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on Microeconomics |
| By: | Biglaiser, Gary; Crémer, Jacques; de Cornière, Alexandre; Mantovani, Andrea |
| Abstract: | As cloud computing continues to expand, it has drawn significant attention from policymakers due to concerns over market concentration and potentially controversial practices employed by dominant providers. In this paper, we examine the impact of egress fees, which are imposed on users when switching providers. Using a two-period horizontal differentiated duopoly model, we analyze their effects on firms and society. Our findings reveal that cloud providers have strong incentives to implement egress fees, yet these fees harm users. Regulating egress fees has often been evoked as a solution, ranging from banning them to capping them at the cost of transfer. We find that regulation improves user surplus, but excessive regulation, such as banning such fees, may harm total welfare when providers’ data-transfer costs or users’ operational switching costs are high. We also find that regulation can have opposing effects on societal outcomes: while it may incentivize cloud providers to increase switching costs for users, thereby harming society, it may also stimulate cloud usage, a consideration that may matter in policy environments where increasing cloud adoption is itself an objective. |
| Keywords: | cloud computing; egress fees; anti-competitive practices |
| JEL: | K21 L13 L51 L86 O33 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131868 |
| By: | Chang-Koo Chi; Jay Pil Choi; Jong-Hee Hahn; Seongkyun Kim |
| Abstract: | This paper studies self-preferencing incentives by vertically integrated platforms that operate both marketplaces and affiliated retail businesses. We show that self-preferencing and transaction fees are substitute instruments for profit extraction, implying that restrictions on self-preferencing may induce offsetting increases in transaction fees and thereby generate unintended consequences for consumer welfare. We characterize the platform’s optimal choice of self-preferencing and transaction fees and evaluate the welfare effects of behavioral and structural remedies. We also extend the analysis to settings with platform competition and consumer search, examining how market forces shape self-preferencing incentives and evaluating the robustness of our main results. |
| Keywords: | self-preferencing, vertically integrated platforms, transaction fees, regulation, hierarchical Hotelling model, search |
| JEL: | L2 L5 D2 D8 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12749 |
| By: | Abinash Panda; Anup Pramanik |
| Abstract: | We study obviously strategy-proof implementation in the framework of social choice over acts introduced by Bahel and Sprumont (2020). We characterize the class of unanimous social choice functions that are implementable via obviously strategy-proof mechanisms. Our main result shows that a unanimous social choice function is obviously strategy-proof implementable if and only if it is dictatorial. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.30515 |
| By: | Guillaume Pommey (DEF, University of Rome "Tor Vergata") |
| Abstract: | I characterize the optimal regulation of a firm constituted by potential judgment-proof agents. I investigate two cases: (i) A principal hires an agent to undertake a prevention effort on their behalf; (ii) Two agents are jointly responsible of undertaking a prevention effort. In both cases, agents are in charge of exerting an unobservable level of safety care to reduce the probability of an accident that may occur due to the firm risky activity. Agents are called judgment proof when their final wealth is not enough to pay for the monetary penalties imposed by the regulator. I show that the standard Equivalence Theorem, stating that the distribution of penalties among injurers is irrelevant, does not hold in this context. Instead, in a principal-agent firm, the optimal regulation requires to fully target the principal if the agent can be subject to judgment proofness. In a two-agent firm, the optimal regulation consists in an almost equal sharing of penalties among agents. |
| Keywords: | Moral Hazard, Regulation, Limited liability, Judgment Proofness |
| JEL: | K13 K32 G33 D86 |
| Date: | 2026–06–16 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:622 |
| By: | Lorenzo Bozzoli (Toulouse School of Economics); Guillaume Pommey (DEF, University of Rome "Tor Vergata") |
| Abstract: | We study agency contracts where a project owner (principal) privately learns her opportunity cost of continuing the relationship after the agent’s effort is sunk. The principalcontrols the design of termination rights and faces a trade-off between preserving incentives and retaining exit flexibility. Even without legal constraints, fully flexible (at-will), fully rigid (lock-in), and intermediate contracts offering partial security and compensation can all arise at equilibrium. While some contractsmay appear to protect the agent, they are always socially inefficient, justifying targeted legal constraints on termination rights. In particular, at-will contracts always under-secure the agent and under-enforce the project and can be banned on efficiency grounds. Inefficiencies also include excessive termination payments and over-securing, suggesting both toomuch and too little flexibility distort outcomes. Finally, we characterize aminimalmandatory termination fee, as commonly seen in employment protection laws, that partially restores efficiency |
