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on Microeconomics |
| By: | Elliot Lipnowski; Doron Ravid |
| Abstract: | Limited attention forces organizations to decide not only how much to discuss, but also which issues merit discussion. We study strategic communication about a multidimensional decision when a receiver can respond only along a few endogenously chosen issues. Players agree on the ideal action but prioritize different errors. In equilibrium, communicated and omitted issues must be statistically unrelated and separable according to the sender's preferences. Thus, the sender's priorities determine the agenda; the receiver's do not. Synchronized priorities raise the receiver's best equilibrium payoff but lower his worst, so he may prefer a less synchronized sender. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.00380 |
| By: | Philipp Peitler |
| Abstract: | The von Neumann-Morgenstern axioms are uncontroversial desiderata for individual decision-making. We say that a bargaining solution is rational if it can be interpreted as the most preferred alternatives under these axioms. Yet, neither the Nash nor the Kalai-Smorodinsky bargaining solution is rational in this sense. We formalize two consequences of rationality, namely that one can neither be strictly better off nor strictly worse off from randomizing over different actions. These two axioms, together with other standard axioms, characterize the relative utilitarian bargaining solution. We then implement this bargaining solution in sub-game perfect equilibrium. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.19932 |
| By: | Christian Basteck; Lars Ehlers |
| Abstract: | We study random assignment of indivisible objects among a set of agents with strict preferences and outside options. When agents may rank some objects as unacceptable, we consider different notions of measuring waste of object(s) from an ex-ante perspective. The most natural one is $q$-agent-object-waste whereby both one agent and one of his acceptable objects are unassigned with at least probability $q$. On the one hand, we show that any mechanism satisfying equal treatement of almost equals (whereby any two agents with identical rankings over objects receive the same probability shares for objects they both regard acceptable), strategy-proofness and ex-post weak non-wastefulness (whereby in any assignment in the support we cannot have that both one agent and one of his acceptable objects are unassigned) must be $q$-agent-object-wasteful with $q\geq \frac{1}{6}$. On the other hand, we show that random serial dictatorship (RSD) attains the minimal bound of $\frac{1}{6}$ in this class for four agents or three objects. In addition, we consider $q$-object-wastefulness where an object remains unassigned with probability $q$, while agents, who consider it acceptable, remain unassigned with aggregate probability $q$. We again show that RSD attains the minimal bound of $\frac{1}{4}$ in this class of mechanisms with respect to $q$-object-wastefulness for three objects. Finally, we show that random deferred acceptance (RDA) may be strictly less agent-object-wasteful than RSD (but at the cost of violating equal treatment of almost equals). |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.27261 |
| By: | Potarca, Matthias |
| Abstract: | The decline of auction-format sales in favor of posted prices on digital marketplaces is commonly attributed to behavioral biases or secular changes in the market environment. This paper examines the latter by jointly modeling two forms of buyer opportunity cost within a standard symmetric independent private values framework: an entry cost sunk upon auction participation, and a mechanism-independent outside option reflecting the surplus a buyer can obtain from a close substitute at a known market price. A seller chooses between a second-price auction and a posted price; potential buyers decide whether to participate after observing their private valuations. The outside option endogenously partitions buyers into low-value types, who bid their full valuation, and high-value types, whose bids are capped at the outside option price, giving rise to qualitatively distinct entry regimes that the seller anticipates and actively shapes. Pressure from either channel strictly erodes the auction's advantage, but the seller's response to the two is asymmetric. The model yields testable implications that qualitatively align well with observed patterns and place weight on the outside option channel as a driver for the shift towards posted prices. |
| Keywords: | auctions, posted prices, entry costs, outside options, mechanism design, e-commerce |
| JEL: | D44 D47 D82 L81 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kitwps:343538 |
| By: | Laurenz Marstaller (University of Bonn) |
