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on Microeconomics |
| By: | Peter Achim (York University); Roland Strausz (HU Berlin) |
| Abstract: | In modern information markets, buyers routinely combine signals from multiple sellers. We develop a model of ``portfolio competition'' to analyze this distinctive feature. We show that the combinability of information overturns standard oligopoly intuition. Unlike traditional markets, competitive pressure does not necessarily protect buyers: when signals are complements, sellers can leverage the buyer's desire for the joint portfolio to extract the full social surplus, regardless of the number of competitors. We characterize the precise conditions for rent extraction, which reduce to a simple geometric test for symmetric sellers. Furthermore, we find that the canonical logic of market entry fails. Entry is never socially excessive because efficient portfolio choices eliminate business-stealing effects. Paradoxically, entry can reduce competitive pressure: when entrants provide strong complementarities, they shift the buyer's threat point, allowing all sellers to extract higher rents. |
| Keywords: | information markets; portfolio competition; market entry; data economy; complementarity; |
| Date: | 2025–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:554 |
| By: | Nikos Dimou; Alex McAvoy |
| Abstract: | Originating in evolutionary game theory, the class of "zero-determinant" strategies enables a player to unilaterally enforce linear payoff relationships in simple repeated games. An upshot of this kind of payoff constraint is that it can shape the incentives for the opponent in a predetermined way. An example is when a player ensures that the agents get equal payoffs. While extensively studied in infinite-horizon games, extensions to discounted games, nonlinear payoff relationships, richer strategic environments, and behaviors with long memory remain incompletely understood. In this paper, we provide necessary and sufficient conditions for a player to enforce arbitrary payoff relationships (linear or nonlinear), in expectation, in discounted games. These conditions characterize precisely which payoff relationships are enforceable using strategies of arbitrary complexity. Our main result establishes that any such enforceable relationship can actually be implemented using a simple two-point reactive learning strategy, which conditions on the opponent's most recent action and the player's own previous mixed action, using information from only one round into the past. For additive payoff constraints, we show that enforcement is possible using even simpler (reactive) strategies that depend solely on the opponent's last move. In other words, this tractable class is universal within expectation-enforcing strategies. As examples, we apply these results to characterize extortionate, generous, equalizer, and fair strategies in the iterated prisoner's dilemma, asymmetric donation game, nonlinear donation game, and the hawk-dove game, identifying precisely when each class of strategy is enforceable and with what minimum discount factor. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.19828 |
| By: | Hu, Peicong; Sobel, Joel |
| Abstract: | A manager has access to expert advisers. The manager selects at most one project and can implement it only if one expert provides support. The game in which the manager consults experts simultaneously typically has multiple equilibria including one in which at least one expert supports the manager’s favorite project. We describe the set of outcomes that survive iterative deletion of weakly dominated strategies. These outcomes typically exclude the manager’s most preferred equilibrium outcome. We introduce sequential procedures and compare their performance to the simultaneous game. In general, sequential consultation may be superior or inferior to simultaneous consultation. |
| Keywords: | 38 Economics (for-2020), 3801 Applied Economics (for-2020), 3803 Economic Theory (for-2020) |
| Date: | 2025–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:cdl:ucsdec:qt3q79f8sh |
| By: | Arlindo Sk\"enderaj |
| Abstract: | I consider an environment in which a decision maker faces uncertainty and privately holds information in the form of a signal about the true state of the world. The decision maker purchases additional information from a data broker before receiving the signal realization. I characterize the data broker's optimal selling mechanism, which involves screening over all possible signals. I allow the space of all signals the data broker can sell to be arbitrarily correlated with the signal the decision maker owns. This plays a key role in designing the optimal menu. In the binary action setting, the data broker extracts the efficient surplus by offering a distinct binary signal for each type. Moreover, this result holds even when the broker does not know the prior distribution over states. In more general environments, I provide conditions on the payoff structure and the decision maker's type space under which the data broker extracts the efficient surplus. I discuss scenarios in which efficient surplus extraction is not possible. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.14103 |
| By: | Dongsoo Shin (Santa Clara University); Roland Strausz (HU Berlin) |
| Abstract: | We study a manufacturer's demand-investment decisions in distribution channels subject to double marginalization. Casting this as a mechanism design problem, we show that demand-enhancing investments strengthen retailers' incentives to exploit market power, forcing manufacturers to concede greater rents. Manufacturers therefore optimally restrict product quality or market coverage. We fully characterize which demand parameters create these perverse incentives: increases benefit manufacturers in segments where they control pricing but harm them in segments with binding incentive constraints. This reveals fundamental limits to demand-side investment in vertical relationships. |
