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on Microeconomics |
| By: | Itai Arieli; Colin Stewart |
| Abstract: | We introduce a model of persuasion in which a sender without any commitment power privately gathers information about an unknown state of the world and then chooses what to verifiably disclose to a receiver. The receiver does not know how many experiments the sender is able to run, and may therefore be uncertain as to whether the sender disclosed all of her information. Despite this challenge, we show that, under general conditions, the sender is able to achieve the same payoff as in the full-commitment Bayesian persuasion case. |
| Keywords: | Persuasion, information design, disclosure, verifiable information |
| JEL: | D82 D83 |
| Date: | 2025–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-808 |
| By: | Carmelo Rodríguez à lvarez (Instituto Complutense de Análisis Económico (ICAE), Universidad Complutense de Madrid (Spain)) |
| Abstract: | We analyze strategy-proof rules that select sets of alternatives based on voters’ preferences over those sets. Sets of alternatives represent social choices pending a final resolution and voters are expected utility maximizers that assign probabilities to alternatives within each set using Bayesian updating from a common prior probability assessment. If there are at least three alternatives, then, for generic priors, only dictatorial rules are strategy-proof and unanimous. However, when the prior probability assessment assigns equal probability to all alternatives, strategyproofness also permits rules that select the set of best elements determined by two fixed voters. |
| Keywords: | Strategy-Proofness; Social Choice Functions over Sets; Cardinal Decision Schemes. |
| JEL: | D71 D82 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ucm:doicae:2507 |
| By: | Francis Bloch; Bhaskar Dutta; Marcin Dziubi\'nski |
| Abstract: | A planner wants to select one agent out of n agents on the basis of a binary characteristic that is commonly known to all agents but is not observed by the planner. Any pair of agents can either be friends or enemies or impartials of each other. An individual's most preferred outcome is that she be selected. If she is not selected, then she would prefer that a friend be selected, and if neither she herself or a friend is selected, then she would prefer that an impartial agent be selected. Finally, her least preferred outcome is that an enemy be selected. The planner wants to design a dominant strategy incentive compatible mechanism in order to be able choose a desirable agent. We derive sufficient conditions for existence of efficient and DSIC mechanisms when the planner knows the bilateral relationships between agents. We also show that if the planner does not know these relationships, then there is no efficient and DSIC mechanism and we compare the relative efficiency of two ``second-best'' DSIC mechanisms. Finally, we obtain sharp characterization results when the network of friends and enemies satisfies structural balance. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.11157 |
| By: | Sukanya Kudva; Anil Aswani |
| Abstract: | We study the problem of auction design in the presence of bidder collusion. Specifically, we consider a multi-unit auction of identical items with single-minded bidders, where a subset of bidders may collude by coordinating bids and transferring payments and items among themselves. While the classical Vickrey-Clarke-Groves (VCG) mechanism achieves efficient and truthful outcomes, it is highly vulnerable to collusion. In contrast, fully collusion-proof mechanisms are limited to posted-price formats, which fail to guarantee even approximate efficiency. This paper aims to bridge this gap by designing auctions that achieve good welfare and revenue guarantees even when some bidders collude. We first characterize the strategic behavior of colluding bidders under VCG and prove that such bidders optimally bid shade: they never overbid or take additional items, but instead reduce the auction price. This characterization enables a Bulow-Klemperer type result: adding colluding bidders can only improve welfare and revenue relative to running VCG on the non-colluding group alone. We then propose a Hybrid VCG (H-VCG) mechanism that combines VCG applied to non-colluding bidders with a posted-price mechanism for colluding bidders, assuming access to a black-box collusion detection algorithm. We show that H-VCG is ex-post dominant-strategy incentive compatible (DSIC) and derive probabilistic guarantees on expected welfare and revenue under both known and unknown valuation distributions. Numerical experiments across several distributions demonstrate that H-VCG consistently outperforms VCG restricted to non-colluding bidders and approaches the performance of the ideal VCG mechanism assuming universal truthfulness. Our results provide a principled framework for incorporating collusion detection into mechanism design, offering a step toward collusion-resistant auctions. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.12456 |
| By: | Daniel Fershtman; Kfir Eliaz; Alexander Frug |
| Abstract: | We study optimal dynamic scheduling of workers to tasks when task completion is privately observed —so that workers can delay the release of finished tasks — and idle time is the only available incentive instrument. We characterize a scheduling rule, and its induced equilibrium, that maximizes expected discounted output. Unless workers are inherently slow, production alternates between efficient phases and delays. Our analysis reveals a trade-off between the quality and the size of the workforce. We also present several extensions, illustrating the versatility of the framework. |
| Keywords: | idle time, moral hazard, multi-server systems, non-monetary incentives, optimal scheduling, strategic servers |
