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on Microeconomics |
| By: | Kiryl Khalmetski (New Economic School); Mark T. Le Quement (School of Economics, University of East Anglia); Florian Hoffmann (Faculty of Economics and Business KU Leuven) |
| Abstract: | We formalize the notion of belief homophily under asymmetric information by introducing a preference for perceived disagreement aversion. We study its implications for information sharing in a disclosure model where a privately informed sender and an uninformed receiver have heterogeneous priors, while the sender is averse to the receiver’s perceived disagreement. Equilibrium disclosure is partial and tends to confirm the prior mean of the more confident player. The receiver earns more from senders whose prior means differ more from his own but whose prior variances are more similar. Perceived disagreement aversion implies qualitatively reverse predictions than aversion to actual disagreement. |
| Keywords: | strategic disclosure, psychological games, disagreement aversion |
| JEL: | D81 D83 D91 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:abo:neswpt:w0293 |
| By: | Malte Kornemann (University of Bonn) |
| Abstract: | I examine when robustly beneficial information can be provided to a receiver who also learns from misspecified background sources that are outside the provider’s control. In contrast to information provision for rational receivers, any source can be harmful under certain misspecifications of background sources. I show that the key aspect of the background environment enabling robustly beneficial design is the receiver’s perception rather than the true structure. For any background source structure and design of the provided source, there exists a misspecification under which harm occurs. Consequently, even complete knowledge of the true structure is insufficient and knowledge of the receiver’s perception is necessary. Under complete knowledge of the perception, I demonstrate how to design an information source that is robustly non-harmful and often strictly beneficial, regardless of the true background sources. |
| Keywords: | Misspecified learning, value of information, robust information design |
| JEL: | D80 D83 D90 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:411 |
| By: | Artyom Jelnov (Ariel University); Maxim Senkov (Department of Actuarial, Financial and Economic Mathematics. Universitat de Barcelona and BEAT) |
| Abstract: | In a political-agency model, an incumbent can initiate a restrictive policy in response to a crisis state of the world. Both the opposition and the citizen value the incumbent's policy matching the state; however, they are uncertain about the incumbent's true motives. If the incumbent is of the dictatorial type, a restrictive policy that is not protested by both the opposition and the citizen leads to the start of authoritarian rule. We show that when the incumbent is relatively unlikely to be dictatorial, the presence of radical opposition, protesting the restrictive policy regardless circumstances, can reduce voter welfare: it eliminates the efficient state-matching equilibrium, since the opposition never fully reveals dictatorial incumbents. Conversely, when the incumbent is relatively likely to be dictatorial, a high probability of radical opposition can increase voter welfare by deterring the dictatorial type from implementing the restrictive policy. |
| Keywords: | democratic backsliding, autocratization, emergency powers, populist radical parties |
| JEL: | D72 D82 D83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:495web |
| By: | Allen Vong |
| Abstract: | I revisit the canonical reputation framework in which a long-lived player interacts with a sequence of short-lived opponents and may be either strategic or a commitment type who always plays the same, possibly mixed, action. I depart by allowing short-lived players to be uncertain not only about the long-lived player's type, but also about the signal structure. I show that even vanishingly small misspecified skepticism of short-lived players about commitment as an explanation of the observed signals can completely eliminate reputation effects: a patient strategic long-lived player's equilibrium payoff is bounded above by the canonical complete-information benchmark. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.17090 |
| By: | Seungjin Han; Siyang Xiong |
| Abstract: | We study contracting with imperfect commitment and identify minimal canonical contract spaces that fully characterize equilibrium outcomes under general preferences. Different from previous solutions, our framework accommodates infinite agent type spaces (unlike Bester and Strausz (2001)), non-quasi-linear utilities (unlike Skreta (2006)), and settings where the principal lacks the commitment power typically assumed in information design (unlike Doval and Skreta (2021)). Moreover, our results apply to both single- and multi-principal environments, providing a unified and tractable approach to contracting under limited commitment. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.19884 |
