C73 D82 D83 D91 |
| Date: | 2025–09–09 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lunewp:2025_007 |
| By: | Georgy Lukyanov; Anna Vlasova |
| Abstract: | We study expert recommendations under career concerns in a continuous signal environment. An expert observes a private signal about a binary payoff and recommends risky or safe; recommendations and outcomes are public and affect reputation and implementation. Equilibrium advice follows a cutoff rule. Under a mild relative-diagnosticity condition, the cutoff increases with reputation (reputational conservatism); informativeness and priors lower the cutoff while stronger career concerns raise it. A success-contingent bonus provides a one-to-one mapping to experimentation. The theory predicts fewer risky recommendations but higher conditional hit rates for high-reputation experts and yields implementable levers for committees and monitoring. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.04036 |
| By: | Kensei Nakamura |
| Abstract: | When aggregating Subjective Expected Utility preferences, the Pareto principle leads to an impossibility result unless the individuals have a common belief. This paper examines the source of this impossibility in more detail by considering the aggregation of a general class of incomplete preferences that can represent gradual ambiguity perceptions. Our result shows that the planner cannot avoid ignoring some individuals unless there is a probability distribution that all individuals agree is most plausible. This means that even if individuals have similar ambiguity perceptions, the impossibility persists as long as some individual's most plausible belief differs even slightly from those of others. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.12542 |
| By: | Georgy Lukyanov |
| Abstract: | We study a repeated sender-receiver game where inspections are public but the sender's action is hidden unless inspected. A detected deception ends the relationship or triggers a finite punishment. We show the public state is one dimensional and prove existence of a stationary equilibrium with cutoff inspection and monotone deception. The sender's mixing pins down a closed-form total inspection probability at the cutoff, and a finite punishment phase implements the same cutoffs as termination. We extend to noisy checks, silent audits, and rare public alarms, preserving the Markov structure and continuity as transparency vanishes or becomes full. The model yields testable implications for auditing, certification, and platform governance: tapering inspections with reputation, bunching of terminations after inspection spurts, and sharper cutoffs as temptation rises relative to costs. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.04035 |
| By: | Rabah Amir; Igor V. Evstigneev; Mikhail V. Zhitlukhin |
| Abstract: | The paper compares two types of industrial organization in the Cournot duopoly: (a) the classical one, where the market players maximize profits and the outcome of the game is a Cournot-Nash equilibrium; (b) a contest in which players strive to win a fixed prize/bonus employing unbeatable strategies. Passing from (a) to (b) leads to a perfect competition with zero profits of the players (Schaffer's paradox). Transition from (b) to (a) results in a substantial decline in the production output, which also seems paradoxical, as it is commonly accepted that competition increases efficiency. We examine these phenomena in two versions of the Cournot model: with a homogeneous good and with differentiated goods. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.00960 |
| By: | Dmitry Shapiro; Tri Phu Vu |
| Abstract: | This paper studies how noise in certification technology affects seller profits in a duopoly with unobservable product quality. We identify two opposing effects of noisy certification. First, it reduces the informativeness of certification outcomes, homogenizing buyers' beliefs and limiting the scope for vertical differentiation. Second, it introduces randomness into buyer perceptions, endogenously generating differentiation between otherwise similar products. When buyers are risk-neutral, the first effect dominates, reducing seller profits. However, when buyers are loss averse, the negative impact of reduced informativeness is mitigated, and noisy certification can increase profits relative to accurate certification. Experimentally, treatments with inaccurate certification are more profitable than those with accurate certification, particularly in settings with intense competition. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.04146 |
| By: | Simon Finster (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Paul W Goldberg (Departement of Computer of Science University of Oxford - University of Oxford); Edwin Lock (Departement of Computer of Science University of Oxford - University of Oxford, Department of Economics - University of Oxford - University of Oxford) |
| Abstract: | In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and only those, are constrained utilitarian efficient, a notion of utilitarian efficiency that respects buyers' demands and budgets. Our main contribution establishes that, when buyers have linear valuations, competitive equilibrium prices are unique and revenue-optimal for a zero-cost seller. |
