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on Microeconomics |
| By: | Shota Ichihashi; Doh-Shin Jeon; Byung-Cheol Kim |
| Abstract: | Many digital platforms earn revenue by selling content access and displaying ads. We study monopoly screening by a platform allocating heterogeneous content and ads to heterogeneous consumers. Advertising generates revenue and affects information rents through nuisance, which alters the platform's incentives to allocate content. The optimal mechanism balances a trade-off between advertising and rent extraction: Expanding content access increases advertising revenue but reduces sales revenue by raising information rents. The mechanism features novel distortions in content access and ad exposure, rationalizes contracts across ad-supported platforms, and explains why greater ad profitability may weaken incentives to invest in content quality. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.12870 |
| By: | Florian Mudekereza |
| Abstract: | This paper studies agency problems when both parties worry that the model linking action to output is misspecified. With observable actions, an optimal contract is linear in output, so performance pay arises solely to share misspecification exposure, the slope reflects the parties' relative robustness concerns, and its allocation is Pareto efficient. With hidden actions, this sharing rule survives and incentives add a nonlinear correction. Misspecification concerns can polarize effort by making intermediate actions impossible to implement. Moreover, ambiguity across competing models has asymmetric effects: uncertainty about desired actions raises the principal's payoff, whereas uncertainty about deviations can lower it. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.25590 |
| By: | Ian Ball; Drew Fudenberg; Stephen Morris |
| Abstract: | Bayesian monotonicity is a necessary condition for full implementation in Bayes-Nash equilibrium. Under the sequential equilibrium refinement, however, multi-stage mechanisms can expand the scope for implementation. We show that this additional implementation power is fragile. Whenever a multi-stage mechanism sequentially implements a social choice correspondence that is not Bayesian monotone, we construct arbitrarily small "information perturbations'' and show that there are sequential equilibria under these perturbations that yield inadmissible decisions with probability bounded away from zero. Under these perturbations, players' types are not independent conditional on the state and some player is sometimes uncertain of their payoff type. We show by example that the general result fails if perturbations are required to satisfy conditional independence or "known payoff types.'' |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.30464 |
| By: | Joshua S. Gans |
| Abstract: | Why might firms make different claims in advertising both with respect to themselves and to rivals? I study how claims direct consumers to different customer experiences, and how prices change the available evidence. Attributing successes to the advertiser requires a low price when its product is superior; attributing failures to the rival supports a higher price. Focussing on a single strategic advertiser, the model shows that the claim that attracts the most customers to a superior product never maximises profit. The optimal campaign raises advertiser profit but lowers consumer surplus relative to fully informed choice, and reduces total welfare whenever product reliabilities differ. When both firms choose claims and prices, competition can sustain a mix of positive and negative claims with price dispersion, restoring claims that a lone advertiser would reject. A rival's pricing response alone can make failure attribution optimal by weakening incentives to undercut. Allowing the rival to advertise can lower both prices and shift customers towards it if the incumbent retains its previous claim; allowing the incumbent to change its claim can eliminate this additional effect. Advertising, therefore, changes not only persuasion but also pricing incentives, making its market consequences different from its effects at fixed prices. |
| JEL: | D83 D91 L13 M31 M37 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35770 |
| By: | Hiroto Sato; Ryo Shirakawa |
| Abstract: | Consider a situation wherein a decision maker sequentially searches for the best alternative among heterogeneous options with an arbitrary search order. The agent partially learns the value of an option when inspecting it. The information structure jointly determines the ex-ante and ex-post value of investigating each option, thereby shaping the entire learning path. We characterize the set of all search behaviors compatible with some information structure, which forms a polytope. A single information structure rationalizes all these search behaviors, which minimizes the agent's welfare among all information structures. Under certain symmetry assumption over primitives, we also examine the set of all feasible pairs of search and choice behaviors, with and without option sellers' price competition, and prove the same results. Our study not only provides a simple framework for analyzing how information shapes ordered learning paths, but also offers sharp insights into information design and identification problems in such environments. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.16431 |
