|
on Microeconomics |
| By: | Pietro Dall’Ara (University of Naples Federico II and CSEF) |
| Abstract: | This paper studies the persuasion of a receiver who accesses information only if she exerts costly attention effort. A sender designs an experiment to persuade the receiver to take a specific action. The experiment affects the receiver’s attention effort, that is, the probability that she updates her beliefs. As an implication, persuasion has two margins: extensive (effort) and intensive (action). The receiver’s utility exhibits a supermodularity property in information and effort. By leveraging this property, we establish a general equivalence between experiments and persuasion mechanisms à la Kolotilin et al. (2017). In applications, the sender’s optimal strategy involves censoring favorable states. |
| Keywords: | persuasion, inattention, information acquisition; information design. |
| JEL: | D82 D83 D91 |
| Date: | 2025–10–27 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:766 |
| By: | Bailey, Ralph W. (Department of Economics, University of Birmingham, UK); Kozlovskaya, Maria (Economics, Finance and Entrepreneurship Department, Aston Business School, Aston University, UK); Ray, Indrajit (Cardiff Business School, Cardiff University) |
| Abstract: | We study mixed-strategy equilibria in a two-good buy-and-sell strategic market game à la Shapley–Shubik. We show that expected utility need not be quasiconcave in strategies, creating difficulties for characterising mixed equilibria. We prove that any mixed Nash profile in which each player mixes over only two positive bids is purifiable and the implied outcome is a mixture over pure equilibria. |
| Keywords: | Mixed bids; Mixed strategy Nash equilibrium; Strategic market games |
| JEL: | C72 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2025/21 |
| By: | Zhang, Qiaoxi (Institute of Economics, Corvinus University of Budapest, Budapest, Hungary); Azacis, Helmuts; Ray, Indrajit (Cardiff Business School, Cardiff University) |
| Abstract: | We analyse how privacy regulations affect information transmission when a platform observes a sensitive and a nonsensitive signal. If privacy is sufficiently important, restrictions that prohibit conditioning on the sensitive signal or require sufficient statistics can eliminate information transmission. When the platform must elicit the sensitive signal from a privacy-concerned sender, the optimal policy endogenously satisfies one or the other requirement depending on parameters. |
| Keywords: | privacy; information design; mechanism design |
| JEL: | D82 D83 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2025/20 |
| By: | Qingmin Liu; Yuyang Miao |
| Abstract: | This paper analyzes the dynamic interaction between a fully rational, privately informed sender and a boundedly rational, uninformed receiver with memory constraints. The sender controls the flow of information, while the receiver designs a decision-making protocol, modeled as a finite-state machine, that governs how information is interpreted, how internal memory states evolve, and when and what decisions are made. The receiver must use the limited set of states optimally, both to learn and to create incentives for the sender to provide information. We show that behavior patterns such as information avoidance, opinion polarization, and indecision arise as equilibrium responses to asymmetric rationality. The model offers an expressive framework for strategic learning and decision-making in environments with cognitive and informational asymmetries, with applications to regulatory review and media distrust. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.23951 |
| By: | Rubik Khachatryan; Georgy Lukyanov |
| Abstract: | We analyze a two-period, two-market chain-store game in which an incumbent's conduct in one market is only sometimes seen in the other. This partial observability generates reputational spillovers across markets. We characterize equilibrium behavior by prior reputation: at high priors the strategic incumbent fights a lone early entrant (and mixes when both arrive together); at low priors it mixes against a single entrant and accommodates coordinated entry. Greater observability increases early fighting yet, because any accommodation is more widely noticed, raises the incidence of later entry. The results are robust to noisy signals and endogenous information acquisition, and extend naturally to many markets. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.21759 |
| By: | Hideo Konishi (Boston College); Michel Le Breton (Toulouse School of Economics); Shlomo Weber (Southern Methodist University) |
| Abstract: | In this paper, we define additive dyadic social interactions games (ADG), in which each player cares not only about the selected action, but also about interactions with other players, especially those who choose the same action. This class of games includes alliance formation games, network games, and dis- crete choice problems with network externalities. While it is known that games in the ADG class admit a pure strategy Nash equilibrium that is a maximizer of the game's potential, the potential approach does not always apply if all coalitional deviations are allowed. We then introduce a novel notion of a strong landscape equilibrium, which relies on a limited scope of coalitional deviations. We show the existence of a strong landscape equilibrium for a class of basic additive dyadic social interactions games (BADG), even though a strong Nash equilibrium may fail to exist. Somewhat surprisingly, a potential-maximizing strong landscape equilibrium is not always a strong Nash equilibrium even if the set of the latter is nonempty. We also provide applications and extensions of our results. |