| By: | Suñas, Zygphryd |
| Abstract: | I develop a simple theory of supervised training under multitask incentives in which participation is valuable independently of completion. When completion-inducing effort is not contractible and supervisors allocate time across competing activities, equilibrium completion effort may be pinned to the minimum required for participation. The model yields two regimes: an alignment regime, where effort is determined by marginal incentives, and a captive regime, where it is pinned by the participation constraint. Comparative statics are regime dependent and can be counterintuitive: higher completion payoffs and participation benefits may reduce effort under a captive regime, while portable benefits and competition can mitigate this distortion by raising outside options. I discuss this mechanism as an explanation for low completion rates and extended time-to-degree in graduate education in developing contexts. |
| Keywords: | multitask incentives, supervision, participation constraints, graduate completion, higher education, human capital, development |
| JEL: | D23 D86 M5 |
| Date: | 2026–04–07 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128702 |
| By: | Morton, Alec (Strathclyde Business School); Østerdal, Lars Peter (Department of Economics, Copenhagen Business School) |
| Abstract: | A feature in many multicriteria problems is a preference for “balance”, understood as achieving a desired distribution (e.g., equality or target proportions) of resources across stakeholders or conceptual categories. This paper presents a normative exploration of the implications of balance preferences when baselines are uncertain or contested. We prove an impossibility theorem showing that if a decision maker is strictly outcome-based yet expresses a strict preference for balance over gains whatever the baseline, then an inconsistency arises. We then show that if the balance preference is weakened and combined with standard conditions (such as monotonicity and continuity), the only consistent aggregation rule is a simple additive one. Our results highlight that deliberative decision making necessarily involves reconciling preference intuitions “in the small” (over a fragment of the decision space) and “in the large” (over the whole of that space). |
| Keywords: | Multi-criteria decision analysis (MCDA); Balance; Baseline; Gains; Portfolio Decision Analysis; Consequentialism; Inequality Aversion; Additive representation |
| JEL: | C44 D63 D71 D81 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:cbsnow:2026_009 |
| By: | Eleftherios Filippiadis (Department of Economics, University of Macedonia, Greece) |
| Abstract: | This paper studies how the distribution of preference intensity affects product survival. Consumers may have the same average valuation of a product attribute, yet differ sharply in how concentrated that valuation is across the population. I show that this distinction matters for market selection. In a differentiated-product economy with fixed operating costs, a product survives only if it attracts enough revenue to cover its fixed cost. When the revenue contribution of consumers is convex in preference intensity, concentrating a fixed aggregate valuation among fewer high-intensity consumers raises the revenue of high-attribute products. Thus, small groups of strongly attached consumers can sustain varieties that would fail under a more diffuse distribution of moderate preferences. In a ranked-attribute benchmark, this condition has a simple interpretation: the product benefits from concentration when it is sufficiently distant from the share-weighted center of the active product range. The paper also separates private survival from welfare and aggregate impact. Applications to green products and privacy-oriented digital services show that cleaner or more privacy-protective varieties improve aggregate outcomes only when they sufficiently displace dirtier or more data-intensive alternatives. |
| Keywords: | preference concentration; product survival; behavioral heterogeneity; differentiated products; green preferences; privacy preferences. |
| JEL: | D11 D43 L11 L13 Q56 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2026_09 |
| By: | Bingyao Liu; Yao Luo |