| Keywords: | demand; investment incentives; distribution channels; double marginalization; |
| JEL: | D21 D82 L11 |
| Date: | 2025–11–25 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:553 |
| By: | Alexander Frug; Malachy James Gavan |
| Abstract: | This paper shows that stability-based equilibrium refinements may not be well defined when taken to the infinite horizon. To do so, we use a stable-set-style notion of the dynamically consistent partition, allowing for incomplete information. We provide a concrete example where, only via taking the game to the infinite horizon, the dynamically consistent partition of equilibria does not exist. |
| Keywords: | dynamic learning and communication , revision-proof equilibria |
| JEL: | D83 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1930 |
| By: | Maryam Farboodi; Nima Haghpanah; Ali Shourideh |
| Abstract: | We study how a monopolist’s use of consumer data for price discrimination affects welfare. To answer this question, we develop a model of market segmentation subject to residual uncertainty. We fully characterize when data usage monotonically increases or decreases welfare or when the effect is non-monotone. The characterization reduces the problem to one with only two demand curves, and gives a condition for the two-demand-curves case that highlights that information affects welfare in three distinct ways. In the non-monotone case, we provide tight bounds on the welfare effects of information and identify the best local direction for providing additional information. |
| JEL: | D42 D83 L12 L15 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34514 |
| By: | Mateus Joffily (CNRS, Université Lumière Lyon 2, Université Jean Monnet Saint-Etienne, emlyon business school, GATE, 69007 Lyon, France); Thijs van de Laar (Department of Electrical Engineering, Eindhoven University of Technology, Eindhoven, The Netherlands) |
| Abstract: | Variants of the Ellsberg urn experiments introduced by Machina (Am. Econ. Rev., 99(1), 385-392, 2009) have challenged several prominent models of ambiguity aversion. We show that our Bayesian hierarchical model - originally developed to explain Ellsberg-type preferences - also captures the ambiguity preferences observed in Machina's reflection example. Our findings indicate that ambiguity aversion in both the Ellsberg and Machina paradoxes can be attributed to pessimistic prior beliefs about unobserved outcomes. Moreover, the model predicts an asymmetric pattern of preferences across intermediate payoff levels in the reflection example: ambiguity aversion is stronger when the intermediate payoff lies closer to the worst outcome, while the opposite holds for ambiguity-seeking preferences. |
| Keywords: | Machina Paradox; Ambiguity Aversion; Bayesian Modeling |
| JEL: | C63 D81 D91 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2525 |
| By: | Daniel Bird; Alexander Frug |
| Abstract: | Mid- and low-level managers play a significant role within the organizational hierarchy, far beyond monitoring. It is often their responsibility to respond to opportunities and threats within their units by adjusting their subordinates’ assignments. Most such managers, however, lack the authority to adapt their subordinates’ wages. In- stead, they rely on other, more restrictive incentive schemes. We study the interaction between a front-line manager and worker, and characterize the “managerial style” as a function of the players’ relative patience and information. |
| Keywords: | front-line management , perishable incentives , asymmetric discounting |
| JEL: | D21 D82 D86 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1929 |
| By: | Sandmann, Christopher; Bonneton, Nicolas |
| Abstract: | This paper proves the existence of a non-stationary equilibrium in the canonical search-and-matching model with heterogeneous agents. Non-stationarity entails that the number and characteristics of unmatched agents evolve endogenously over time. An equilibrium exists under minimal regularity conditions and for both paradigms considered in the literature: transferable and non-transferable utility. To address potential discontinuities in match opportunities across types, our analysis introduces a generalized Schauder fixed-point theorem suitable for models with discontinuous value functions. |
| Keywords: | equilibrium existence; search-and-matching; non-stationary search; mean field games; fixed point theorem |
| JEL: | C78 D83 E32 |
| Date: | 2025–11–26 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128071 |
| By: | David Ronayne (ESMT Berlin); David P. Myatt (London Business School) |
| Abstract: | We study sampling from a finite population without replacement when seeking an extreme (lowest or highest) value. An example is a buyer searching for the lowest price. It is well known that there are decreasing returns to sampling from continuous populations: the expected minimum is a decreasing and discretely convex function of the sample size. We show that is true for sampling without replacement from a finite population. We also give a simple sufficient condition on population values for the properties to hold for other order statistics. |
| Keywords: | order statistics; sampling without replacement; decreasing returns; consumer search; |
| Date: | 2025–11–27 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:555 |