| Keywords: | Moral Hazard, Termination rights, Severance Pay, Commitment |
| JEL: | D86 J33 J65 |
| Date: | 2026–06–16 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:621 |
| By: | Daniel Baumgarten (Department of Economics, Ludwig-Maximilian University Munich); Sergei Snegirev; Barbara Schöndube-Pirchegger (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | This paper studies how inequity aversion affects the optimal incentive contract in a multi-task principal–agent model with a non-congruent performance measure. We assume that the agent is inequity averse relative to the principal. The agent is envious if he/she expects to get less than the principal and feels guilty, if he/she expects to be paid more. The agent performs two equally productive tasks, but the contractible performance measure is more sensitive to one task than the other, generating a congruity problem. We find that it is never optimal to offer a contract, which leaves the agent envious. Rather, in equilibrium the principal offers either an equal-pay contract or a contract that leaves the agent feeling guilty. For a lower range of the agent’s reservation utility, the only feasible contract is an equal-pay contract. It requires a distortion of incentives and thus results in agency costs from avoiding inequity in addition to agency costs from incongruity. It follows that the principal would prefer to hire a purely self-interested agent as opposed to an inequity averse one. For an upper range of reservation utilities, a contract that leaves the agent feeling guilty is feasible and preferred to an equal-pay contract. This contract results in costs from inequity, but also reduces costs from incongruity. If the first effect dominates the second, hiring an inequity averse agent again turns out to be detrimental. However, we identify scenarios in which the second effect dominates and hiring an inequity averse agent benefits the principal. Acknowledging that an agent might derive extra utility from being paid more than the principal, rather than to feel guilty, we extend our analysis to capture a status-seeking agent. We find that an agent with such preferences requires less pay but his/her effort choice amplifies the congruity problem. Depending on which of the two effects dominates, the principal either prefers to hire a self-interested or a status-seeking agent. |
| Keywords: | moral hazard problem, multi task, social preferences, inequity aversion |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:mag:wpaper:26014 |
| By: | Calvano, Emilio (Department of Economics and Financial Markets, Luiss University); Possnig, Clemens (School of Economics, University of Waterloo); Tolvanen, Juha (Department of Economics and Finance, University of Rome Tor Vergata) |
| Abstract: | We analyze strategic communication when advice is generated by a reinforcement-learning algorithm rather than by a fully rational sender. Building on the cheap-talk framework of Crawford and Sobel (1982), an advisor adapts its messages based on payoff feedback, while a decision maker best-responds. We provide a theoretical analysis of the long-run communication outcomes induced by such reward-driven adaptation. With aligned preferences, we establish that learning robustly leads to informative communication even from uninformative initial policies. With misaligned preferences, no stable outcome exists; instead, learning generates cycles that sustain highly informative communication and payoffs exceeding those of any static equilibrium. |
| Keywords: | strategic communication, reinforcement-learning algorithm |
| Date: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:wat:wpaper:26001 |
| By: | Patrick Allmis; Paolo Pin; Fernando Vega Redondo |
| Abstract: | We build upon a simple micro-founded model of asset trading proposed by Kyle (1985) to study under what conditions a trader who is privately informed of the future return of the asset may want to share her information with other traders. Despite what conventional wisdom suggests, we show that in the unique equilibrium of the game the informed trader reveals her information with positive probability. A consequence of it is that, in contrast with the corresponding no-communication benchmark, the equilibrium price need not be fully revealing of the asset's return, even if traders are risk neutral. This, in turn, has significant implications on the distribution of the social surplus. While our model initially assumes that inter-agent communication is restricted by an arbitrarily given social network, we also study which such networks arise when links are endogenously formed through traders' prior connection decisions. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.11053 |
| By: | Peter Andre; Paul Heidhues; Botond Kőszegi; Takeshi Murooka |
