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on Microeconomics |
| By: | Steg, Jan-Henrik (Center for Mathematical Economics, Bielefeld University); Garashli, Elshan (Center for Mathematical Economics, Bielefeld University); Greinecker, Michael (Center for Mathematical Economics, Bielefeld University); Kuzmics, Christoph (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | For cheap-talk games with a binary state space in which the sender has state-independent preferences, we characterize equilibria that are robust to introducing slight state-dependence on the side of the sender. Not all equilibria are robust, but the sender-optimum is always achieved at some robust equilibrium. |
| Keywords: | Cheap talk, Communication, Information transmission, Robustness |
| Date: | 2025–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:727 |
| By: | Robin Ng; Greg Taylor |
| Abstract: | We study how content moderation facilitates communication on online platforms. A sender transmits information to a receiver, exerting effort to signal their truthfulness. Communication fails without moderation because the effort required is prohibitive. Moderation resolves this problem by making effort a more powerful signal of veracity. However, moderation crowds-out sender effort, decreasing content quality on the platform. A socially optimal or profit-maximizing policy may therefore involve limited moderation. We study the choice between being a platform or broadcaster, how moderation influences competition for attention, and the effects of misinformation actors, AI-generated content, and moderator errors on the sustainability of communication. |
| Keywords: | user-generated content, content moderation, creator economy, media platforms, misinformation |
| JEL: | D83 L82 L86 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_698v2 |
| By: | Maria Titova |
| Abstract: | How does targeted advertising influence electoral outcomes? This paper presents a one-dimensional spatial model of voting in which a privately informed challenger persuades voters to support him over the status quo. I show that targeted advertising enables the challenger to persuade voters with opposing preferences and swing elections decided by such voters; under simple majority, the challenger can defeat the status quo even when it is located at the median voter's bliss point. Ex-ante commitment power is unnecessary -- the challenger succeeds by strategically revealing different pieces of verifiable information to different voters. Publicizing all political ads would mitigate the negative effects of targeted advertising and help voters collectively make the right choice. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.10422 |
| By: | Frank Yang (Harvard University); Kai Hao Yang (Yale University) |
| Abstract: | We characterize the extreme points of multidimensional monotone functions from $[0, 1]^n$ to $[0, 1]$, as well as the extreme points of the set of one-dimensional marginals of these functions. These characterizations lead to new results for various mechanism design and information design problems, including public good provision with interdependent values; interim efficient bilateral trade mechanisms; mechanism (anti) equivalence; asymmetric reduced form auctions; and optimal private private information structure. |
| Date: | 2025–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2428r1 |
| By: | Pablo Arribillaga (UNSL/CONICET); Jordi Massó (Universitat Autonoma de Barcelona/Barcelona School of Economics); Alejandro Neme (UNSL/CONICET) |
| Abstract: | We introduce the concept of group obvious strategy-proofness, an extension of Li (2017)’s notion of obvious strategy-proofness, by requiring that truth-tellingremains an obviously dominant strategy for any group of agents in the extensive game form implementing the social choice function. We show that this stronger condition isno more restrictive: the set of all group obviously strategy-proof social choice functions coincides with the set of all obviously strategy-proof social choice functions. Building on this equivalence result and existing results on obvious strategy-proofness, we derive further equivalence results concerning the implementability of social choice functions via round-table mechanisms: strategy-proofness, group strategy-proofness, obvious strategy-proofness, and group obvious strategy-proofness are all equivalent. |
| Keywords: | Group strategy-proofness; Obvious strategy-proofness. |
| JEL: | D71 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:372 |
| By: | Ren\'e A\"id; Philippe Bergault; Mathieu Rosenbaum |
| Abstract: | Recent regulation on intraday electricity markets has led to the development of shared order books with the intention to foster competition and increase market liquidity. In this paper, we address the question of the efficiency of such regulations by analysing the situation of two exchanges sharing a single limit order book, i.e. a quote by a market maker can be hit by a trade arriving on the other exchange. We develop a Principal-Agent model where each exchange acts as the Principal of her own market maker acting as her Agent. Exchanges and market makers have all CARA utility functions with potentially different risk-aversion parameters. In terms of mathematical result, we show existence and uniqueness of the resulting Nash equilibrium between exchanges, give the optimal incentive contracts and provide numerical solution to the PDE satisfied by the certainty equivalent of the exchanges. From an economic standpoint, our model demonstrates that incentive provision constitutes a public good. More precisely, it highlights the presence of a competitiveness spillover effect: when one exchange optimally incentivizes its market maker, the competing exchange also reaps indirect benefits. This interdependence gives rise to a free-rider problem. Given that providing incentives entails a cost, the strategic interaction between exchanges may lead to an equilibrium in which neither platform offers incentives -- ultimately resulting in diminished overall competition. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.10094 |