| Keywords: | social interactions games, coalition, landscape equilibrium |
| Date: | 2025–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1098 |
| By: | Daria Fedyaeva; Georgy Lukyanov; Hannah Tolli\'e |
| Abstract: | We study education as a remedy for misspecified beliefs in a canonical sequential social-learning model. Uneducated agents misinterpret action histories - treating actions as if they were independent signals and, potentially, overstating signal precision - while educated agents use the correct likelihoods (and may also enjoy higher private precision). We define a misspecified-belief PBE and show existence with a simple structure: education is a cutoff in the realized cost and actions are threshold rules in a single log-likelihood index. A closed-form value-of-education statistic compares the accuracy of the educated versus uneducated decision at any history; this yields transparent conditions for self-education. When a misspecified process sustains an incorrect cascade, uniformly positive private value and a positive flip probability imply that education breaks the cascade almost surely in finite time, with an explicit bound on expected break time. We quantify welfare gains from making education available and show how small per-education subsidies sharply raise de-cascading probabilities and improve discounted welfare. Extensions cover imperfect observability of education choices and a planner who deploys history-dependent subsidies. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.24735 |
| By: | Arnav Sood; James Best |
| Abstract: | A sender persuades a strategically naive decisionmaker (DM) by committing privately to an experiment. Sender's choice of experiment is unknown to the DM, who must form her posterior beliefs nonparametrically by applying some learning rule to an IID sample of (state, message) realizations. We show that, given mild regularity conditions, the empirical payoff functions hypo-converge to the full-information counterpart. This is sufficient to ensure that payoffs and optimal signals converge to the Bayesian benchmark. For finite sample sizes, the force of this "sampling friction" is nonmonotonic: it can induce more informative experiments than the Bayesian benchmark in settings like the classic Prosecutor-Judge game, and less revelation even in situations with perfectly aligned preferences. For many problems with state-independent preferences, we show that there is an optimal finite sample size for the DM. Although the DM would always prefer a larger sample for a fixed experiment, this result holds because the sample size affects sender's choice of experiment. Our results are robust to imperfectly informative feedback and the choice of learning rule. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.25066 |
| By: | Holmberg, P.; Ruddell, K.; Willems, B. |
| Abstract: | We characterize Nash equilibria in multi-product markets in which producers commit to vectors of supply functions contingent on all prices. The framework accommodates (dis)economies of scope in production, and goods may be substitutes or complements in demand. We show that equilibrium allocations of underlying goods and payoffs are invariant under bundling. With quadratic costs and linear demand, this invariance reduces the multi-product problem to an equivalent set of single-product markets that can be analyzed independently. We introduce Lerner and pass-through matrices to capture markups and welfare losses; their eigenvalues summarize fundamental market properties, remain invariant under bundling, and lend themselves to comparative statics analysis. |
| Keywords: | Supply Function Equilibrium, Multi-Product Pricing, Divisible-Good Auction, Bundling, Pass-Through, Welfare |
| JEL: | C62 C72 D43 D44 L94 |
| Date: | 2025–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2565 |
| By: | Kaibalyapati Mishra |
| Abstract: | In this paper, I develop a refinement of stability for matching markets with incomplete information. I introduce Information-Credible Pairwise Stability (ICPS), a solution concept in which deviating pairs can use credible, costly tests to reveal match-relevant information before deciding whether to block. By leveraging the option value of information, ICPS strictly refines Bayesian stability, rules out fear-driven matchings, and connects belief-based and information-based notions of stability. ICPS collapses to Bayesian stability when testing is uninformative or infeasible and coincides with complete-information stability when testing is perfect and free. I show that any ICPS-blocking deviation strictly increases total expected surplus, ensuring welfare improvement. I also prove that ICPS-stable allocations always exist, promote positive assortative matching, and are unique when the test power is sufficiently strong. The framework extends to settings with non-transferable utility, correlated types, and endogenous or sequential testing. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.22750 |
| By: | Banerjee, Swapnendu; Chakraborty, Somenath |
| Abstract: | We examine the impact of social preferences on the choice between individual production and team production. An inequity-averse principal can hire a single or a team of two agents to work on a single project. The agents are inequity-averse with respect to the principal. We show that even without ‘synergy’ a moderately inequity-averse principal can opt for team production. Thus we provide an additional rationale for the empirically observed prevalence of team based production in terms of the possible existence of social preferences. For sufficiently inequity-averse principal the incentive for team production remains the same across short-term and long-term relationships. |