| Abstract: | We develop a model of price competition with procrastinating consumers in which market discipline is supposed to arise from both the initial selection of providers and the possibility of switching providers. As in other theories, consumers may forego large gains by sticking with their initially chosen offer, so competition at the switching stage is weak. Unlike in other theories, consumers — who falsely expect to switch soon — may also fail to select the best starting offer, so competition at the initial stage is weak as well. This mechanism can translate temporary product differentiation into permanently high prices, greatly enhance the price effect of persistent differentiation, or generate high markups even with perfect substitutes. Reflecting the same mechanism, sign-up deals do not serve their classically hypothesized role of returning ex-post profits to consumers, but instead often exacerbate the failure of price competition. We complement our analysis with a tailored survey of consumers, confirming the logic of procrastination underlying our model. Consumer procrastination thus emerges as a novel source of competition failure that applies where other theories do not, helping to explain high average prices in many markets with switching costs. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1315 |
| By: | Aman Ray; Srikanth B. Pai |
| Abstract: | Parties in spatial competition rarely choose platforms that reverse their ideological order. Mutual leapfrogging is the strongest form of reversal: each party locates beyond the other party's ideal point. In voting models without abstention single-peakedness rules out such reversals. We show that this conclusion does not survive endogenous abstention. There is a spatial voting model in which voter and party preferences are single-peaked, yet mutual leapfrogging occurs in pure-strategy equilibrium. The equilibrium survives because some deviations change which voters participate. We prove that such equilibria are impossible under a sufficient ordinal condition: parties agree on how to rank leftward and rightward deviations from their ideal points. The condition is general enough to cover symmetric single-peaked utilities and common translated utility shapes. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.25131 |
| By: | Shichao Ma |
| Abstract: | A user faces a list returned by a search system, ordered by a noisy proxy for relevance, and decides sequentially whether to pay a fixed cost to inspect another item or stop with the best she has uncovered. She does not enter the page knowing how good its items are, so each inspection both produces a candidate item and refines her belief about the page's underlying quality. We show the optimal policy is a standout rule: the user stops as soon as her best find exceeds her posterior mean of an average item on the page by a depth-dependent threshold. The induced dynamics collapse to a one-dimensional Markov chain, which yields the full distribution of inspection depth through a closed-form recursion. The model uncovers three hidden mechanisms (trust, commit, and cut-losses) on why users stop and yields a rich set of testable implications. Moreover, the Bayesian-rational view delivers a novel learning-to-rank likelihood: an observed depth censors the latent relevance path into a polyhedron of survival inequalities, whose Gaussian probability is a differentiable function of any feature-based relevance prediction. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.24233 |
| By: | Jeremy Bertomeu |
| Abstract: | Strategic communication often relies on anchors observed by the sender but not by the receiver. An analyst may report against a proprietary valuation model, an auditor against an internal score, a manager against an accounting estimate, or an institution against its own standard. I study a sender-receiver game in which reports are costly to move away from such privately observed anchors. Anchor heterogeneity changes the geometry of communication. Rather than relying on partitions, privately anchored reporting generates continuous variation in messages because different senders find different reports costly to make. This mechanism can improve information transmission, but it can also pull reports toward noisy private anchors. I show that (i) small positive reporting costs can make communication approach full revelation, even though zero costs return the model to cheap talk, (ii) uninformative anchors can transmit information through strategic distortions. Anchored reports and cheap-talk messages can coexist as endogenous hard and soft information, but cheap-talk alone is preferred by all parties under sufficiently low misalignment, explaining why organizations may rely exclusively on informal channels. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.24730 |
| By: | Zhonghong Kuang; Jingfeng Lu; Yiyao Zhu |
| Abstract: | Teams frequently compete on multiple fronts: political parties contest districts for majority control, contractors field specialized units to win procurement contracts, and squads play match by match for titles. Although the prize accrues collectively to the winning team, individual incentives depend on how it is divided internally. We study a majoritarian team contest in which two rival managers simultaneously divide their teams' prizes among heterogeneous members. The contest admits a unique pure-strategy equilibrium: both managers choose identical relative allocations -- regardless of heterogeneity in winning values or player costs -- with each battle's share proportional to its discriminatory power, symmetry, and pivotality. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.25349 |
| By: | Patrick Becker; Felix Brandt; Satyanand Rammohan |