| By: | Georgy Lukyanov; Yaroslav Yosifov |
| Abstract: | Global games select a unique cutoff when a player's incentive moves monotonically with private information. We show that this logic can fail when a privately informed participant can take a costly, simultaneous, and unobserved action that defends the status quo. In a currency-attack model, the defender acts only at intermediate signals. Along the traders' cutoff equation, this interval response creates an endogenous defense-loss term that vanishes at the endpoints of an activation component but can dominate the decreasing benchmark payoff margin in between. We establish a primitive region in which defense is inactive and uniqueness survives, and a finite-CDF overshoot condition under which two active-defense cutoff roots coexist with the inactive benchmark root. Because marginal indifference need not imply global incentives, we also give sufficient conditions for a genuine monotone cutoff best response. Finally, outward-rounded interval arithmetic proves that a proper-prior parameter vector has exactly three symmetric monotone-cutoff equilibria and that this topology persists locally. The result isolates a payoff-based boundary of global-game selection: hidden intervention can restore multiplicity without public signalling or a perturbation of the information hierarchy. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.00323 |
| By: | Constantine Sorokin; Eyal Winter |
| Abstract: | We study a war of attrition in which each party chooses how far to escalate before conceding. If neither concedes before escalation reaches a random disaster threshold, both receive nothing; otherwise the confrontation ends peacefully. When the parties are ex-ante symmetric and their benefits are independent, improving both parties' private information about their own stakes raises both the probability of peace and each party's ex-ante equilibrium utility. The result holds for every nontrivial mean-preserving spread of posterior values---each party's expected benefit from prevailing given its private information. Higher stakes work in the opposite direction: a first-order stochastic increase in posterior values induces greater persistence, lowers the probability of peace, and can reduce both parties' ex-ante utilities. Starting from symmetry, a sufficiently small improvement in only one party's information also promotes peace; its first-order effect is exactly half that of improving both parties' information. At an asymmetric starting point, however, even a small one-sided improvement can instead lower the probability of peace. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.12210 |
| By: | Xiaotie Deng; Ningyuan Li |
| Abstract: | We study strategic disclosure of the action space in principal-agent contracting, where an agent selects a disclosed action set to shape the principal's perception of her capabilities before contract design. Unaware of the strategic disclosure, the principal designs a revenue-optimal contract as if the disclosed action set were complete and accurate. We consider two variants distinguished by cost verifiability. When costs are unverifiable, the agent can extract the entire first-best surplus, leaving the principal with zero revenue. When costs are verifiable, we characterize the agent's optimal disclosure strategy in binary-outcome settings and, more generally, when the principal is restricted to linear contracts, reducing the agent's problem to a two-variable convex optimization problem. We prove that the agent can secure utility of at least a $1/e$ fraction of the first-best surplus, which also yields a $1/e$ welfare guarantee under optimal disclosure. While the principal's revenue can be arbitrarily small compared to the first-best surplus, when the ratio of maximum to minimum expected reward among non-null base actions is at most $L$, we establish a revenue guarantee of $\Theta(1/\log L)$ relative to the first-best surplus. We also compare utilities and welfare under strategic disclosure with their counterparts in the canonical model. Finally, we extend the agent's $1/e$ utility guarantee to general outcome spaces without restricting the principal to linear contracts. Our results show how strategic action-space disclosure changes the distribution of surplus while preserving a constant-factor welfare guarantee under the agent's optimal disclosure. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.25410 |
| By: | Terrence McGovern; Jan Benedikt Napp; Wenjun Zheng |
| Abstract: | We consider a robust delegation problem in which the principal does not know the distribution from which the underlying state is drawn. The principal can choose a general randomized mechanism and maximizes her worst-case expected payoff over all state distributions. Our main result characterizes the robustly optimal mechanism. The mechanism has up to three regions: (i) accommodation, where the agent's ideal action is taken, (ii) calibrated randomization, where each type receives a distinct lottery, and (iii) pooling, where all types receive the same lottery. We then extend our model to a multidimensional setting in which preferences are additively separable and satisfy a cross-dimensional symmetry condition, and show that delegating separately across dimensions is robustly optimal. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.31529 |