| Keywords: | Social Preferences; Inequity Aversion; Individual Production; Team Production; Synergy. |
| JEL: | D21 D86 L23 |
| Date: | 2025–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125933 |
| By: | Klajdi Hoxha |
| Abstract: | E-commerce platforms are rolling out ambitious targeted advertising initiatives that rely on merchants sharing customer data with each other via the platform. Yet current platform designs fail to address participating merchants' concerns about customer poaching. This paper proposes a model of designing targeted advertising platforms that incentivizes merchants to voluntarily share customer data despite poaching concerns. I characterize the optimal mechanism that maximizes a weighted sum of platform's revenues, customer engagement and merchants' surplus. In sufficiently large platforms, the optimal mechanism can be implemented through the design of three markets: $i)$ selling market, where merchants can sell all their data at a posted price $p$, $ii)$ exchange market, where merchants share all their data in exchange for high click-through rate (CTR) ads, and $iii)$ buying market, where high-value merchants buy high CTR ads at the full price. The model is broad in scope with applications in other market design settings like the greenhouse gas credit markets and reallocating public resources, and points toward new directions in combinatorial market exchange designs. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.27112 |
| By: | Konstantin von Beringe; Mark Whitmeyer |
| Abstract: | We study welfare analysis for policy changes when supply behavior is only partially known. We augment the robust-demand approach of Kang and Vasserman (2025) with two supply primitives--intervals of feasible pass-through and conduct (market-power) parameters--applied to two equilibrium snapshots. A simple accounting identity distills the supply-side contribution to welfare to a simple integral expression. From there, we deduce that the bounds are produced by a single-threshold "bang-bang" inverse pass-through function. This, plus a modification of Kang and Vasserman's (2025) demand-side characterization, delivers simple bounds for consumer surplus, producer surplus, tax revenue, total surplus, and deadweight loss. We also study an ad valorem extension. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.26387 |
| By: | Salvatore Ciucci (Dipartimento di Economia, Università degli Studi della Campania “Luigi Vanvitelli”) |
| Abstract: | There are many evidences which prove that cartels’ price leads to an economic inefficiency, due to the reduced consumers welfare. Antitrust authorities have set up different ways to defeat and prevent collusive agreements, but as widely showed by the literature, deterring collusion may have adverse effects, like higher price in surviving cartels, reduced turnover of firms’ employees, and disincentive for competing firms to cooperate, in the sense that if firms exchange information about the evolution of demand or costs, then they may adopt better choices; moreover, deterring collusion may have even a pro-collusion effect. The paper suggests an additional anti-cartel tool which does not have side effects, and supporting no cost, it can get worse collusion stability. Analysing a supergame of collusion, in a Bertrand duopoly framework in which is run a two-stage lottery, we show that deviation strategy becomes more attractive, even if lottery jackpot tends to zero. |
| Keywords: | Competition policy, Antitrust, Cartel, Collusion, Lottery |
| JEL: | L40 L41 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2025.21 |
| By: | Peng Liu; Alexander Schied |
| Abstract: | In this paper, we investigate the Lambda Value-at-Risk ($\Lambda$VaR) under ambiguity, where the ambiguity is represented by a family of probability measures. We establish that for increasing Lambda functions, the robust (i.e., worst-case) $\Lambda$VaR under such an ambiguity set is equivalent to $\Lambda$VaR computed with respect to a capacity, a novel extension in the literature. This framework unifies and extends both traditional $\Lambda$VaR and Choquet quantiles (Value-at-Risk under ambiguity). We analyze the fundamental properties of this extended risk measure and establish a novel equivalent representation for $\Lambda$VaR under capacities with monotone Lambda functions in terms of families of downsets. Moreover, explicit formulas are derived for robust $\Lambda$VaR when ambiguity sets are characterized by $\phi$-divergence and the likelihood ratio constraints, respectively. We further explore the applications in risk sharing among multiple agents. We demonstrate that the family of risk measures induced by families of downsets is closed under inf-convolution. In particular, we prove that the inf-convolution of $\Lambda$VaR with capacities and monotone Lambda functions is another$\Lambda$VaR under a capacity. The explicit forms of optimal allocations are also derived. Moreover, we obtain more explicit results for risk sharing under ambiguity sets characterized by $\phi$-divergence and likelihood ratio constraints. Finally, we explore comonotonic risk-sharing for $\Lambda$VaR under ambiguity. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.00717 |
| By: | Milo Bianchi (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements 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, UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse, CNRS - Centre National de la Recherche Scientifique); Philippe Jehiel (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - 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 - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, UCL - University College of London [London]) |