| JEL: | D82 J24 C73 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1535 |
| By: | Preyas S. Desai; Jessie Liu |
| Abstract: | Businesses often react to external events by sending pro-social messages on social media that show the sender's alignment with the underlying prosocial cause and enhance their brand image. Consumers are uncertain about the authenticity of such messages because a company can choose to send prosocial messages even when their alignment with the social cause is not genuine. We study the sender's incentives to send (in)authentic messages and the consumer's reactions when an external investigator can verify the sender's message. We find that the sender's equilibrium strategy depends on the receiver's emphasis on external investigation versus their self-signaling incentives. When the receiver is more internally focused, the sender chooses self-sufficiency strategy, building credibility independent of external investigation. When the receiver is more externally focused, the sender can either use self-sufficiency or complementarity, the latter relying on validation by the external investigator. Thus, authenticity is coproduced by the sender, the receiver, and the investigator. Importantly, self-sufficiency results in more authenticity in reactive marketing messages than complementarity. We extend the model to incorporate confirmation bias of the receiver. We show that confirmation bias can act a doubled-edged sword, sometimes making the sender's persuasion task easier and other times making it more difficult. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.16793 |
| By: | Antelo, Manel; Bru, Lluís |
| Abstract: | This paper examines the commercialization of an external, quality-enhancing (product) innovation within a vertically related market, comparing outright sale and licensing. Licensing may involve a royalty of per-unit or ad valorem type and potential adopters are two downstream firms that source a core input from a single upstream supplier. The analysis reveals that the patentholder’s incentive to license the innovation, particularly through per-unit royalties, outweighs that of an outright sale. This form of technology transfer, however, is shown to potentially reduce consumer and social welfare compared to the pre-innovation state, thus providing a rationale for public policy interventions aimed at restricting royalty-based technology transfer. |
| Keywords: | Vertical industry, quality-enhancing product innovation, sale versus licensing, two-part tariff contracts, per-unit royalty, ad-valorem royalty, welfare |
| JEL: | L13 O32 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126850 |
| By: | Andrei Gyarmathy; Georgy Lukyanov |
| Abstract: | Costly pre-play messages can deter unnecessary wars - but the same messages can also entrench stalemates once violence begins. We develop an overlapping-generations model of a security dilemma with persistent group types (normal vs bad), one-sided private signaling by the current old to the current young, and noisy private memory of the last encounter. We characterize a stationary equilibrium in which, for an intermediate band of signal costs, normal old agents mix on sending a costly reassurance only after an alarming private history; the signal is kept marginally persuasive by endogenous receiver cutoffs and strategic mimicking by bad types. Signaling strictly reduces the hazard of conflict onset; conditional on onset, duration is unchanged in the private model but increases once a small probability of publicity (leaks) creates a public record of failed reconciliation. With publicity, play generically absorbs in a peace trap or a conflict trap. We discuss welfare and policy: when to prefer back-channels versus public pledges. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.11580 |
| By: | Alexandre Arnout (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Gaëtan Fournier (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | Political campaigns influence how voters prioritize issues, which in turn impacts electoral outcomes. In this paper, we study how candidates’ communication shapes which issues prevail during the campaign, through which mechanisms, and to what extent. We develop an electoral competition model with two candidates, each endowed with exogenous platforms and characteristics. Candidates allocate strategically their communication time across two issues to maximize their expected vote shares. We find that when one candidate holds similar comparative advantages on both issues, the disadvantaged candidate communicate on a single issue to saturate the campaign with one topic and then increases the randomness of the election. The advantaged candidate has the opposite incentive and communicate on both issues, creating an asymmetry in the campaign. We show that in some cases, the campaign can become entirely centered on a single issue. |
| Keywords: | electoral competition, Communication time, Priming |
| JEL: | C72 D72 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2520 |
| By: | Argyrios Deligkas; Gregory Gutin; Mark Jones; Philip R. Neary; Anders Yeo |
| Abstract: | In a public goods game, every player chooses whether or not to buy a good that all neighboring players will have access to. We consider a setting in which the good is indivisible, neighboring players are out-neighbors in a directed graph, and there is a capacity constraint on their number, k, that can benefit from the good. This means that each player makes a two-pronged decision: decide whether or not to buy and, conditional on buying, choose which k out-neighbors to share access. We examine both pure and mixed Nash equilibria in the model from the perspective of existence, computation, and efficiency. We perform a comprehensive study for these three dimensions with respect to both sharing capacity (k) and the network structure (the underlying directed graph), and establish sharp complexity dichotomies for each. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.11475 |