| Abstract: | This paper studies how platforms jointly choose fees and recommendations and their implications for fee regulation. A platform charges sellers a commission rate and ranks products based on price and match-value. The analysis shows that price-sensitive rankings intensify seller competition, allowing the platform to extract more surplus. Commission-rate caps constrain fees, but platforms may respond by making recommendations less price-sensitive, attenuating consumersurplus gains. By contrast, capped nominal fees can be more effective because they shift the platform’s incentives toward transaction volume rather than transaction value. Effective fee regulation must therefore account for how platforms adjust their recommendation policies in response. |
| Keywords: | Algorithm Design, DMA, Platform Regulation, Platforms, Recommendations, Search |
| JEL: | D43 D83 L13 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:430 |
| By: | Yi Liu |
| Abstract: | We develop a computational framework for Bayesian decision-making. We show that as long as no action is optimal in every state, Bayes-optimal choice is intractable. This hardness need not arise from large action, state, or signal spaces, nor from a complicated represented utility function: extracting enough information from a hard-to-interpret signal to act optimally can itself be computationally hard. We also characterize tractability across approximation notions and identify their sources of difficulty. Under the probably approximately correct criterion, sample-based Bayesian learning is tractable if and only if the signal support is bounded. Our results provide justifications for bounded rationality, costly Bayesian inference, and sample-based Bayesian learning. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.29840 |
| By: | Yosuke Hashidate |
| Abstract: | We study a mechanism of cooperation in the Prisoner's Dilemma (PD). Incorporating social preferences as efficiency concerns into the PD game, we study how altruism translates into cooperation. Under complete information, cooperation requires the opponent's altruism to clear a threshold. We then introduce a subjective extension of Bayesian Nash equilibrium that relaxes the Common Prior Assumption, letting players hold heterogeneous, potentially misspecified beliefs about each other's altruistic type. Cooperation then depends on beliefs about altruism rather than altruism itself, and can be sustained even when opponents are, on average, only weakly altruistic. When fear of exploitation dominates the temptation to defect, beliefs about the opponent's cooperation become strategic complements, so a cooperative and an uncooperative equilibrium can coexist under identical payoffs and an identical, correctly specified prior. Using multiplier preferences, we then study how robust this belief-driven cooperation is to model misspecification. Cooperation is fragile: it survives only above a threshold level of confidence in one's own belief, and can unravel even when the belief itself correctly supports cooperation. As a formal extension, the same robust-control apparatus, applied to a player's action choice, nests Nash equilibrium, Bayesian Nash equilibrium, and logit Quantal Response Equilibrium as limiting cases. Cooperation depends less on how altruistic agents are than on what they believe about each other, and how confident they are that this belief is right. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.11374 |
| By: | Igal Milchtaich |
| Abstract: | Agnostic sequential equilibrium (ASE) is a refinement of sequential equilibrium that does not force on the players a single, arbitrary belief system. In addition, whereas sequential equilibrium assumes the players' beliefs to be fully consistent (a notion that is based on perturbations of strategies), ASE employs a novel, simpler and local concept of strong consistency between strategy profiles and off-equilibrium beliefs, which is applicable to a large class of dynamic games, including games with a continuum of actions. In the last respect, the new solution concept is similar to perfect Bayesian equilibrium. It is shown that a strategy profile in an imperfect-information extensive-form game with perfect recall is an ASE precisely when it is a sequential equilibrium with every fully consistent belief system. ASE is generalized by the set-valued solution concept of agnostic sequential polyequilibrium, which allows leaving the players' actions in some information sets partially or completely unspecified. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.25731 |
| By: | Alessandro Lizzeri; Yichuan Lou; Jacopo Perego |