| By: | Benjamin Brooks (Department of Economics, University of Chicago); Songzi Du (Department of Economics, University of California San Diego) |
| Abstract: | A mechanism is participation secure if each agent has an action that guarantees them a payoff better than their outside option, no matter how other agents behave and no matter how uncertainty about preferences is resolved. Participation security implies that every agent’s interim payoff exceeds their outside option, in every information structure and equilibrium. The converse is true if the mechanism is elementary: Every action is the unique best response for some type in some information structure and equilibrium. Elementary mechanisms are shown to be a sufficient class for maximizing the welfare guarantee. Hence, for maximizing the guarantee, participation security is equivalent to interim participation in all information structures and equilibria. |
| Keywords: | Mechanism design, information design, dual reduction, max-min, Bayes correlated equilibrium, robustness, participation security, individual rationality. |
| JEL: | C72 D44 D82 D83 |
| Date: | 2026–09–14 |
| URL: | https://d.repec.org/n?u=RePEc:bfi:wpaper:2026-126 |
| By: | Ziran Liu |
| Abstract: | Bernheim, Braghieri, Mart\'inez-Marquina, and Zuckerman (2021, American Economic Review) develop a theory of chosen preferences and conjecture convergence to pure worldviews at low mindset flexibility. We show that the (original) conjecture fails: with arbitrarily many worldviews, a common-value action sustains mixed worldviews in every stationary equilibrium from a relatively open set of initial worldviews, even when all pure worldviews are absorbing. However, finite linear programs characterize a sufficient persistence condition. Conversely, mixed accumulation points require shared valuation maxima. If each implementable action has a unique maximizing evaluator, every existing stationary equilibrium converges to purity for all interior flexibility and discount parameters. Experienced utility converges without uniqueness. In existing equilibria, small payoff perturbations preserve compromise over fixed horizons with high probability. Strictly tailored worldviews yield existence and a one-step equilibrium characterization at sufficiently low mindset flexibility; weak implementation can preclude stationary pure-strategy existence. The persistence and convergence results extend to stationary randomization. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.19316 |
| By: | Arkarup Basu Mallik; Mihir Bhattacharya; Ojasvi Khare |
| Abstract: | We study strategy-proof social choice where agents have single-dipped preferences and outcomes may be sets of alternatives. While point-valued strategy-proof rules select an endpoint, we ask which outcomes survive when sets are compared through responsive extensions. Under the standard responsive extension, preferences over fixed-length intervals remain single-dipped, so the endpoint restriction persists and anonymity yields a single-threshold rule. Under responsive dominance, the incomplete order shared by all responsive extensions, an interior interval can survive because the two extreme intervals need not be comparable. For arbitrary sets, requiring every chosen alternative to be most preferred by some agent yields voting-by-committees rules, with one committee per endpoint; anonymous rules have a two-threshold quota form. The characterization holds on the entire endpoint-peaked domain, and every such rule is group-strategy-proof. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14059 |
| By: | Yi Chen; Fei Li; Marcel Preuss |
| Abstract: | We study revenue-maximizing attention allocation on an ad-funded social media platform governed by recommendation algorithms. Attention is costly and can be monetized through advertising or allocated to increase creators' exposure, creating a trade-off between monetization and production incentives. In a two-sided model with heterogeneous viewers and creators under private information, the optimal recommendation mix includes content that is ex post suboptimal for some viewers to leverage network externalities. These distortions are targeted: low-ability creators are excluded, while high-ability creators are subsidized through exposure or monetary payments. Two-sided complementarities reshape content variety and quality, with implications for personalization regulation and advertising markets. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.15573 |
| By: | Juergen Eichberger (Universitat Heidelberg); Simon Grant (Australian National University); David Kelsey (University of Nottingham) |
