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on Microeconomics |
| By: | Johannes H\"orner; Paula Onuchic |
| Abstract: | We study a reputational cheap-talk environment in which a judge, who is privately and imperfectly informed about a state, must choose between two speakers of unknown reliability. Exactly one speaker is an expert who perfectly observes the state, while the other is a quack with no information. Both speakers seek to be selected, while the judge wishes to identify the expert. We show that, quite generally, there is an equilibrium in which the expert is honest, yet the judge favors more extreme signals. This bias toward extremism does not induce exaggeration by the expert, but instead sustains truthful communication. The quack strategically mimics the expert's speech, and sometimes panders to the judge's prior. We show that learning in this environment exhibits an ``information begets information'' property: judges with more precise private information are more likely to identify the expert and learn the true state, implying that exposure to competing sources of uncertain reliability may amplify informational inequality across audiences. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.00653 |
| By: | Chia-Hui Chen; Hulya Eraslan; Junichiro Ishida; Takuro Yamashita |
| Abstract: | We consider a dynamic model in which a principal decides what information to release about a product of unknown quality (e.g., a vaccine) to incentivize agents to experiment with the product. Assuming forward-looking agents, their incentive to wait and see others’ experiences poses a significant obstacle to social learning, implying suboptimality of full transparency. We show that the optimal feedback mechanism to mitigate information free-riding takes a strikingly simple form: the principal makes a binary recommendation and recommends against adoption with some probability even when she is relatively optimistic; once she recommends against adoption, she never reverses her stance. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1247r |
| By: | Youichiro Higashi; Kemal Ozbek; Norio Takeoka |
| Abstract: | In this paper, we study axiomatic foundations of Bayesian persuasion, where a principal (i.e., sender) delegates the task of choice making after informing a biased agent (i.e., receiver) about the payoff relevant uncertain state (see, e.g., Kamenica and Gentzkow (2011)). Our characterizations involve novel models of Bayesian persuasion, where the principal can steer the agent's bias after acquiring costly information. Importantly, we provide an elicitation method using only observable menu-choice data of the principal, which shows how to construct the principal's subjective costs of acquiring information even when he anticipates managing the agent's bias. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23409 |
| By: | John W.E. Cremin (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | Modern society is increasingly polarized, even on purely factual questions, despite greater access to information than ever. In a model of sequential sociallearning, I study the impact ofmotivated reasoningon information aggregation. This is a belief formation process in which agents trade-off accuracy against ideological convenience. I find that even Bayesian agents only learn in very highly connected networks, where agents have arbitrarily large neighborhoods asymptotically. This is driven by the fact that motivated agents sometimes reject information that can be inferred from their neighbors’ actions when it refutes their desired beliefs. Observing any finite neighborhood, there is always some probability that all of an agent’s neighbors will have disregarded information thus. Moreover, I establish thatconsensus, where all agents eventually choose the same action, is only possible with relatively uninformative private signals and low levels of motivated reasoning. |
| Keywords: | Social Learning, Motivated Reasoning, Networks, polarization |
| JEL: | D72 D83 D85 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2527 |
| By: | Eric Gao |
| Abstract: | I study multidimensional sequential screening. A monopolist contracts with an agent endowed with private information about the distribution of their eventual valuations of different goods; a contract is written and the agent reports their initial private information before drawing and reporting their valuations. In these settings, the monopolist frontloads surplus extraction: Any information rents given to the agent to elicit their post-contractual valuations can be extracted in expectation before valuations are drawn. This significantly simplifies the multidimensional screening problem. If the agent's valuations satisfy invariant dependencies (valuations can be dependent across dimensions, but how valuations are coupled cannot vary in their initial private information), the optimal mechanism coincides with independently offering the optimal sequential screening mechanism for each good, regardless of the dependency structure. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23274 |
| By: | Chia-Hui Chen; Junichiro Ishida; Wing Suen |
| Abstract: | We consider a screening problem in which a data seller offers a dynamic payment schedule for a sequence of experiments to a privately informed buyer. Different buyer types face different expected costs for the same payment schedule. This payment gap can be optimized to reduce information rent. Dynamic mechanisms strictly increase seller revenue compared to the optimal static mechanism, and may even extract full surplus under some conditions. We obtain a full characterization of optimal dynamic mechanisms, which can take the simple form of a binary experiment at each stage. Payments are backloaded and experiments become progressively more informative over stages. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1294 |