| Abstract: | We compare verifiable and unverifiable communication in a sender–receiver setting with partially aligned preferences, where the sender knows more than what her evidence can prove. We identify a credibility–flexibility tradeoff: tying the sender’s claims to her evidence enhances her credibility, but limits how flexibly she can communicate when her evidence does not accurately reflect her private information. This tradeoff changes the economics of verifiable disclosure. When preferences are sufficiently aligned, full evidence disclosure is neither sustainable in equilibrium nor efficient. We show that verifiability facilitates communication when preferences are sufficiently misaligned, but hinders it when they are sufficiently aligned, suggesting that institutions that impose verification need not al- ways improve information transmission. Finally, we study how verifiable and unverifiable communication can complement one another when both are available: unverifiable communication can contextualize verifiable evidence when the latter is misleading. |
| JEL: | C72 D83 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35712 |
| By: | David Dillenberger; Jay Lu |
| Abstract: | We introduce a behavioral notion of domain-specific risk aversion that separates attitudes toward risk from deterministic utility: an agent is more pure risk averse in one domain than in another if, for prizes that are indifferent under certainty, he is more averse to risk in the former domain than in the latter. We develop a model that goes beyond expected utility by allowing risk attitudes to vary across domains, while preserving expected utility within each domain. The domains are subjective and need not be specified in advance; they are identified from choice behavior. We establish uniqueness of the model's parameters and provide an axiomatic characterization. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.29506 |
| By: | Jeremy Bertomeu; Edwige Cheynel; Peicong Hu |
| Abstract: | We study voluntary disclosure when investors observe firm reports through noisy information intermediaries such as auditors, analysts, rating agencies, or data providers. Any processing noise overturns the standard prediction of a unique partial-disclosure equilibrium. With low disclosure costs, the model unravels to full disclosure despite positive costs. With higher costs, the game admits two threshold equilibria featuring different disclosure probabilities. We characterize how the cost threshold for unraveling and the equilibrium set respond to changes in noise and fundamental uncertainty. In settings with high disclosure, both uncertainty and processing noise reduce disclosure, while higher certification costs can counterintuitively increase it. Endogenizing disclosure costs as optimal fees shows how profit-maximizing intermediaries select among equilibria, potentially generating a high-fee, high-disclosure regime. Extensions with bounded support, uncertain information endowment, endogenous noise, and competing information sources apply the insights to general information environments. The results caution against interpreting greater frictions as necessarily reducing disclosure. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.07898 |
| By: | Granados Samayoa, Javier (Texas Christian University); Hyde, Timothy (Department of Economics, Oberlin College) |
| Abstract: | Conspiracy beliefs are the subject of a rich literature in psychology, which explains them through personal dysfunction. The corresponding economics literature is scant. We offer a demand-side model of belief in specific conspiracy theories with no biases, misspecification, or strategic manipulation. A conspiracy, by its nature, generates equivocal evidence about its own existence, because the same strength that produces more to detect also produces better concealment. We model belief in a specific conspiracy theory as learning about the strength 𝑞 of a cabal, a stand-in for the secretly coordinating actors of any conspiracy theory. In the baseline the cabal influences events with probability 𝑞 and conceals that influence with probability 𝑞, so public evidence arrives at rate 𝑞(1−𝑞) and cannot distinguish a weak cabal from a strong, wellconcealed one. Bayesian agents converge to two-point beliefs on the pair of observationally equivalent states, with weights given by the ratio of their prior densities there, and their optimal actions diverge accordingly. Divergence requires only that concealment improve elastically with strength over some range, not exact symmetry. It is also invisible to standard belief elicitation: agents with indistinguishable measured priors can be driven to opposite camps by identical public information. Polarization, opposite responses to common information, and stable adherence follow from Bayes’ rule alone. The model provides a complementary account to the one offered by the psychology literature. |
| Keywords: | Belief polarization, Bayesian learning, Partial identification, Merging of opinions, Conspiracy theories |
| JEL: | D83 D84 D91 |
| Date: | 2026–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:cxv:wpaper:2604 |
| By: | Peiran Xiao; Hashim Zaman |