| Abstract: | We propose Consistent-Planning Equilibrium under Ambiguity (CP-EUA), a solution concept for two-player multi-stage games with almost perfect information. Players evaluate continuation payoffs using a neo-additive representation centred on a behavioural-strategy theory of the opponent. The additive component is identified with the opponent’s behavioural strategy, while the ambiguity component captures the player’s lack of confidence in that theory. The lack-of-confidence parameter is revised by Generalized Bayesian Updating (GBU). Players take account of possible changes in their future ambiguity-sensitive evaluations by using consistent planning. We show that, in the centipede game, ambiguity about the opponent’s strategic behaviour together with sufficient optimism can sustain cooperation for many periods. Similarly, in a non-cooperative bargaining game, ambiguity and optimism may generate delay before agreement is reached. |
| Keywords: | optimism; neo-additive beliefs; extensive-form games; dynamic consistency; consistent planning; centipede game; bargaining |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:not:notcdx:2026-07 |
| By: | Wolfgang Kuhle |
| Abstract: | We study coordination games in which every action requires planning and preparation. Before players act, they can revise their plans based on partially revealing information about their adversary's preparations. Precise information enables agents to screen for cooperation, selecting the payoff-dominant equilibrium either via small exogenous trembles or via payoff uncertainty. Across scenarios, we emphasize that decomposing an action into (i) preparation and (ii) execution allows us to analyze simultaneous-move games where players partially observe each other's contemporaneous actions. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.17608 |
| By: | Zichang Wang |
| Abstract: | A decision maker may have several information sources available and choose which one to consult only after learning the decision problem she faces. When is one such set of sources uniformly more valuable than another? For unrestricted Bayesian decision problems, we show that the answer can be stated entirely in terms of Blackwell comparisons. Form a tagged mixture by drawing a source independently of the state and revealing both its identity and its signal. One source set is more valuable in every decision problem if and only if each tagged mixture of the second source set is Blackwell dominated by some tagged mixture of the first. The result applies to compact, possibly infinite source sets and general signal spaces. It also has an exact quantitative counterpart: the largest normalized value shortfall is the directed Le Cam deficiency between the source sets' tagged hulls. The analogous program for monotone decision problems reveals a boundary. We call the passage from problem-by-problem source-set superiority to a problem-independent pairwise dominance a lifting. The Blackwell lifting does not extend directly to the Lehmann order: mixing sources that individually satisfy the monotone likelihood ratio property (MLRP) need not preserve MLRP, and even when it does, no fixed Lehmann-dominating mixture need exist. Requiring one source to serve a finite bundle of monotone decision problems restores the equivalence. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.29066 |
| By: | Han Wang |
| Abstract: | A principal faces a decision problem under uncertainty and can contract with a researcher to provide relevant information. The cost of acquiring information is only known to the researcher, and, moreover, by privately making an investment the researcher can reduce their expected cost. We show that this contracting problem can be viewed as an information design problem with cost constraints and use techniques from that literature to solve for the optimal contract. The principal never overinvests but may underprovide investment even when it is efficient. We establish a cutoff in the cost of investment below which the principal induces investment and show that this cutoff is higher for a better investment opportunity, in the sense that the post-investment distribution of costs improves in the monotone-likelihood-ratio order. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.15019 |
| By: | Benjamin Brooks (Department of Economics, University of Chicago); Songzi Du (Department of Economics, University of California—San Diego) |
| Abstract: | We extend the frameworks of Harsanyi (1967) and Mertens and Zamir (1985) to study the higher-order beliefs that groups of individuals obtain by pooling their information. A universal group type space is constructed, which contains all of the belief hierarchies that could be held by any group of players in any type space. This formalism is used to study group belief invariant Bayes correlated equilibria; this is shown to be the minimal solution concept that only depends on group belief hierarchies and contains all Bayes Nash equilibria. |
| Keywords: | Bayes correlated equilibrium, belief invariance, information design, robust predictions. |
| JEL: | C72 D82 D83 |
| Date: | 2026–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:bfi:wpaper:2026-127 |
| By: | Siwei Chen; Pengbo Wang |