| Abstract: | We consider the random assignment problem with abstract continuous and convex preferences. In particular, we admit preference relations that are not constrained by independence or transitivity. By extending the Hylland--Zeckhauser pseudo-market mechanism, we show that weakly efficient and envy-free random assignments always exist. For preferences that can be represented via skew-symmetric bilinear (SSB) utility functions -- which generalize linear expected utility functions -- we prove the existence of efficient and approximately envy-free random assignments. Efficient and envy-free random assignments exist under a mild additional assumption on preferences. These findings have notable implications for ordinal random assignment, where ordinal preferences are extended to preferences over lotteries via the pairwise comparison (PC) extension. While the probabilistic serial rule and popular random assignments frequently and significantly violate PC-efficiency and PC-envy-freeness, respectively, random assignments that satisfy both conditions do exist. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.13730 |
| By: | Georgy Egorov; Konstantin Sonin |
| Abstract: | Consider a society that faces uncertainty about a payoff-relevant state and wants to train students to make correct decisions. In educational institutions, students learn from their teachers, but they also get outside information, and later learn from peers. We show that privately Bayesian actions need not be optimal inputs into social learning: when students' actions reflect teacher-side information that is correlated across peers, observing many such actions can give this information excessive social weight. A social planner may therefore optimally reduce the precision of instruction, inducing students to rely more on outside information before their actions become signals for others, and students can end up better informed despite learning less from their teachers. The case for a precision cap is stronger when peer interaction is homophilous, because same-teacher information is more likely to survive aggregation, and weaker when outside information is itself systematically distorted. This provides an informational rationale for viewpoint neutrality as an institutional policy: it limits the social overrepresentation of correlated teacher-side information when students mostly learn from peers exposed to similar sources. |
| JEL: | D83 D85 I21 I28 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35351 |
| By: | Noah Dane Hebdon; Dax Enshan Koh |
| Abstract: | A well-known model in game theory, the Volunteer's Dilemma describes a group of $n$ players who decide whether to volunteer for a collective benefit at a personal cost, or to abstain and risk forfeiting the benefit altogether. A quantum version of this dilemma, developed within the Eisert-Wilkens-Lewenstein framework, allows each player to manipulate one qubit of a shared entangled state, leading to symmetric Nash equilibria with higher expected payoffs than in the classical game. Existing analyses, however, assume maximal entanglement. Within the same framework, we introduce a generalized Quantum Volunteer's Dilemma with a tunable entanglement parameter $\gamma$ and study the extent to which equilibrium behavior depends on the level of entanglement. We derive explicit conditions relating $\gamma$, the number of players, and the players' strategies under which symmetric Nash equilibria exist, focusing on two canonical strategy profiles: one for $2\leq n\leq 9$, and one for even $n$. We find that maximal entanglement is not required to sustain symmetric equilibria. Instead, equilibrium behavior persists above a threshold value, which we compute analytically in both cases. We also demonstrate that the threshold value directly depends on system size. This characterization is directly relevant for implementations on resource-constrained quantum devices, where entanglement is inherently limited. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.08227 |
| By: | Askenazi-Golan, Galit (Department of Mathematics, The London School of Economics and Political Science); Mergoni Cecchelli, Domenico (Department of Mathematics, The London School of Economics and Political Science); Plumb, Edward (Department of Mathematics, The London School of Economics and Political Science); Possnig, Clemens (School of Economics, University of Waterloo) |
| Abstract: | We explore the behaviour emerging from learning agents repeatedly interacting strategically for a wide range of learning dynamics, including Q-learning, projected gradient, replicator and log-barrier dynamics. Going beyond the better understood classes of potential games and zero-sum games, we consider the setting of a general repeated game with finite recall under different forms of monitoring. We obtain a Folk Theorem-style result and characterise the set of payoff vectors that can be obtained by these dynamics, discovering a wide range of possibilities for the emergence of algorithmic collusion. Achieving this requires a novel technical approach, which, to the best of our knowledge, yields the first convergence result for multi-agent Q-learning algorithms in repeated games. |
| Keywords: | Q-learning, projected gradient, replicator, log-barrier dynamics |
| Date: | 2026–03–03 |
| URL: | https://d.repec.org/n?u=RePEc:wat:wpaper:26002 |