| By: | Eric Gao; Eric Tang |
| Abstract: | In many auctions, bidders may be reluctant to reveal private information to the auctioneer and other bidders. Among deterministic bilateral communication protocols, reducing what bidders learn requires increasing what the auctioneer learns. A protocol implementing a given social choice rule is on the privacy Pareto frontier if no alternative protocol reveals less to both bidders and the auctioneer. For first-price auctions, the descending protocol and the sealed-bid protocol are both on the privacy Pareto frontier. For second-price auctions, the ascending protocol and the ascending-join protocol of Haupt and Hitzig (2025) are both on the privacy Pareto frontier, but the sealed-bid protocol is not. A designer can flexibly trade off between what bidders learn and what the auctioneer learns by "stitching" different protocols together. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.10349 |
| By: | Yu-Ting Ho |
| Abstract: | This paper studies a decentralized many-to-one matching market where preferences remain uncertain during the matching process. Institutions initiate matching by sending offers, and applicants decide whether to accept upon receiving them. Since applicants learn their preferences only after receiving offers, institutions face a challenge in deciding how many offers to issue. I address this challenge by introducing probabilistic offers (admitting applicants with a probability less than one), which ensure that ex-ante market clearing and stability are achievable. However, the welfare effect of information is subtle: applicants may become worse off as they acquire more information. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.09988 |
| By: | I. Sebastian Buhai |
| Abstract: | We model the cadence of AI product releases, i.e. quiet spells, reversible patches, and rarer pivots, as optimal exercise of strategic real options under reputational learning. A privately observed technical state follows a diffusion. The firm controls two upgrade options with asymmetric costs and reversibility (a cheap patch and a costly pivot) and a publication-frequency clock, a Cox process whose intensity governs when noisy public performance and safety signals are disclosed. For sufficiently low clock costs the optimal policy posts observable clock-off windows around knife-edge regions. These windows shut down the martingale part of public beliefs, eliminate knife-edge mixing, and collapse behavior to a two-rung release ladder with endogenous triggers, jump targets, and no interior mixing. Within stationary Markov strategies we show that this ladder is uniquely characterized by a boundary-value system with value matching and smooth pasting at triggers and target optimality at jump targets. We endogenize market or platform adoption as a threshold rule in public beliefs and show that leverage creates an irreversibility wedge: the gap between first-best and levered surplus is bounded by the takeover switching cost of the least reversible rung. Patches are debt-insensitive; pivots can be distorted, but only up to that bound. The framework predicts telemetry signatures in firm-authored disclosures: a pre-release cadence dip in publication intensity and intra-month dispersion as the clock is shut off before a major reset; two post-release plateaus in disclosed performance, consistent with patch versus pivot jump targets; and debt-insensitive patch timing in high-reversibility regimes, with leverage effects concentrated in pivots. Unlike option-implied volatility spikes, these patterns reflect the firm's own throttling of technical signals rather than market pricing of event risk. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.16958 |
| By: | Minoru Kitahara; Hiroshi Uno |
| Abstract: | This paper studies one-sided matching under a complete exchange (CE) requirement, where each agent must be assigned an object different from its initial endowment. We introduce assignment partition -- a partition of agents and choice sets that builds CE into feasibility -- and, within this structure, propose two new mechanisms. Chain Serial Dictatorship (C-SD) operates within the partition as a binding-choice chain: the highest-priority agent picks from its allowed set and the right to pick passes to the owner of the chosen object; if that owner has already picked, the right reverts to the highest-priority remaining agent. Two-Stage Serial Dictatorship (T-SD) operates within the partition as a nominate-then-assign procedure: in Stage 1, agents tentatively nominate objects in exogenous priority, and the owners of nominated objects determine an endogenous final priority; in Stage 2, serial dictatorship runs within the partition using that final priority. For any given assignment partition, C-SD and T-SD simultaneously satisfy strategy-proofness, respecting improvement, and efficiency relative to the partition. We then examine the limits of pursuing market-wide efficiency under the CE constraint. As a benchmark, we study a modified TTC, CE-TTC, which first enforces a CE-compliant reassignment and then runs a self-avoiding top-trading-cycles phase; CE-TTC achieves efficiency within the CE constraint and strategy-proofness but fails respecting improvement. Moreover, for three and four agents, no mechanism can simultaneously achieve efficiency within the CE constraint, respecting improvement, and strategy-proofness. These findings underscore the value of partition-based design for truthful implementation with investment incentives under a hard CE mandate. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.11278 |
| By: | Daniel Bird; Alexander Frug |