| Abstract: | A collective rule must often choose a public outcome on a constrained boundary. We characterize truthful choice with diagonal unanimity on the entire boundary of any compact full-dimensional strictly convex body in finite dimension at least two. On the full domain of linear support preferences, ordinary individual strategy-proofness and diagonal unanimity force the rule to select one fixed participant's preferred point at every profile. The population is any fixed finite nonempty set. No Pareto condition, boundary smoothness, or continuity or measurability of the rule is assumed. If interior outcomes are allowed instead, two or more participants can use positive fixed weighted averages of preferred points for truthful non-dictatorial compromise on the same type domain. The proof derives regularity from the two agents' incentive inequalities, transports a common support-measure bound across reports, and makes every convexified attainable menu a Minkowski summand of the feasible body. Boundary generation then forces fixed control. The result extends the spherical public-good location question and identifies the role of boundary-valued choice in eliminating truthful compromise. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.26302 |
| By: | David Lagziel; Ehud Lehrer; Tao Wang |
| Abstract: | We analyze incomplete-information games where an oracle publicly shares information with players. One oracle dominates another if, in every game, it can match the set of equilibrium outcomes induced by the latter. Characterizations are provided for deterministic signaling functions, based on simultaneous posterior matching, a constructive partition criterion, and common knowledge components. This study elaborates on the work of Blackwell (1951) in games with incomplete information, using the common knowledge components of Aumann (1976). |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.18701 |
| By: | Shani Cohen; Shengwu Li |
| Abstract: | Cursed players understand the distribution of opponents' actions and the distribution of the payoff-relevant state, conditional on their own information, but respond as if the two were independent. Cursed equilibrium additionally requires statistically correct beliefs about the distribution of play. We propose a solution concept that separates the bias from equilibrium: cursed rationalizability iteratively deletes every action that is not a cursed response to a conjecture about opponents' surviving play. The cursed-rationalizable set is the interim correlated rationalizable set of a virtual game, in which payoffs are averaged over the state. Under strategic complements, cursed rationalizability yields the same bounds on behavior as cursed equilibrium. A cautious refinement, the analog of admissibility, delivers sharp predictions in the laboratory games that documented the winner's curse. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.28392 |
| By: | Martin Bichler; Abheek Ghosh |
| Abstract: | We study equilibrium computation in discrete multiplayer Colonel Blotto games with player-specific battlefield values. In the two-player model with common battlefield values, equilibria can be computed in polynomial time. We show that this tractability breaks down in the multiplayer model with player-specific values under the standard uniform tie-breaking rule. In particular, computing a $(c/n)$-approximate Nash equilibrium is PPAD-hard for some constant $c>0$, even when every player has three resources, where $n$ is the number of players. The main technical step is PPAD-hardness for computing a constant-approximate well-supported Nash equilibrium. In contrast, under uniform tie-breaking, a pure Nash equilibrium can be computed in polynomial time when every player has one resource. We also prove PPAD membership for computing $\varepsilon$-approximate Nash equilibria for inverse-exponentially small $\varepsilon$. Finally, for non-uniform monotone tie-breaking, we show PPAD-hardness even when every player has one resource and all players have identical battlefield values. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.30019 |
| By: | Maria Kovalenko; Georgy Lukyanov |
| Abstract: | This paper studies social learning when buying access to previous decisions also determines whose decision enters the record. Individuals first receive private information and then decide whether to pay for access. A positive price selects relatively weak private beliefs. With one founding observation, every buyer copies it, and the record acquires no further information. With a richer initial history, buyers can disagree and the record can improve; nevertheless, a price bounded away from zero prevents complete learning, even with unbounded private beliefs. We then consider a rule under which a buyer makes a preliminary choice before access and a revised choice afterward. A positive probability of implementing the preliminary choice makes it follow the private signal. Retaining both choices restores complete learning under a fixed effective fee or pooled myopic pricing, including with bounded beliefs. The rule reduces willingness to pay and sacrifices some current decision accuracy. A worked example shows how the subsequent improvement in information can outweigh both initial losses. The results show why preserving a judgment made before exposure can change what later users learn from the same selected population. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.25071 |