| By: | Marcus Pivato (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | A single agent may encounter many sources of uncertainty and many menus of outcomes, which can be combined together into many different decision problems. There may be analogies between different uncertainty sources (or different outcome menus). Some uncertainty sources (or outcome menus) may exhibit internal symmetries. The agent may also have different levels of awareness. In some situations, the state spaces and outcome spaces have additional mathematical structure (e.g. a topology or differentiable structure), and feasible acts must respect this structure (i.e. they must be continuous or differentiable functions). In other situations, the agent might only be aware of a set of abstract "acts", and be unable to specify explicit state spaces and outcome spaces. We introduce a new approach to decision theory that addresses these issues. It posits multiple uncertainty sources and outcome menus, linked by the aforementioned analogies, symmetries, and awareness changes. It makes no assumption about the internal structure of these sources and menus, so it is applicable in diverse mathematical environments (i.e. categories). In this framework, we define a suitable notion of subjective expected utility (SEU) representations, and provide conditions under which such SEU representations are unique. |
| Keywords: | uncertainty, unawareness, analogy, category theory |
| Date: | 2025–12–14 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-05415427 |
| By: | Marcus Pivato (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | In recent work, we developed a new model of decision-making under uncertainty, which can simultaneously accommodate multiple sources of uncertainty and multiple outcome menus, related by analogies and/or changes in awareness. This framework can also accommodate state spaces and outcome spaces with additional structure (e.g. a topology), as well as decision problems where states and outcomes are not explicitly specified. The present paper axiomatically characterizes a subjective expected utility representation that is "global" in two senses. First: it posits probabilistic beliefs for all uncertainty sources and utility functions over all outcome menus, which simultaneously rationalize the agent's preferences across all possible decision problems, and which are consistent with the aforementioned analogies, symmetries, and awareness levels. Second: it applies in many mathematical environments (i.e. categories), making it unnecessary to develop a separate theory for each one. We illustrate this by applying our representation in several categories (sets, measurable spaces, topological spaces, bounded distributive lattices, Riesz spaces, and Banach algebras), and showing that it delivers utility functions suitable to each one. |
| Keywords: | uncertainty, unawareness, analogy, category theory, Anscombe-Aumann |
| Date: | 2025–12–14 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-05415430 |
| By: | Can Urgun; Mark Whitmeyer |
| Abstract: | We study continuous-time persuasion where a sender controls both how informative a signal is over time and when to stop providing information to a receiver. Given an exogenous signal process, the sender can both garble the evolving signal path and delay the receiver's decision at a convex, increasing cost of time. We show that, although both instruments are available, any optimal persuasion scheme is fully transparent: the sender keeps the signal fully informative and persuades solely by choosing when to stop. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.16850 |
| By: | Qiushi Han; David Simchi-Levi; Renfei Tan; Zishuo Zhao |
| Abstract: | We study a sequential mechanism design problem in which a principal seeks to elicit truthful reports from multiple rational agents while starting with no prior knowledge of agents' beliefs. We introduce Distributionally Robust Adaptive Mechanism (DRAM), a general framework combining insights from both mechanism design and online learning to jointly address truthfulness and cost-optimality. Throughout the sequential game, the mechanism estimates agents' beliefs and iteratively updates a distributionally robust linear program with shrinking ambiguity sets to reduce payments while preserving truthfulness. Our mechanism guarantees truthful reporting with high probability while achieving $\tilde{O}(\sqrt{T})$ cumulative regret, and we establish a matching lower bound showing that no truthful adaptive mechanism can asymptotically do better. The framework generalizes to plug-in estimators, supporting structured priors and delayed feedback. To our knowledge, this is the first adaptive mechanism under general settings that maintains truthfulness and achieves optimal regret when incentive constraints are unknown and must be learned. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.21794 |
| By: | John W.E. Cremin (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | Models of social learning conventionally assume that all actions are visible, whereas in reality, we can often choose whether or not to advertise our choices. Inthis paper, I study a model of sequential social learning in which social agents choose whether or not to let successors see their action, only wanting to do so if they are sufficiently confident in their choice (they are timid), and noise agents act randomly. I find that in sparse networks, this produces a form of unravelling to the effect that noise agents are overrepresented. This can damage learning to an arbitrary extent if social agents are sufficiently timid. In dense networks, however, no such unravelling occurs, and the combination of noise and timidity can facilitate complete learning even with bounded beliefs. |
| Keywords: | Sequential Social Learning, Endogenous Social Networks, Network Theory, Information Economics |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2526 |
| By: | Gregorio Curello; Ludvig Sinander; Mark Whitmeyer |
| Abstract: | In finite problems comprising objects, situations, and an object- and situation-contingent payoff function, we study the comparative statics of the set of undominated objects, meaning those for which there exists no mixture over objects that is superior whatever the situation. We consider both weak and strict dominance (corresponding to different degrees of 'strictness' in the definition of superiority). Our main theorem characterises those payoff transformations which robustly expand the not-weakly-dominated and not-strictly-dominated sets: the necessary and sufficient condition is that payoffs be transformed separately across situations, in either a monotone-concave or a constant manner. We apply our results to Pareto frontiers and games. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.15341 |