| By: | Zachary Van Oosten; Ruodu Wang |
| Abstract: | We propose a new decision model under ambiguity, called the Choquet rank-dependent utility model. The model extends the Choquet expected utility model by allowing for the reduction to the rank-dependent utility model in the absence of ambiguity, rather than to the expected utility model. The model has three major components: a utility function $u$ and a probability distortion $g$, which together capture the risk component of the preferences, and generalized probabilistic beliefs $\nu$, which captures the ambiguity component of the preferences. The representation takes the form $X\succsim Y\iff \int_{\Omega} u(X)d(g\circ\nu)\iff \int_{\Omega} u(Y)d(g\circ\nu).$ To obtain the axiomatization, we work in the uncertainty setting of Savage with a non-ambiguous source. Afterwards, we discuss ambiguity attitudes and their representation with respect to the generalized probabilistic beliefs, along with conditions for a robust representation. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.10788 |
| By: | Johannes Johnen; Robin Ng |
| Abstract: | Ratings play a crucial role in online marketplaces, shaping consumer decisions and firm strategies. We investigate how firms strategically use pricing to influence ratings, and how this undermines ratings as signals of product quality. We develop a two-period model of price competition between an established firm and a potentially high- or low-quality entrant, capturing the challenge high-quality newcomers face in building reputation. Consumers rate based on value-for-money, but cannot distinguish whether positive ratings result from genuine quality or discounted prices. Low-quality entrants take advantage of this and may offer low prices to harvest good ratings in the future, or mimic high prices to signal high quality. We show that ratings harvesting inflates positive ratings, reduces their informativeness, and exacerbates the cold-start problem, discouraging high-quality entry. Our results mirror empirical patterns and generate implications for how rating design affects market outcomes: reducing effort-costs to rate induces more but less-informative ratings, and discourages entry. Policy implications include discouraging excessive discounts for new sellers, incorporating price-paid into rating displays, and balancing rating effort-costs to preserve informativeness. While the effects of individual entrants’ harvesting may appear temporary, harvesting hinders high-quality entrants from building reputation, discouraging entry and causing lasting distortions. |
| Keywords: | Rating and reviews, digital economy, reputation, cold-start problem, biased ratings |
| JEL: | D21 D83 L10 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_509v3 |
| By: | Chao Huang |
| Abstract: | This paper studies a matching problem in which a group of agents cooperate with agents on two sides. In environments with either nontransferable or transferable utilities, we demonstrate that a stable outcome exists when cooperations exhibit same-side complementarity and cross-side substitutability. Our results apply to pick-side matching problems and membership competition in online duopoly markets. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.10942 |
| By: | Josue Ortega |
| Abstract: | We analyze the performance of the Boston mechanism under equilibrium play in uniform random markets. We provide two results. First, while the share of students assigned to their first preference is 63% under truthfulness, this fraction becomes vanishingly small in any Nash equilibrium of the preference revelation game induced by the Boston mechanism. Second, we show that there is a Nash equilibrium of the corresponding preference revelation game where the average student is assigned to a highly undesirable school-dramatically worse ranked than the logarithmic rank achieved under truthfulness. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.19450 |
| 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:dp2505 |
| By: | Xienan Cheng; Mustafa Dogan; Pinar Yildirim |
| Abstract: | This study investigates the effects of artificial intelligence (AI) adoption in organizations. We ask: (1) How should a principal optimally deploy limited AI resources to replace workers in a team? (2) In a sequential workflow, which workers face the highest risk of AI replacement? (3) How does substitution with AI affect both the replaced and non-replaced workers’ wages? We develop a sequential team production model in which a principal can use peer monitoring—where each worker observes the effort of their predecessor—to discipline team members. The principal may replace some workers with AI agents, whose actions are not subject to moral hazard. Our analysis yields four key results. First, the optimal AI strategy stochastically replaces workers rather than fixating on a single position. Second, the principal replaces workers at the beginning and at the end of the workflow, but does not replace the middle worker, since this worker is crucial for sustaining the flow of information obtained by peer monitoring. Third, the principal may optimally underutilize available AI capacity. Fourth, the optimal AI adoption increases average wages and reduces intra-team wage inequality. |
| JEL: | D20 L0 M0 M12 M2 M21 M5 M52 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34259 |
| By: | Joshua S. Gans |