| Abstract: | We analyze bubbles and crashes in a model in which some investors are partially sophisticated. While the expectations of such investors are endogenously determined in equilibrium, these are based on a coarse understanding of the market dynamics. We highlight how such investors may endogenously switch from euphoria to panic and how this may lead to equilibrium bubbles and crashes even in a purely speculative market in which information is complete and it is commonly understood that the bubble cannot grow forever. We also show how this setting can match stylized empirical facts, and we investigate whether bubbles may last longer when the share of fully rational traders increases. |
| Keywords: | Bounded rationality, Crashes, Speculative bubbles |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05327589 |
| By: | Ce Li; Qianfan Zhang; Weiqiang Zheng |
| Abstract: | We study the welfare of a mechanism in a dynamic environment where a learning investor can make a costly investment to change her value. In many real-world problems, the common assumption that the investor always makes the best responses, i.e., choosing her utility-maximizing investment option, is unrealistic due to incomplete information in a dynamically evolving environment. To address this, we consider an investor who uses a no-regret online learning algorithm to adaptively select investments through repeated interactions with the environment. We analyze how the welfare guarantees of approximation allocation algorithms extend from static to dynamic settings when the investor learns rather than best-responds, by studying the approximation ratio for optimal welfare as a measurement of an algorithm's performance against different benchmarks in the dynamic learning environment. First, we show that the approximation ratio in the static environment remains unchanged in the dynamic environment against the best-in-hindsight benchmark. Second, we provide tight characterizations of the approximation upper and lower bounds relative to a stronger time-varying benchmark. Bridging mechanism design with online learning theory, our work shows how robust welfare guarantees can be maintained even when an agent cannot make best responses but learns their investment strategies in complex, uncertain environments. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.01157 |
| By: | Ohnishi, Kazuhiro |
| Abstract: | We employ a game-theoretic model to analyze five duopoly regimes: (1) state-owned and labor-managed firms, (2) labor-managed firms, (3) state-owned and capitalist firms, (4) capitalist firms, and (5) capitalist and labor-managed firms. We compare the welfare outcomes across these regimes and find that labor-managed firms may not be socially desirable due to their adverse impact on economic welfare. This may help explain why labor-managed firms are relatively rare compared to capitalist firms. |
| Keywords: | Capitalist firm; Cournot model; Economic welfare; Labor-managed firms; State-owned firm |
| JEL: | C72 D21 L32 |
| Date: | 2025–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126158 |
| By: | Shuige Liu; Gabriel Ziegler |
| Abstract: | Interactive decision-making relies on strategic reasoning. Two prominent frameworks capture this idea. One follows a structural perspective, exemplified by level-k and Cognitive Hierarchy models, which represent reasoning as an algorithmic process. The other adopts an epistemic perspective, formalizing reasoning through beliefs and higher-order beliefs. We connect these approaches by "Lifting" static complete-information games into incomplete-information settings where payoff types reflect players' levels. Within this unified framework, reasoning is represented through mathematically explicit and transparent belief restrictions. We analyze three instances: downward rationalizability, a robust benchmark concept; and two refinements, L-rationalizability and CH-rationalizability, which provide epistemic foundations---albeit with a nuance---for the classic level-k and Cognitive Hierarchy models, respectively. Our results clarify how reasoning depth relates to behavioral predictions, distinguish cognitive limits from belief restrictions, and connect bounded reasoning to robustness principles from mechanism design. The framework thus offers a transparent and tractable bridge between structural and epistemic approaches to reasoning in games. |
| Keywords: | bounded reasoning, behavioral game theory, level-k, cognitive hierarchy, epistemic game theory, belief restrictions, Δ-rationalizability, robustness |
| JEL: | C72 D82 D83 D90 |
| Date: | 2025–10–20 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0079 |
| By: | Natalia Fabra (CEMFI, Centro de Estudios Monetarios y Financieros); Gerard Llobet (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | This paper examines the limitations of spot markets in providing adequate investment incentives to support zero-carbon investments in electricity markets. In contrast, properly designed long-term contracts have the potential to mitigate price volatility and facilitate the funding of the investments. A theoretical model is developed to analyze contract design under conditions of moral hazard and adverse selection, emphasizing the trade-offs that arise when exposing firms to price and quantity risk. The findings inform optimal contract design for nuclear and renewable energy projects, offering policy recommendations to enhance investment incentives while minimizing productive inefficiencies and excessive rents. |
| Keywords: | Contract design, adverse selection, moral hazard, risk aversion, renewable energies, nuclear power plants. |
| JEL: | L13 L94 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cmf:wpaper:wp2025_2521 |