| By: | Hervé Crès (Division of Social Science, New York University in Abu Dhabi, 129188, Abu Dhabi, UAE); Mich Tvede (School of Economics, University of Sheffield, Sheffield S10 2TU, UK) |
| Abstract: | Majority voting is widely observed to produce stable policy outcomes, despite theoretical predictions of instability in multidimensional policy spaces. The present paper shows that stability can arise because voters have non-ordered preferences. We model preferences as correspondences within d-dimensional policy spaces and introduce a geometric measure of orderedness based on the angular spread α of strictly preferred alternatives. Our main result is that majority equilibria exist provided α |
| Keywords: | ambiguity, centerpoint theorem, collective decision-making, Euclidean preferences, majority equilibrium, non-ordered preferences, status quo bias, voting |
| JEL: | C65 D71 D72 D81 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2025010 |
| By: | Leo Kurata; Kensei Nakamura |
| Abstract: | This paper studies preference aggregation under ambiguity when agents have incomplete preference relations due to imprecise beliefs. We introduce the "dual" of the Pareto principle, which respects unanimity among individuals, including those with unexpressed opinions. Our first theorem shows that, in most cases, this principle leads to a dictatorial rule in taste aggregation. We argue that this stems from the problem of spurious unanimity, even when the individuals have the same prior set. By weakening the above principle to avoid respecting spurious unanimity, the second theorem characterizes novel belief-aggregation rules, under which society does not discard any combination of plausible priors. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.16240 |
| By: | R. Pablo Arribillaga; Agustin G. Bonifacio |
| Abstract: | In problems involving the allocation of a single non-disposable commodity, we study rules defined on a general domain of preferences requiring only that each preference exhibit a unique global maximum. Our focus is on rules that satisfy a relaxed form of strategy-proofness, known as non-obvious manipulability. We show that the combination of efficiency and non-obvious manipulability leads to impossibility results, whereas weakening efficiency to unanimity gives rise to a large family of well-behaved non-obviously manipulable rules. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.15024 |
| By: | Alexander M. G. Cox; Daniel Hernandez-Hernandez |
| Abstract: | We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she must also ensure that the mark-to-market value of her portfolio remains above a given threshold. When the mark-to-market value is based on a more pessimistic valuation method, such as model-independent bounds, we recover a novel optimisation problem for the agent where the agents investment problem must satisfy a pathwise constraint. For complete markets, the expression of the optimal terminal wealth is given, using the max-plus decomposition for supermartingales. Moreover, for the Black-Scholes-Merton model the explicit form of the process involved in such decomposition is obtained, and we are able to investigate numerically optimal portfolios in the presence of options which are mispriced according to the agent's beliefs. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.24371 |
| By: | Mauricio Ribeiro |
| Abstract: | Economists often rely on people’s choices to infer their preferences. However, inferring preferences from choices becomes problematic when people face unobserved constraints. In this paper, I study how to (cautiously) infer preferences from choices when the choices of the members of a social group are subject to a constraint that we only imperfectly know. When this happens, heterogeneity in the group’s choices, along with more information about the constraint, helps recover the preferences of group members, whereas homogeneity in choices hinders it. I further argue that standard approaches to choice-based welfare analysis can lead to misleading inferences about welfare when there are unobserved social constraints. |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:25/809 |
| By: | Rosokha, Yaroslav; Wu, Steven Y. |
| Abstract: | Behavioral nudges have come under recent scrutiny due to meta-analyses showing that the impact of nudges may be over-stated in academic studies relative to scaled nudges conducted by government nudge units. Unfortunately, the economics literature provides few, if any, theoretical mechanisms for understanding the limits of behavioral nudges. We develop a theoretical model, which examines behavioral nudges from the perspective of an incentive design problem, where discrete choice architecture strategies are used rather than monetary incentives. We propose that nudge incentive power should satisfy incentive compatibility conditions. This provides researchers with a clear theoretical mechanism for understanding when we should expect nudges to induce a response and when they might have muted effects across different contexts. We also highlight that when the social planner has a “common value” payoff function and consumers are heterogeneous, even a nudge that appears successful in inducing a response at the population level may not increase welfare. This is because a nudge is likely to induce a larger response from non-targeted subgroups rather than the targed subgroup. This creates an illusion of success where distortions are created with the non-targeted group while generating only weak or no response from the targeted group. Finally, we show that an optimal monetary based contract can induce targeted subgroups to respond while not creating distortions by the non-targeted subgroup. |
| Keywords: | Institutional and Behavioral Economics |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360714 |
| By: | Umutcan Salman |