| Abstract: | We study tournaments with managerial discretion in hiring. A manager selects a coworker from a pool of candidates and then competes against him in a Lazear--Rosen--style tournament with a prize equal to a share of total output. A profit-maximizing principal sets the prize share together with a head start (or handicap)---an advantage (or disadvantage) in the output comparison---granted to the manager. The head start affects output through three channels: (i) encouraging the manager, (ii) discouraging the new hire, and (iii) inducing the manager to hire a stronger candidate. The hiring effect dominates the discouragement effect until the strongest candidate is hired; beyond that point, any further head start discourages the new hire more than it encourages the manager. The optimal contract therefore grants a head start just large enough to induce the manager to hire the strongest candidate. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.04068 |
| By: | Paul H. Y. Cheung; Zichang Wang |
| Abstract: | We study a setting in which an agent receives private information before choosing from a menu and anticipates hindsight scrutiny. Such scrutiny creates a motive for conservatism toward menu expansions. Our key axiom, conservatism, is a direct weakening of preference for flexibility: Adding an option is weakly beneficial whenever it leaves the menu's hindsight benchmark unchanged. Together with standard axioms, conservatism characterizes a scrutiny representation of preferences over menus in which the agent behaves as if she evaluates each menu by subtracting anticipated scrutiny from the material value of informed choice. Menu preference identifies a unique minimum pair of private information and scrutiny intensity, while incorporating subsequent stochastic-choice data pins down the actual pair. Applications to medical liability and corporate innovation illustrate the implications of our model for accountability design. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.28866 |
| By: | Philipp Peitler; Karl H. Schlag |
| Abstract: | The axioms underlying Arrow's impossibility theorem are very restrictive in terms of what can be used when aggregating preferences. Social preferences may not depend on the menu nor on preferences over alternatives outside the menu. But context matters. So, we weaken these restrictions to allow for context to be included. The context, as we define, describes which alternatives in the menu and which preferences over alternatives outside the menu matter. We obtain unique representations. These are discussed in examples involving markets, the intertemporal well-being of an individual, and bargaining. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.19888 |
| By: | Pham, Ngoc Anh |
| Abstract: | A funder divides a fixed budget between an equal baseline and a merit pool awarded through a contest on a measured signal. Applicants produce the signal with two efforts: research, which the funder values, and polishing, which only raises the measure. The two-effort contest reduces exactly to a one-effort contest governed by two numbers, the signal's cost and its research content, and the design problem runs on the gap between them. Better polishing technology strictly shrinks the optimal pool; costly scrutiny of proposals re-expands it, and full scrutiny is never optimal. Voluntary participation removes researchers first and retains polishers, so the equal baseline is what shelters the research-rich; a shortlist ranked on contest strength admits exactly the entrants that shrink the pool. The same structure appears wherever fixed money is split between a flat share and a contest on a measured signal that mixes valued production with measure-improving effort, from exam-based awards to merit pay and promotion tournaments. The rule is deterministic throughout: merit still decides who wins, and the design decides how much merit pays. |
| Keywords: | contests, grantsmanship, research funding, sharing rules, multitask incentives |
| JEL: | C72 D72 O38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qmsrps:202607 |
| By: | Endre Cs\'oka |
| Abstract: | We study the repeated allocation of a single indivisible resource among $n$ strategic players. Each player $i$ has a privately known value distribution $D_i$, and values are drawn independently across players and periods. The goal is to find fair and efficient mechanisms. We apply the repeated first-price auction with equal initial endowments of virtual money. We show that each player can asymptotically secure the same fair-floor guarantee $f(D_i)$ as in Cs\'oka 2026; consequently, the mechanism is $1.283$-optimal. This provides a simpler and more robust alternative mechanism for this special case and may also help derive sharper upper bounds on the price of anarchy. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.05499 |
| By: | Sylvain Béal (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France); Emmanuelle Lebeuf (Université Marie et Louis Pasteur, F-25000 Besançon, France); Kevin Techer (Université Marie et Louis Pasteur, CRESE UR3190, F-25000 Besançon, France) |