| By: | Kenzo Imamura; Yasushi Kawase |
| Abstract: | Random allocations are widely used to handle ties and indifferences in two-sided environments. In such environments, commonly used procedures such as random tie-breaking may fail to ensure stability and fairness from an ex ante perspective. We show that when agents have discrete concave (M$^\natural$-concave) valuations, there exists an ex ante stable and fair allocation. To establish this result, we relate our framework to the model of stability introduced by Alkan and Gale. In particular, we show that ex ante stable and fair fractional allocations are exactly characterized as Alkan--Gale stable outcomes under choice functions induced from concave closures together with a symmetric strictly convex tie-breaking rule. We further prove that any ex ante stable fractional allocation can be decomposed into a lottery over stable deterministic allocations, using a generalization of the Birkhoff--von Neumann theorem. Finally, we study a setting that does not rely on cardinal valuations and instead assumes ordinal preferences. Within this ordinal framework, we establish the existence of an ex ante stable and fair fractional allocation. This setting is formulated within the matching-with-contracts framework under matroid constraints. The resulting class includes existing models, such as one-to-many random allocation with responsive choice correspondences, and captures a wide range of applications, including controlled school choice with lotteries. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.18574 |
| By: | Possnig, Clemens (School of Economics, University of Waterloo) |
| Abstract: | This paper develops an analytical framework to study when sophisticated machine learning algorithms may learn to collude. Algorithms observe a state variable and update policies to maximize long-term payoffs; their long-run policies correspond to the stable equilibria of a tractable differential equation. In a repeated Bertrand game, I derive necessary and sufficient conditions under which Nash equilibria are learned. This reveals how the interplay between monitoring technology (state variables) and market conditions determines whether competitive or collusive outcomes emerge. I apply these insights to evaluate two key regulatory policies: limiting algorithmic data inputs and imposing competition in the software provider market. |
| Keywords: | Multi-agent reinforcement learning, Repeated games, Collusion, Learning in games |
| Date: | 2026–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:wat:wpaper:26005 |
| By: | Volker Nocke; Martin Peitz; Nicolas Schutz |
| Abstract: | How should merger control account for future changes in market conditions? We study horizontal merger policy in the presence of industry-wide cost or demand shocks, using both a homogeneous-goods Cournot model and a multiproduct-firm model of price competition with constant elasticity of substitution (CES) or multinomial logit (MNL) demand. We derive two main sets of results. First, regarding deterministic shocks: under both Cournot competition with incomplete pass-through and multiproduct firm price competition, an adverse shock increases industry concentration but calls for softer merger control. Second, regarding cost or demand uncertainty: under a cautious maxmin approach, aggregate cost uncertainty calls for softer merger control under the same assumptions. By contrast, under a risk-neutral expected-consumer-surplus stan dard, greater cost uncertainty demands tougher merger control in the Cournot model with log-concave demand, and in the multiproduct-firm price competition model when the outside option is sufficiently attractive. |
| Keywords: | merger control, market concentration, cost shocks, demand shocks, pass through, resilience |
| JEL: | L13 L40 L41 K21 D43 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_754 |
| By: | Hattori, Keisuke |
| Abstract: | Does diversity in ability and in mutual concern help or hurt team performance? We study a team in which efforts may be complements or substitutes. Holding mean ability and mean relational orientation fixed, we vary the dispersion of each. In horizontal teams, where no one leads, ability diversity raises performance through specialization regardless of the task, whereas diversity in relational orientation lowers it under complementarity and raises it under substitutability—so complementary tasks call for diverse hands but aligned hearts. Holding both attribute gaps fixed, performance is strictly higher when the abler member has the higher relational orientation, and the fully homogeneous team is a saddle point. In vertical teams, where one leads and the other follows, under weak interaction ability diversity remains beneficial regardless of who leads, while the optimal placement of the more prosocial member flips with the task—she should follow when efforts are complements and lead when they are substitutes. Taken together, the results show that the two dimensions of diversity interact and must be designed jointly rather than separately. Measuring relational orientation therefore pays off in both team composition and role assignment. |
| Keywords: | team production, ability diversity, social preferences, complementarity, assortative matching, leadership |
| JEL: | D23 J24 M54 D91 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:341465 |