| Abstract: | Capacity constraints are central to oligopoly competition in many industries, yet existing multiproduct Bertrand theory does not characterize equilibrium when capacity binds across markets. We establish existence and uniqueness of Bertrand–Nash equilibrium in a multimarket, multiproduct oligopoly under multinomial logit demand, with both linear and convex costs. Capacity creates cross-market spillovers: pricing in one market affects the shadow value of capacity in others. Methodologically, we extend the aggregative-games framework to a nested fixed-point structure separating across-market capacity allocation from within-market pricing, using tools from nonsmooth analysis to handle kinks from binding constraints. The framework yields new insights for merger analysis: binding capacity dampens merger-induced price increases through shadow-cost relief, while post-merger reallocation of scarce capacity can raise consumer surplus. However, the merged firm's privately optimal reallocation generally differs from the social optimum, creating a role for merger remedies. |
| Keywords: | Differentiated Products; Capacity Constraints; Mergers; Aggregative Games; Cross-Market Spillovers; Equilibrium Uniqueness |
| JEL: | L13 D24 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-821 |
| By: | Yuhang Wu; Assaf Zeevi |
| Abstract: | On a platform with many sellers, should a pricing algorithm explicitly model competitors' prices when learning demand? Classical learning arguments suggest an affirmative answer: ignoring competitors induces model misspecification and inefficiency. In contrast, recent work on algorithmic collusion suggests that strategic obliviousness -- deliberately ignoring competitor prices -- may facilitate collusive outcomes and improve profits. We study this modeling choice in a stylized competitive market with unknown noisy demand, in which multiple sellers repeatedly set prices and estimate demand via iterated least squares, and either incorporate competitors' prices into their demand models (informed) or ignore them (oblivious). We first show that, relative to a monopolist, an oblivious seller in a competitive market must explore more aggressively to compensate for the loss of dynamic competitor information. Building on this insight, we characterize market dynamics when all sellers are oblivious and show that prices converge to the competitive outcome under sufficient exploration, while a continuum of pseudo-equilibria arises when exploration decays. Analyzing the resulting price trajectories, we uncover an excursion phenomenon that gives rise to transient collusive patterns that dissipate as learning progresses. In markets with both oblivious and informed sellers, the informed strictly out-earn the oblivious. Read as a strategy game, the modeling choice has a unique Nash equilibrium: the all-informed market, in which prices converge to the competitive outcome efficiently. Overall, our results indicate that collusive patterns are not robust and are not sustained by oblivious modeling; therefore, incorporating competitor information, together with sufficient price exploration, remains a reliable strategy for sellers in competitive markets. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.05363 |
| By: | Mihir Bhattacharya; Ojasvi Khare |
| Abstract: | We study the division of a heterogeneous good between two agents into contiguous bundles, each defined by a starting location and a quantity, in a purely ordinal framework that does not rely on cardinal valuations. We introduce a general class of monotonic preferences representable by indifference curves. We show that an allocation is Pareto efficient and envy-free if and only if it lies in a specific ``balanced region'', implying that an equal split is fair only when it belongs to this region. We further show that no rule can simultaneously satisfy Pareto efficiency, envy-freeness, and strategy-proofness. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.06059 |
| By: | Noriaki Matsushima (Osaka School of International Public Policy, the University of Osaka) |
| Abstract: | This paper develops a model of two monopoly markets linked by a common consumer budget constraint. A data-rich firm can set personalized prices in one market, whereas a traditional firm in the other must charge a uniform price. Personalized pricing can expand demand in the data-rich firm's market, but because purchases come from a shared budget, it shrinks the residual demand facing the traditional firm and reduces its profit. When budgets are sufficiently tight, this adjacent-market distortion dominates same-market demand expansion, reducing total surplus. Thus, favorable same-market evidence alone is insufficient to support a benign assessment. |
| Keywords: | personalized pricing, competition law, cross-market effects, consumer budgets |
| JEL: | L13 D43 L41 K21 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:26e006 |
| By: | Robert M. Hunt; Konstantinos Serfes; Yin Zhang |