| Abstract: | I develop a revealed preference framework to test whether an aggregate allocation of indivisible objects satisfies Pareto efficiency and individual rationality (PI) without observing individual preferences. Exploiting the type-based preferences of Echenique et. al. (2013), I derive necessary and sufficient conditions for PI-rationalizability. I show that an allocation is PI-rationalizable if and only if its allocation graph is acyclic. Next, I analyse non-PI-rationalizable allocations. First, I study the three respective problems: removal of a minimum size of subset of individuals/types/objects to restore PI-rationalizability. I prove that these three problems are NP-complete. Then, I provide an alternative goodness-of-fit measure, namely Critical Exchange Index (CEI). The CEI assess the highest portion of individuals who can involve exchanging their final objects to reach PI. This measure shows the extent of inefficiencies. The results yield the first complete revealed preference analysis for Pareto efficiency and individual rationality in matching markets and provide an implementable tool for empirical applications. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23352 |
| By: | Yotam Gafni |
| Abstract: | Consider a social-choice function (SCF) is chosen to decide votes in a formal system, including votes to replace the voting method itself. Agents vote according to their ex-ante preference between the incumbent SCF and the suggested replacement. The existing SCF then aggregates the agents' votes and arrives at a decision of whether it should itself be replaced. An SCF is self-maintaining if it can not be replaced in such fashion by any other SCF. Our focus is on the implications of self-maintenance for centralization. We present results considering optimistic, pessimistic and i.i.d. approaches w.r.t. agent beliefs, and different tie-breaking rules. To highlight two of the results, (i) for the i.i.d. unbiased case with arbitrary tie-breaking, we prove an ``Arrow-Style'' Theorem for Dynamics: We show that only a dictatorship is self-maintaining, and any other SCF has a path of changes that arrives at a dictatorship. (ii) If we take into account wisdom of the crowd effects, for a society with a variable size of ruling elite, we demonstrate how the stable elite size is decreasing in both how extractive the economy is, and the quality of individual decision-making. All in all we provide a basic framework and body of results for centralization dynamics and stability, applicable for institution design, especially in formal ``De-Jure'' systems, such as Blockchain Decentralized Autonomous Organizations (DAOs). |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22051 |
| By: | Giampaolo Bonomi |
| Abstract: | We study how open disagreement influences team performance in a dynamic production game. Team members can hold different priors about the productivity of the available production technologies. Initial beliefs are common knowledge and updated based on observed production outcomes. We show that when only one technology is available, a player works harder early on when her coworkers are initially more pessimistic about the technology's productivity. Holding average team optimism constant, this force implies that a team's expected output increases in the degree of disagreement of its members. A manager with the task of forming two-member teams from a large workforce maximizes total expected output by matching coworkers' beliefs in a negative assortative way. When alternative, equally good, production technologies are available, a disagreeing team outperforms any like-minded team in terms of average output and team members' welfare. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22736 |
| By: | Job Boerma; Andrea Ottolini; Aleh Tsyvinski |
| Abstract: | In sorting literature, comparative statics for multidimensional assignment models with general output functions and input distributions is an important open question. We provide a complete theory of comparative statics for technological change in general multidimensional assignment models. Our main result is that any technological change is uniquely decomposed into two distinct components. The first component (gradient) gives a characterization of changes in marginal earnings through a Poisson equation. The second component (divergence-free) gives a characterization of labor reallocation. For U.S. data, we quantify equilibrium responses in sorting and earnings with respect to cognitive skill-biased technological change. |
| JEL: | E0 J01 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34591 |
| By: | Federico Etro |
| Abstract: | We analyze the economic dynamics of art markets through workshops that transmit artistic tradition to apprentices and invest in innovations that shape art history. Initial innovations are more radical and associated with low prices and increasing profitability, but the subsequent evolution implies a gradual convergence toward a steady state with stable quality and prices. The equilibrium involves under-investment in creativity, a problem that can be solved through institutions setting payments for apprenticeship, such as art guilds. Heterogeneous talent can generate a highly skewed distribution of art prices with superstar effects. We analyze the role of principal-agent contracts between patrons and artists when quality is not verifiable, cost-saving innovations and mass production, price-setting artists and dealers, endogenous entry of artists and networks of interdependent artistic traditions. |
| Keywords: | Art history, Artistic innovation, Art prices, Patron-artist contracts |
| JEL: | Z11 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2025_21.rdf |
| By: | Sylvain Chassang |
| Abstract: | This paper argues that in long-term consumer–producer relationships, menus of contracts can often be advantageously replaced by a single generous contract such that, at any point in time, a consumer’s cumulative transfers equal the cumulative transfers they would have made under the contract that would have been best for them in hindsight. Such generous long-term contracts can increase skeptical consumers’ demand for complex and higher-powered contracts while approximately implementing the same outcomes as the underlying menu evaluated by a rational decision maker. Applications include voluntary load shedding in retail electricity markets and cost sharing in health insurance. |
| JEL: | D47 D82 D86 I13 Q41 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34593 |