| Abstract: | This paper examines when and why entrepreneurs choose to standardise their ventures and make themselves replaceable, extending Rajan's (2012) analysis within a property rights framework. A model is developed where entrepreneurs face finite pools of potential replacements and may remain with their ventures post-IPO, rather than retiring as in Rajan's setting. The analysis yields two main results. First, when worker effort is fully contractible, entrepreneurs never choose to standardise, preferring to remain irreplaceable to maximise their bargaining power. Second, when key workers exert non-contractible effort that affects firm value, standardisation becomes beneficial as it motivates worker performance while managing the entrepreneur's replaceability. The optimal level of standardisation increases with the entrepreneur's equity stake, creating a ``dead zone" where entrepreneurs retain control but will not sell to outsiders. I extend the model to allow replacement of both entrepreneurs and workers, showing that standardisation can serve to reduce the bargaining power of all participants. The findings provide testable predictions about the relationship between equity structures, replacement market depth, and organisational design choices, while highlighting the strategic trade-offs entrepreneurs face between maintaining founder-specific advantages and creating transferable value for investors. |
| JEL: | D23 G30 L23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34271 |
| By: | H\'ector Jasso-Fuentes; Alejandra Quintos; Xinta Yang |
| Abstract: | In this paper we apply a probabilistic approach to analyze the impact of contagious default among investment group members. A general formula is given to compute the group survival probability with the presence of contagion effect. Special cases of this probability model are examined. In particular, we show that if the investment group is homogeneous, defined in the paper, then including more members into the group will eventually lead to default with probability 1, contrasting with the non-contagious scenario, where the default probability increases monotonically with respect to the group size. Also, we provide an upper bound of the optimal group size under the homogeneous setup; so, one can run a linear search with finite time to locate this optimizer. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.11579 |
| By: | Kensei Nakamura; Shohei Yanagita |
| Abstract: | Completeness and transitivity are standard rationality conditions in economics. However, under ambiguity, decision makers sometimes violate these requirements because of the difficulty of forming accurate predictions about ambiguous events. Motivated by this, we study various ambiguity preferences that partially satisfy completeness and transitivity. Our characterization results show that completeness and a novel yet natural weakening of transitivity correspond to two opposite ways of using multiple probability distributions in mind; that is, these two axioms have dual implications at the level of cognitive processes for ambiguity. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.11660 |
| By: | Oliwia Kurtyka (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes); Rania Mabrouk (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes) |
| Abstract: | The extent to which innovation is good news for environment depends not only on the research and development incentives but also on adoption stimulus. We analyze firm's choice of abatement technology in vertical chains. A downstream polluting monopoly can sign a contract with an upstream supplier of mature end-of-pipe equipment or develop an in-house clean technology. We show that contracting plays a crucial role in the efficiency of environmental regulation in spurring adoption. We find that polluter's innovation may be undertaken only to increase bargaining power and a share of industry profits he manages to capture. Consequently, polluter's and regulator's interests are not always aligned. The role of regulator as a technology forcing authority is partially confirmed in regions of under-investment. However, the regulator may not be able to trigger innovation and/or adoption if clean technology increases marginal costs too much. On the other hand, regulator may become laxer and oppose innovation in case of over-investment. All these results rely upon the creation of total profits from the integrated vertical structure and the partitioning rule. |
| Keywords: | Bargaining, Regulation, Vertical chain, End-of-pipe equipment, Clean technology, Abatement technology, Environmental innovation |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05244378 |
| By: | Aniruddha Ghosh (Department of Economics, Cal Poly University); M. Ali Khan (Department of Economics, Johns Hopkins University); Metin Uyanik (School of Economics, University of Queensland) |
| Abstract: | We provide necessary and sufficient conditions for a correspondence taking values in a finite-dimensional Euclidean space to be open so as to revisit the pioneering work of Schmeidler(1969), Shafer (1974), Shafer-Sonnenschein (1975) and Bergstrom-Rader-Parks (1976) to answer several questions they and their followers left open. We introduce the notion of separate convexity for a correspondence and use it to relate to classical notions of continuity while giving salience to the notion of separateness in the interplay of separate continuity and separate convexity of binary relations. As such, we provide a consolidation of the convexity-continuity postulates from a broad inter-disciplinary perspective and comment on how the qualified notions proposed here have implications of substantive interest for choice theory. |
| Keywords: | Separately convex, separately continuous, linearly continuous, graph-continuous, section-continuous, preferences, correspondences |
| JEL: | C00 C02 D01 D11 D51 D81 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cpl:wpaper:2502 |