| Abstract: | We present a dynamic learning setting in which the periodic data observed by the decision-maker is mediated by an agent. We study when, and to what extent, this mediation can distort the decision-maker's long-run learning, even though the agent's reports are restricted to consist of verifiable hard evidence and must adhere to certain standards. We introduce the manipulation-proof law of large numbers – that delivers a sharp dichotomy: when it holds, the decision-maker's learning is guaranteed in the long-run; when it fails, the scope for manipulation is essentially unrestricted. |
| Keywords: | long-run beliefs, manipulation, selective forced disclosure |
| JEL: | D83 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1534 |
| By: | Du, G. |
| Abstract: | We propose a unified microeconomic theory that takes the behavioral rules of firms in real markets as the endogenous mechanism through which market structures are generated, replacing the standard practice of imposing perfect competition, monopoly, and other market forms as exogenous assumptions. Under a set of minimal axioms (consumer utility maximization, firm profit maximization, firm entry/exit mechanisms, and market clearing) and by introducing realistic cost and demand structures (firm-level cost heterogeneity, fixed costs, and demand elasticity, among others), pricing behavior and market structures long treated as exogenous (such as perfect competition and monopoly) are derived endogenously as equilibrium outcomes of firms' profit-maximizing behavior. Within a single framework, the theory nests traditional cost and marginal analysis, game-theoretic approaches to imperfect competition, and the Walrasian general equilibrium model; different regions of the parameter space naturally yield equilibrium outcomes corresponding to perfect competition, monopoly, monopolistic competition, and competitive-fringe structures. Our analysis shows that perfect competition is only a highly symmetric and intrinsically unstable equilibrium point: even small cost differences suffice to push the system toward more common monopoly or oligopoly configurations, while positive feedback mechanisms render these structures stable, helping to explain why market power is not easily competed away. Under empirically observable premises, the theory coherently derives the principal market forms and, in doing so, clarifies the domains of applicability of various classic models. It can also be used to predict which market structures industries will evolve toward under given conditions, providing a unified and operational theoretical foundation for empirical research, industrial policy, and firms' business and competitive strategy decision-making. |
| Keywords: | Unified Market Structure Theory; Endogenous Structural Evolution; Imperfect Competition; Unified General Equilibrium Framework; Network Externalities and Feedback Mechanisms; Pareto Optimality under Heterogeneity |
| JEL: | D40 D41 D42 D43 D50 D85 L11 L12 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126828 |
| By: | Osei, Prince (Center for Mathematical Economics, Bielefeld University); Riedel, Frank (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We study optimal portfolio choice when the variance of asset returns is ambiguous. Building on the smooth model of ambiguity aversion by Klibanoff et al. (2005), we introduce a one-period framework in which returns follow a Variance–Gamma specification, obtained by mixing a normal distribution with a gamma prior on the variance. This structure captures empirically observed excess kurtosis and allows us to derive closed-form solutions for optimal demand. Our main results show that ambiguity about volatility leads to bounded portfolio positions, in sharp contrast to the unbounded exposures predicted by the classical CAPM when expected excess returns are large or when the mean variance tends to zero. We characterize the comparative statics of the optimal allocation with respect to risk aversion, ambiguity aversion, and the parameters of the prior distribution. For small mean excess returns, portfolio demand converges to the CAPM benchmark, indicating that ambiguity aversion affects higher-order terms only. The model provides a tractable link between robust portfolio choice and realistic, heavy-tailed return dynamics. |
| Date: | 2025–11–27 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:756 |
| By: | Ulrike Schmidt-Kraepelin; Warut Suksompong; Steven Wijaya |
| Abstract: | Apportionment refers to the well-studied problem of allocating legislative seats among parties or groups with different entitlements. We present a multi-level generalization of apportionment where the groups form a hierarchical structure, which gives rise to stronger versions of the upper and lower quota notions. We show that running Adams' method level-by-level satisfies upper quota, while running Jefferson's method or the quota method level-by-level guarantees lower quota. Moreover, we prove that both quota notions can always be fulfilled simultaneously. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.10000 |
| By: | Xun (Grace) Gong; Ziqi Qiao; Randall Wright |
| Abstract: | This essay surveys the literature on middlemen—i.e., intermediation in exchange—reviewing, extending and consolidating key developments in the field. This is important because intermediated trade is common in reality but absent in standard general equilibrium theory. We focus on research using search theory. In various models, agents may act as middlemen when they are good at search, bargaining, recognizing quality, storing inventories, using credit, etc. The theory applies to markets for goods, inputs or assets. We discuss versions with indivisible or divisible goods, fixed or endogenous participation, stationary and dynamic equilibria, and some implications for efficiency and volatility. |
| JEL: | D0 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34477 |