| Abstract: | This paper develops a two-sided model of the payment card market with elastic consumer demand, merchant and network market power, ad valorem interchange fees, cardholder rewards and cash as an alternative payment method. Drawing on insights from public finance, we define a credit card tax—an endogenous wedge between consumer and merchant prices generated by interchange fees, rewards, and credit card adoption. We show how this tax affects equilibrium prices, platform profits and welfare. Our analysis yields a novel and policy-relevant result: Contrary to conventional wisdom, capping interchange fees can increase equilibrium rewards when consumer demand is relatively inelastic. This, in turn, raises credit card adoption and intensifies cross-subsidization, benefiting card users, potentially at the expense of cash users. By contrast, when demand is more elastic, fee caps reduce rewards and card usage, improving outcomes for both groups. We also characterize the conditions under which interchange fee caps enhance allocative efficiency and encourage socially desirable payment choices. Overall, the paper offers new theoretical insights into the regulation of two-sided payment markets. |
| Keywords: | credit cards; two-sided networks; merchant competition; interchange fees; regulation |
| JEL: | L13 L40 G28 E42 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103315 |
| By: | Filipp Ushchev; Roger LR Lagunoff |
| Abstract: | Coordination failures arise when society gets stuck in a “bad” equilibriumwhen a Pareto superior one exists. How does wealth inequality affect coordinationfailure? This paper models a large, heterogeneous society where individuals’ consumptionsavings choices are influenced by investment spillovers. The cost of coordination failure(CCF) in this society is the welfare difference between the “good” (high investment) andthe “bad” (low investment) equilibrium. We provide natural conditions under which theCCF is increasing under mean-preserving spreads in wealth inequality.We also establish a trifurcation result in which high enough inequality creates acoordination failure where none had existed. Starting from a stable equilibrium whereinvestment is unaffected by inequality, the equilibrium becomes unstable as inequalityincreases, and two other stable equilibria — a good one and a bad one — emerge. In thebad equilibrium, inequality always reduces both aggregate investment and aggregatewelfare. In the good one, inequality is always investment-enhancing. Furthermore, there is a range of parameters where inequality is actually Pareto-improving in the goodequilibrium. In all cases, the welfare gap (the CCF) between the two equilibria increaseswith inequality |
| Keywords: | aggregative games; Coordination problems; cost of coordination failure; wealth inequality |
| JEL: | C72 D30 D62 |
| Date: | 2026–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/407352 |
| By: | Karun Adusumilli; Abhi Vemulapati |
| Abstract: | Incentives in experimental design are often misaligned: experimenters design and finance experiments to seek regulatory approval, while regulators seek to maximize social-welfare. We propose a framework to resolve this conflict, wherein regulators set a minimum expected welfare threshold, and experimenters optimize designs subject to this constraint. It requires no knowledge of experimenters' private preferences or costs and mitigates strategic Bayesian persuasion. Under normal priors, sampling according to the Neyman-allocation is always optimal, independent of the specific objectives. Furthermore, we characterize the optimal stopping-rule. In a numerical study calibrated to historical clinical-trial data, our framework reduces expected sample-sizes by over 48% relative to classical designs that attain the same social-welfare. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.16703 |
| By: | Hugh Montag; Randal J. Verbrugge |
| Abstract: | Shelter inflation, driven by continuing-tenant rents, accounts for one-third of the consumer price index (CPI). Yet continuing-tenant rent inflation, notoriously sticky, has attracted almost no theoretical attention. Standard sticky price theories cannot explain the basic facts. We provide a simple theory yielding implicit contracts as an equilibrium. The landlord will wish to renege when costs rise; reputation is unavailable to enforce the contract. A well-established mechanism serves: landlord off-equilibrium-path play might result in renter frustration and endogenous breakup. Our implicit-contracts theory gracefully explains nominal (rather than real) rigidity, and provides a microfounded explanation of key rental market facts. |
| Keywords: | continuing-tenant rent; inflation; frustration; customer anger; costly punishment |
| JEL: | R31 R21 E31 |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:103313 |
| By: | Marina Núñez (Universitat de Barcelona, Barcelona Economic Analysis Team); Francisco Robles (Universitat de Barcelona, Barcelona Economic Analysis Team) |