| Keywords: | budget constraints, Fisher markets, product-mix auctions, arctic auction, market design, efficiency, revenue maximisation, competitive equilibrium |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05234001 |
| By: | Shiladitya Kumar |
| Abstract: | How can voters induce politicians to put forth more proximate (in terms of preference) as well as credible platforms (in terms of promise fulfillment) under repeated elections? Building on the work of Aragones et al. (2007), I study how reputation and re-election concerns affect candidate behavior and its resultant effect on voters' beliefs and their consequent electoral decisions. I present a formal model where, instead of assuming voters to be naive, I tackle the question by completely characterizing a set of subgame-perfect equilibria by introducing non-naive (or strategic) voting behavior into the mix. I find that non-naive voting behavior, by using the candidate's reputation as an instrument of policy discipline after the election, aids in successfully inducing candidates to put forth their maximal incentive-compatible promise (among a range of such credible promises) in equilibrium. Through the credible threat of punishment in the form of loss of reputation for all future elections, non-naive voters gain a unanimous increase in expected utility relative to when they behave naively. In fact, comparative statics show that candidates who are more likely to win are more likely to keep their promises. In this framework, voters are not only able to bargain for more credible promises but also end up raising their expected future payoffs in equilibrium. Including such forms of strategic behavior thus reduces cheap talk by creating a credible electoral system where candidates do as they say once elected. Later, I present an analysis that includes limited punishment as a political accountability mechanism. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.08249 |
| By: | Wei He; Yeneng Sun; Hanping Xu |
| Abstract: | This paper introduces the concept of perfect monotone equilibrium in Bayesian games, which refines the standard monotone equilibrium by accounting for the possibility of unintended moves (trembling hand) and thereby enhancing robustness to small mistakes. We construct two counterexamples to demonstrate that the commonly used conditions in Athey (2001), McAdams (2003) and Reny (2011) - specifically, the single crossing condition and quasi-supermodularity - are insufficient to guarantee the existence of a perfect monotone equilibrium. Instead, we establish that the stronger conditions of increasing differences and supermodularity are required to ensure equilibrium existence. To illustrate the practical relevance of our findings, we apply our main results to multiunit auctions and further extend the analysis to first-price auctions, all-pay auctions, and Bertrand competitions. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.01358 |
| By: | Taubman, Dmitriy |
| Abstract: | We introduce a new collection auction mechanism for selling multiple identical items to a single winner—the Prefix-Based Collection Auction. The auction restricts the winner to a prefix of their bids and imposes a payment rule based on both an internal prefix sum and an external second price. This dual structure offers strong protection against both market power and bidder collusion, while maintaining intuitive and truthful bidding behavior. The mechanism is robust, simple to implement, and has potential applications in art-collection markets, online advertising, and other environments where bundle demand is critical. |
| Keywords: | auctions; mechanism design; game theory; collusion resistance; market power; prefix structure |
| JEL: | A10 A11 |
| Date: | 2025–08–21 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125907 |
| By: | Wei Ma |
| Abstract: | This paper assumes each individual in society has a random discount factor and assesses an intertemporal project using rank-dependent expected utility theory. We consider both the ex ante and the ex post approaches. For the former, we show the social planner's discount factor is a convex combination of those of the individuals under the standard Pareto condition. For the latter, we propose a method for determining the social planner's discount factor distribution from the individuals' distributions, which are possibly heterogenous. We demonstrate that relative to expected utility, overweighing of small probabilities can substantially accelerate the decline of the social discount rate. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.17978 |