| Abstract: | We introduce a new allocation rule for network games that combines a local component and a global component. The local component depends only on the links incident to each player, whereas the global component allocates a surplus equally among the members of each connected component. We characterize this allocation rule by three classical axioms together with a new axiom, Fairness under Neighborhood Restriction, which requires that two adjacent players experience the same payoff variation when the network is restricted to their local neighborhoods, that is, to the sets of links incident to each player. We also examine an alternative allocation rule that differs only in its global component, distributing the surplus within each connected component in proportion to players’ degrees in the network. |
| Keywords: | Network games, Fairness under Neighborhood Restriction, Neighborhood Equal Surplus Division, axiomatic characterization |
| JEL: | C71 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:crb:wpaper:2026-08 |
| By: | Hadi Hosseini; Shraddha Pathak; Lirong Xia; Chengkai Zhang |
| Abstract: | Recent work in fair division has focused on either simultaneously satisfying closely related fairness notions or achieving a single notion across the ex-ante and ex-post worlds. We study the compatibility of two fundamentally different fairness notions: envy-freeness and equitability. For indivisible goods-only and chores-only settings, we study the existence and complexity of simultaneously satisfying their relaxations, revealing sharp contrasts between the two settings. We show that EF1+EQ1 may fail to exist even for normalized binary goods: we construct an instance with 113 agents and 341 goods in which every agent approves exactly 165 goods, but no complete allocation satisfies both notions. Our main algorithmic result computes an EF1+EQ1 allocation for every normalized binary goods instance with at most seven agents. Thus, the smallest number of agents admitting a counterexample lies between 8 and 113, leaving the cases from 8 through 112 unresolved. In sharp contrast, binary chores admit the stronger EFX+EQX guarantee for any number of agents, even without normalization. We further initiate the study of cross-notion ex-ante and ex-post guarantees, asking whether randomized allocations can provide ex-ante guarantees for one notion while preserving ex-post guarantees for another. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.26410 |
| By: | Kemal Ozbek |
| Abstract: | Experimental evidence suggests that ambiguity-sensitive choice can vary systematically with the circumstances of a decision. This paper isolates one channel within a stable preference relation: ambiguity weighting may depend on the act's certainty-equivalent level. After the standard Anscombe-Aumann calibration of consequence utility, a set of behavioral axioms yields a unique continuous family of normalized monotone capacities $\{\nu_v\}_{v\in(0, 1)}$. Each nonendpoint act is evaluated by the Choquet integral associated with the capacity at its own interior certainty-equivalent level, while nonendpoint acts on the same indifference surface share the same capacity. Binary event comparisons identify local event weights at each elicited level and trace their cross-level variation, providing tests of the fixed-capacity restriction. Local uncertainty aversion is equivalent to convexity of $\nu_v$ and yields an implicit multiple-priors representation with certainty-equivalent-indexed local cores. Certainty translation invariance holds if and only if the capacity is fixed across levels, recovering the maintained nondegenerate fixed-capacity Choquet expected utility benchmark; global mixture-betweenness yields implicit additive utility, and imposing both restrictions recovers full-support subjective expected utility. The capacity schedule is a reduced-form ambiguity weighting whose variation may reflect changes in ambiguity perception, ambiguity attitude, or both. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.11748 |
| By: | Imenkamp, Nico; Wey, Christian |
| Abstract: | We analyze resale price maintenance (RPM) in a successive monopoly framework. When the retailer faces decreasing average costs or shelf-space opportunity costs while the manufacturer's marginal costs increase, linear pricing forces wholesale prices below marginal cost, potentially causing trade to collapse. Minimum RPM restores efficiency if trade fails, but reduces welfare if trade remains viable. Under the Colgate doctrine, the manufacturer's right to refuse to deal sustains trade even under price-floor bans. Finally, incomplete contracts induce retailer opportunism, including pocketing trade allowances without supporting the product, or exploiting inflated margins to push sales. Strategic contract combinations minimize both margins simultaneously. |
| Keywords: | Successive Monopoly, Resale Price Maintenance, Trade Allowance, Retailer Opportunism |
| JEL: | L42 D86 L12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:dicedp:343592 |