| Abstract: | We revisit the classical tension between stability and marginalism in the package allocation model of Milgrom [2007]. Our main finite-market stability results provide multiple necessary and sufficient conditions for the Banzhaf payoff vector to belong to the core. The key condition is the feasibility of an optimal assignment in which each buyer receives one of his most preferred bundles. Further, we show that the Shapley and Banzhaf payoff vectors coincide if and only if the Banzhaf payoff vector is in the core. We then consider replica economies. We construct a market in which, after finitely many replications, neither the Shapley nor the Banzhaf payoff vector belongs to the core of the replicated game. Strikingly, as the number of replicas tends to infinity, none of those payoff vectors converges to the core. Consequently, they do not converge to a competitive-equilibrium payoff vector in the limit. This stands in contrast to Luo et al. [2024], which shows that, in their setting of assignment games with multiple partnership, both payoff vectors converge to a competitive-equilibrium payoff vector as the number of replicas tends to infinity. |
| Keywords: | Package allocations, core, Banzhaf value, Shapley value |
| JEL: | C71 C78 D44 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:498web |
| By: | Jesse Perla; Pau Roldan-Blanco; Murat Alp Celik; Laurent Cavenaile |
| Abstract: | Technological advances in advertising enable firms to contact new customers faster and to better target those most likely to buy their products. To study the aggregate implications, we develop a framework of demand as a network, where heterogeneous consumers dynamically become "aware" of differentiated products. With their adver- tising choices, firms can affect the rate at which their networks expand ("contacting") and the probability with which they match with high valuation consumers ("targeting"). When calibrating the model to the advent of digital advertising in the United States, we find an increase in aggregate productivity due to improved consumer-firm match quality. Moreover, while both contacting and targeting intensified over this period, firms did not sufficiently increase their targeting investment relative to the social optimum. |
| Keywords: | advertising, choice sets, customer capital, information frictions, product awareness, Targeting |
| JEL: | D40 E20 M30 O40 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1577 |
| By: | Evan M. Calford |
| Abstract: | This paper introduces ambiguity-dominance as a novel equilibrium selection procedure that, in 2x2 games, unifies risk-dominance and payoffdominance as special cases. Ambiguity-dominance provides an intuitive answer to the question "Which equilibrium is most robust to ambiguous beliefs about the behavior of other players?" and is defined for all finite normal form games. Ambiguity-dominance is parametrized by players' ambiguity preference and, using data from three recent experiments we find, on aggregate, ambiguity loving coupled with substantial subject-level heterogeneity. |
| Keywords: | Equilibrium selection, ambiguity aversion |
| JEL: | C70 D81 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:acb:cbeeco:2025-707 |
| By: | Asbjoern Juul Petersen (Department of Economics, University of Copenhagen); Jacob Richard Boeggild Strabo (Department of Economics, University of Copenhagen) |
| Abstract: | We develop a general sorting model that incorporates both self-selection by applicants, who assess their own skills, and evaluation by admissions agents, who rely on noisy signals of skills. Building upon the theoretical framework of the Roy model, our analysis examines how the presence of noise in signals of skills influences admission behaviour and the wage distribution. Our analysis reveals two novel behavioural effects on admission procedures. First, institutions may optimally assign positive weight to skill signals that are uncorrelated and unproductive in the relevant sector—a phenomenon we call talent hoarding. This talent-hoarding effect disrupts comparative advantages, reallocates talent towards restricted sectors, and diminishes overall efficiency. With the presence of noise in signals, the admissions agent is further incentivised to increase the number of admitted applicants, which lowers wages. This, in turn, reduces reliance on admission rules and promotes more informative self-selection—a behavioural effect we label talent separation. Under relatively lenient assumptions, talent separation improves efficiency. Evidence from Danish administrative data reveals empirical patterns consistent with the predicted talent-hoarding effect, and a structural model of Denmarks education system highlights that the two behavioural effects can have a substantial impact on the distribution of wages. |
| Keywords: | talent allocation, asymmetric information, noisy signals, self-selection, two-sided selection, college admissions, recruitment |
| JEL: | D82 I23 J24 D83 |
| Date: | 2026–05–18 |
| URL: | https://d.repec.org/n?u=RePEc:kud:kucebi:2608 |