| By: | Simon Finster (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We consider a package assignment problem with multiple units of indivisible items. The seller can specify preferences over partitions of their supply between buyers as packaging costs. We propose incremental costs together with a graph that defines cost interdependence to express these preferences. This facilitates the use of linear programming to characterize Walrasian equilibrium prices. Firstly, we show that equilibrium prices are uniform, anonymous, and linear in packages. Prices and marginal gains exhibit a nested structure, which we characterize in closed form for complete graphs. Secondly, we provide sufficient conditions for the existence of package-linear competitive prices using an ascending auction implementation. Our framework of partition preferences ensures fair and transparent dual pricing and admits preferences over the concentration of allocated bundles in the market. |
| Keywords: | linear programming, value graph, partition preferences, Walrasian equilibrium, non-linear pricing, package assignment |
| Date: | 2025–07–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05233957 |
| By: | Ponthiere, Gregory |
| Abstract: | This paper analyzes the mechanisms by which Stoic ethics can produce coordination. We study how agents satisfying the Stoic discipline of desires (that is, one should wish for nothing that is out of control, including other players'acts) behave in 2-player simultaneous symmetric coordination games. It is shown that the extent to which the Stoic discipline of desires produces coordination depends on the particular way in which this is translated into the language of microeconomics. Under the I1 account of the Stoic discipline of desires (requiring indifference between outcomes that differ only on other players'acts), it is the case either that coordination is achieved or that coordination is valueless. Hence adopting the I1 account suffices to coordinate agents, without any need for a shared idea of the 'Common Good'. On the contrary, the I2 account of the Stoic discipline of desires (requiring indifference between outcomes that are the best given other players'acts) does not always suffice to coordinate agents. |
| Keywords: | Stoicism, games, coordination, rationality, discipline of desires |
| JEL: | C70 D01 D60 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1661 |
| By: | Georgy Lukyanov |
| Abstract: | When does reputation make experts play it safe, and what policy reverses that? I isolate a single lever - visibility of outcomes. In a two-page model with binary signals and outcomes, I show: (i) with an uninformative safe option and symmetric visibility, career concerns alone do not generate conservatism; (ii) increasing failure visibility (as in Registered Reports) weakens high-reputation caution and relaxes selection. I provide a necessary-and-sufficient local sign test, agnostic about utility curvature and allowing informative safe actions, and an identification map suitable for staggered RR adoption. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.04037 |
| By: | Patrick Arnold, Marc Möller, Catherine Roux |
| Abstract: | Uncertainty about the value of a contested innovation induces leaders and laggards to update their expectations in opposite directions. We characterize situations in which firms that have obtained an initial advantage are not the most likely to achieve final success. In spite of amplifying a leader’s advantage, greater contest intensity facilitates this effect, challenging the view that laggards require support to remain competitive. |
| Keywords: | innovation contests, learning, competitive balance, leapfrogging |
| JEL: | C72 D82 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2025 |
| By: | Chaigneau, Pierre; Edmans, Alex; Gottlieb, Daniel |
| Abstract: | This paper studies executive pay with fairness concerns: if the CEO's wage falls below a perceived fair share of output, he suffers disutility that is increasing in the discrepancy. Fairness concerns do not always lead to fair wages; instead, the firm threatens the CEO with unfair wages for low output to induce effort. The contract sometimes involves performance-vesting equity: the CEO is paid a constant share of output if it is sufficiently high, and zero otherwise. Even without moral hazard, the contract features pay-for-performance, to address fairness concerns and ensure participation. This rationalizes pay-for-performance even if effort incentives are unnecessary. |
| Keywords: | moral hazard; executive compensation; fairness |
| JEL: | D86 G32 J33 G34 |
| Date: | 2025–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125993 |
| By: | Chengqing Li; Junjie Zhou |
| Abstract: | We examine price regulation for monopolists in networks with demand spillovers. The Pareto frontier of the profit-surplus set is characterized using a centrality-based price family. Under typical price regulation policies, regulated outcomes are generically Pareto inefficient at fixed spillover levels but become neutral as spillovers grow, with relative profit loss and surplus changes vanishing. Welfare impacts of banning price discrimination under strong spillovers depend solely on the correlation between intrinsic values and network summary statistics. In networks with two node types (e.g., coreperiphery or complete bipartite), intrinsic value averages across node types suffice for welfare comparisons. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.17301 |