| By: | Alexis Akira Toda |
| Abstract: | Concave consumption functions imply a marginal propensity to consume that falls with wealth. I characterize the utility functions that guarantee this property in finite-horizon optimal saving problems with stochastic discounting, returns, income, and borrowing limits. Under conditional impatience---the conditional expected discounted gross return does not exceed one---consumption functions are always concave if and only if inverse absolute prudence, $-u''/u'''$, is concave. When no conditional-impatience restriction is imposed, hyperbolic absolute risk aversion (HARA) is necessary and sufficient for uniform concavity. Thus conditional impatience permits declining marginal propensities to consume for a preference class strictly larger than HARA. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.29488 |
| By: | Gerrit Meyerheim |
| Abstract: | Observed action returns guide decisions: use less of the lower-return action. I show when that rule fails in adversarial environments. A zero-sum envelope validates comparisons. When actions move a persistent defense state, an interior stationary equilibrium equates the net current-return gap to the negative discounted value of the induced path. Observed and decision-relevant return gaps coincide when reallocation has no separate payoff effect. Otherwise, the observed gap must be adjusted. This creates a use-up/return-down inversion: strategic leverage can raise use while lowering the gross return gap. Stronger preparedness incentives and lower adjustment costs preserve this inversion with a forward-looking defender on an open set. A curvature-feedback condition characterizes their signs along an affine-equilibrium branch. A two-state patent model shows lower-return patents can remain privately valuable through diversion and blocking yet be socially overused. Net return gaps identify the continuation wedge, not its decomposition into state values, persistence, and action leverage. |
| Keywords: | dynamic games, post-defense returns, strategic decoys, strategic state dependence |
| JEL: | C73 D21 D43 O34 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12962 |
| By: | Buchholz, Wolfgang; Hattori, Keisuke |
| Abstract: | This paper studies how an outsider can strategically induce a merger between rival firms. The outsider's anticipated post-merger output expansion lets it capture part of the gains from the merger but can also make the merger unprofitable for the insiders. We show that the outsider can make the merger profitable by committing in advance to a weaker competitive position, while the softer competition following the merger can more than compensate it for its self-imposed handicap. A general framework identifies conditions under which the outsider optimally chooses the minimum merger-inducing handicap. Three Cournot models show that voluntary capacity reduction, withdrawal from a profitable market, and a credible increase in marginal cost can each strictly raise the outsider's profit above the no-handicap, no-merger benchmark. Merger synergies can also benefit the outsider by reducing the handicap required to induce the merger. The analysis highlights the need to account for endogenous outsider constraints in ex ante assessments of mergers. |
| Keywords: | horizontal mergers, strategic commitment, self-handicapping, merger paradox, Cournot competition |
| JEL: | D43 L13 L41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:343613 |
| By: | Endre Cs\'oka |
| Abstract: | The VCG family and the AGV mechanism are two classical approaches to efficient implementation in the static social choice problem. In 2024, Cs\'oka et al. showed that AGV has critical weaknesses. In contrast, the transferable-utility Guaranteed Utility Mechanism (TU-GUM) retains all the standard desirable properties of AGV while adding further ones, including collusion-proofness, because it implements efficiency in Guaranteed Utility Equilibrium. TU-GUM also applies to a more general dynamic setting with multiple extensions. Moreover, TU-GUM is a special case of an even more general and robust mechanism that combines contingent first-price tendering with the coordinated execution of dynamic stochastic multi-agent projects through a surprisingly simple rule. This paper summarizes and connects existing results from a different perspective, with some minor new observations. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.28722 |
| By: | Jérôme Pouyet (CY - CY Cergy Paris Université, CNRS - Centre National de la Recherche Scientifique, ESSEC Business School and THEMA (UMR 8184) - ESSEC Business School - THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université); David Martimort (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse, CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | A retailer can boost demand for a manufacturer's product through non-verifiable activities. Performance-based trade allowances—rebates conditional on the retailer's successful sales efforts—help mitigate this moral hazard problem. In equilibrium, the wholesale contract includes a retail price set below cost, complemented by a rebate for incremental units purchased when efforts successfully increase sales. Loss leading thus emerges as an incentive mechanism, rather than a practice driven by anti-competitive or exploitative intent. A ban on below-cost pricing leads to higher retail prices and reduced promotional efforts. |