| By: | Dammann, Felix (Center for Mathematical Economics, Bielefeld University); Rodosthenous, Neofytos (Center for Mathematical Economics, Bielefeld University); Villeneuve, Stéphane (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We introduce a non-zero-sum game between a government and a legislative body to study the optimal level of debt. Each player, with different time preferences, can intervene on the stochastic dynamics of the debt-to-GDP ratio via singular stochastic controls, in view of minimiz- ing non-continuously differentiable running costs. We completely characterise Nash equilibria in the class of Skorokhod-reflection-type policies. We highlight the importance of different time preferences resulting in qualitatively different type of equilibria. In particular, we show that, while it is always optimal for the government to devise an appropriate debt issuance policy, the legislator should opti- mally impose a debt ceiling only under relatively low discount rates and a laissez-faire policy can be optimal for high values of the legislator’s discount rate. |
| Keywords: | We introduce a non-zero-sum game between a government and a legislative body to study the optimal level of debt. Each player, with different time preferences, can intervene on the stochastic dynamics of the debt-to-GDP ratio via singular stochastic controls, in view of minimiz- ing non-continuously differentiable running costs. We completely characterise Nash equilibria in the class of Skorokhod-reflection-type policies. We highlight the importance of different time preferences resulting in qualitatively different type of equilibria. In particular, we show that, while it is always optimal for the government to devise an appropriate debt issuance policy, the legislator should opti- mally impose a debt ceiling only under relatively low discount rates and a laissez-faire policy can be optimal for high values of the legislator’s discount rate |
| Date: | 2025–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:730 |
| By: | Dianetti, Jodi (Center for Mathematical Economics, Bielefeld University); Nendel, Max (Center for Mathematical Economics, Bielefeld University); Tangpi, Ludovic (Center for Mathematical Economics, Bielefeld University); Wang, Shichun (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | This paper studies the relation between equilibria in single-period, discrete-time and continuous-time mean field game models. First, for single-period mean field games, we establish the existence of equilibria and then prove the propagation of the Lasry-Lions monotonicity to the optimal equilibrium value, as a function of the realization of the initial condition and its distribution. Secondly, we prove a pasting property for equilibria; that is, we construct equilibria to multi-period discrete-time mean field games by recursively pasting the equilibria of suitably initialized single- period games. Then, we show that any sequence of equilibria of discrete-time mean field games with discretized noise converges (up to a subsequence) to some equilibrium of the continuous-time mean field game as the mesh size of the discretization tends to zero. When the cost functions of the game satisfy the Lasry-Lions monotonicity property, we strengthen this convergence result by providing a sharp convergence rate. |
| Date: | 2025–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:743 |
| By: | Niels Boissonnet; Alexis Ghersengorin |
| Abstract: | Restricting individuals' access to some opportunities may steer their desire toward their substitutes, a phenomenon known as the forbidden fruit effect. We axiomatize a choice model named restriction-sensitive choice (RSC), which rationalizes the forbidden fruit effect and is compatible with the prominent psychological explanations: reactance theory and commodity theory. The model is identifiable from choice data, specifically from the observation of choice reversals caused by the removal of options. We conduct a normative analysis both in terms of the agent's freedom and welfare. We apply our model to shed light on two phenomena: the backfire effect of beliefs and the backlash of integration policies targeted towards minorities. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.11673 |
| By: | Kristian Behrens; Yasusada Murata |
| Abstract: | We characterize the family of utility functions satisfying linear fractional relative risk aversion (LFRRA) in terms of the Gauss hypergeometric functions. We apply this family, which nests various utility functions used in different strands of literature, to monopolistic competition and obtain a closed-form solution for the profit-maximizing price by generalizing the Lambert W function. We let firm-level data decide whether the RRA in each sector or in the aggregate economy is increasing, decreasing, or constant, which in turn determines whether markups are decreasing, increasing, or constant with respect to marginal costs. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.09865 |
| By: | Sylvain Béal (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France); Léa Munich (Université Paris Panthéon Assas, CRED UR 7321, F-75005 Paris, France); Philippe Solal (Université Paris Panthéon Assas, GATE Lyon Saint-Etienne, UMR 5824, F-42023 Saint-Etienne, France); Kevin Techer (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France) |
| Abstract: | We consider cooperative TU-games with unpaid players, which are described by a TUgame and two categories of players, paid and unpaid. Unpaid players participate in the cooperative game but are not rewarded for their participation, for instance for legal reasons. The objective is then to determine how the contributions of unpaid players are redistributed among the paid players. To meet this goal, we introduce and characterize axiomatically three values that are inspired by the Shapley value but differ in the way they redistribute the contributions of unpaid players. These values are unified as instances of a more general two-step allocation procedure. |
| Keywords: | Unpaid players, Shapley value, Harsanyi dividends, axioms, two-step procedure, Priority value |
| JEL: | C72 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:crb:wpaper:2025-11 |