| Keywords: | Vertical restraints, Moral hazard, Loss leading, Performance-based allowances, Below-cost pricing |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05740397 |
| By: | Alistair Barton |
| Abstract: | I propose a novel, tractable model of pro-social norms in large communities with slightly altruistic agents. Agents participate in the norm to influence others to participate in the norm, influencing further agents. A continuum of equilibria sustain the pro-social norm, varying in the distribution of how much agents are influenced by their observations. If agents' effective altruism $\alpha$ is larger than their impatience $1-\delta$, equilibria exist that are robust to a population of bad actors. Greater strategic homogeneity increases the robustness of the norm. Robustness is not improved by increasing the number of observers of each action beyond 1. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.06151 |
| By: | Doruk Cetemen; Yonggyun Kim; Fei Li; Curtis R. Taylor |
| Abstract: | We study why organizations conduct interim performance reviews when monetary rewards are limited. An interim review creates incentive capacity by allowing future work and career opportunities to serve as rewards for past performance. Optimal review policies map a continuum of performance outcomes into a simple incentive ladder: termination, tough or easy continuation, and, for exceptional performance, an early maximal reward with no further work. Review can even sustain high effort when terminal compensation alone cannot. Its timing balances two forces: waiting improves the information revealed by performance, but leaves less future work available to motivate the agent. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.07871 |
| By: | Peter Caradonna; Zachary Raines |
| Abstract: | We develop a theory of measurement scales for utility functions, based on a generalization of the notion of numeraire commodity. Every sufficiently well-behaved utility is denominated in some scale of this form, and conversely, the choice of a compatible scale unit uniquely identifies utilities up to an additive constant. We define a profile of utilities to be interpersonally comparable precisely when they are denominated in a common measurement unit. We study when profiles of comparable utilities exist, as well as how a planner ought to aggregate them, and provide applications to social choice and welfare economics. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.25043 |
| By: | Kazumi Shimizu (Faculty of Political Science and Economics, Waseda University) |
| Abstract: | This paper develops a theoretical model of belief updating under local representativeness. Building on the finite-urn framework of Rabin (2002), we study a quasi-Bayesian agent who updates by Bayes' rule but mistakenly interprets independent and identically distributed signals as if they were drawn without replacement from a finite-urn. Under this misperception, posterior beliefs are systematically distorted, and these distortions may generate biased economic behavior. Using a beta prior, we derive closed-form results for the benchmark pure-streak case in which the perceived urn is reset every two draws. This benchmark corresponds to the canonical setting in which gambler's fallacy reasoning is typically elicited, namely prediction after a short run of identical outcomes. After two consecutive successes, the quasi-Bayesian agent becomes more willing to invest than a Bayesian, whereas after two consecutive failures, the same agent becomes more pessimistic and less willing to invest. Notably, these responses can move in the opposite direction from what a naive reading of local representativeness alone would suggest, because the effect of the finite-urn misperception on posterior beliefs is shaped by Bayesian updating and normalization. The paper also provides a behavioral characterization of the finite-urn updating rule under blockwise reset. We show how a qualitative principle of local representativeness, together with a blockwise reset assumption and a within-block predictive structure, yields the generalized finite-urn likelihood kernel used in the analysis. This characterization does not amount to a full axiomatization of dynamic choice, but it clarifies the short-run cognitive logic underlying the model. Overall, the paper offers a tractable framework for analyzing how local representativeness distorts Bayesian inference, thereby affecting posterior beliefs and economic decision-making. |
| Keywords: | local representativeness, law of small numbers, Bayesian updating, finite-urn model, belief distortion |
| JEL: | C11 D03 D91 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2611 |
| By: | Bruno Pellegrino |
| Abstract: | How does prior information affect discrete choice? In the seminal rational inattention model of Matějka and McKay (2015), multinomial logit arises from the discrete choice of agents who are uncertain about choice payoffs and who have access to a flexible information acquisition technology (RI-logit). A key limitation of this powerful framework is the lack of known solutions that allow the decision maker's prior information to vary across choices: obtaining such solutions has remained an open problem in this literature. In this paper, I solve the RI-logit model analytically for two related families of priors known respectively as Positive Stable and Tempered Stable distributions. In my solution, the decision maker's prior information enters the choice probabilities through a choice-specific parameter, which can be read as shifting either the ex-ante expected utility of a risk-neutral decision maker, or the ex-ante riskiness perceived by a risk-averse one. These results complete the RI-logit framework by separating prior information from information that is endogenously acquired, and expand its empirical applications by making it possible to study how choice probabilities react to changes in prior information. |
| JEL: | D11 D81 D83 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35702 |
| By: | Chai, Ziyi; Dietzenbacher, Bas (RS: GSBE other - not theme-related research, QE Math. Economics & Game Theory) |
| Abstract: | This paper studies classes of two-bound core games with communication restrictions modeled by an undirected graph. We focus on unanimity games, bankruptcy games, 1-convex games, big boss games, clan games, compromise stable games, one-bound core games, and the entire class of two-bound core games. For each of these classes, we characterize all communication graphs that guarantee that the graph-restricted game belongs to the same class as the original two-bound core game. |
| Keywords: | two-bound core games, communication situations, graph-restricted games |
| JEL: | C71 |
| Date: | 2026–09–10 |
| URL: | https://d.repec.org/n?u=RePEc:unm:umagsb:2026008 |
| By: | Antonio Cabrales; Gregorio Curello; Olivier Gossner; Roberto Serrano |
| Abstract: | We study how willingness to pay for information depends on risk aversion when a decision maker faces background risk and can acquire information before choosing from a menu of assets. We distinguish investment menus, whose payoffs are procyclical with background wealth, from insurance menus, whose payoffs are countercyclical. Our main results show that the interaction between asset cyclicality and the tail geometry of background risk determines the direction of the comparative statics. When the density of background risk is log-concave, willingness to pay for information decreases with risk aversion for investment menus, whereas with downward-log-convex background risk it increases with risk aversion for insurance menus. The proofs compare the distributions of terminal wealth with and without information and develop new aggregation arguments for state-dependent single-crossing comparisons. We also construct reversals under strictly log-convex tails for investment menus and super-exponential left tails for insurance menus. |
| Keywords: | investment, insurance, background risk tails, risk aversion, value of information |
| JEL: | C00 C43 D00 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12982 |
| By: | Sven A. Simon; Sven Arne Simon |
| Abstract: | Ignorance of facts and laws may provide an excuse for self-serving reporting behavior, even at the risk of telling the untruth. This paper examines what decision-makers report when they do not know their true entitlement to a financial gain, why they do so, and how the resulting dilemma under ignorance can be mitigated. In a theory-guided online experiment, I show that ignorance substantially increases self-serving but potentially untruthful reporting behavior relative to a full-information benchmark. Three mechanisms – two behavioral and one institutional – drive this shift: (i) decision-makers' beliefs about their true entitlement, (ii) social norms governing reporting under ignorance, and (iii) the requirement to provide a definite statement. I evaluate two interventions: allowing information acquisition and offering a fair buyout of the unknown entitlement. Both mitigate self-serving reporting under ignorance, but the fair buyout involves a trade-off: it has the unintended side effect of increasing dishonesty among informed decision-makers. |
| Keywords: | dishonesty, ignorance, information acquisition, fair buyout, social norms, experiment |
| JEL: | C91 D83 D91 H26 K42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12985 |