| By: | Chupeng Xie |
| Abstract: | Platforms increasingly host, distribute, and orchestrate third-party AI agents. A developer's investment in workflows, tool connections, testing, task records, and authorized memory creates a private capability stock and can also make complementary agents productive. The resulting stock is generated within a platform relationship, becomes platform specific, and is vulnerable to appropriation after investment. We model an origin platform that cannot commit to complete future fee and routing terms, a destination platform that commits to a verifiable recognition rule, and developers that invest before the origin resets terms. Portability protects investment through an exit option while preserving the origin's operating discretion. We characterize closed, partial, and full portability and show that the investment result survives incomplete ex post extraction. Verification has two opposing effects: it reduces transfer harm but can strengthen destination recognition and developer outside rent. It expands optimal portability only when safety and induced-investment gains exceed the additional rent and competitive leakage. Conditional on a target protected return, we compare portability with fee commitment and characterize the least-cost instrument mix. Finally, the origin is too closed when private leakage is mainly redistributive, but can be too open when duplication, fragmentation, or security costs are sufficiently real. The analysis turns agent interoperability into a conditional governance choice over relational capability rather than a presumption that openness is always efficient. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.17558 |
| By: | Surajeet Chakravarty (University of Exeter); David Kelsey (University of Nottingham); Byung-Cheol Kim (University of Alabama); Tigran Melkonyan (University of Alabama) |
| Abstract: | We study investment incentives when contracts do not cover all payoff-relevant contingencies. In a principal-agent model with moral hazard, the agent’s non-contractible investment changes both the distribution over contracted contingencies and the probability of an unforeseen contingency governed by legal default and ex post negotiation. First, we develop a framework separating awareness effects across parties and contractual branches: the agent’s awareness determines whether the unforeseen branch enters her investment incentives, whereas the principal’s awareness affects his perceived profitability and prediction of her investment. Second, we show contractual unawareness can reverse the hold-up comparison: the aligned contract gives the agent the full marginal surplus on foreseen contingencies, while her marginal return on the unforeseen branch is generated by default and negotiation, and either force can dominate. Third, heterogeneous ex post evaluations or transfer constraints can cause negotiation to fail, leaving the court-imposed default in place. Legal defaults thus shape ex ante investment and ex post efficiency, and we characterize the trade-off governing the optimal default. |
| Keywords: | Unawareness; awareness asymmetry; hold-up; awareness of unawareness; investment incentives; default rules |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:not:notcdx:2026-08 |
| By: | Hiroto Sawada; Raphael Boleslavsky; Kristopher W. Ramsay; Mehdi Shadmehr |
| Abstract: | States and alliances spend enormous resources signaling resolve to deter adversaries. Two canonical strategies are burning money (sunk costs) and burning bridges (audience costs). Large audience costs can deter effectively, but they may be infeasible and, even when feasible, can increase the likelihood of war relative to burning money. We propose a signaling design in which the defender retains the flexibility to fight or back down but commits ex ante, before learning its resolve, to a rule mapping realized resolve into costly actions. When audience costs are limited, this design raises defender payoffs while reducing the likelihood of war. We discuss implementation through laws and automated algorithms. We also characterize defender payoffs when audience costs are chosen endogenously from a feasible set, showing that lowering the maximum feasible audience cost can raise defender payoffs, and we compare these payoffs with those under the standard burning-money setting without commitment. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14625 |
| By: | Yijia Ding |
| Abstract: | This paper provides an explicit characterization of the (unique) equilibrium of the two-bidder all-pay auction with asymmetrically distributed, independent private values. The characterization is achieved through recasting the problem into its equivalence in the quantile space and thereby obtaining equilibrium bid functions that involve only integrals and inverses of the primitives. No regularity assumption is required: the value distributions can be continuous, discrete, singular continuous, or any mixture of these. The explicit formula makes comparative statics transparent. Raising one bidder's value distribution in first-order stochastic dominance raises that bidder's equilibrium bid distribution in the same order. Perturbing a symmetric-bidder model has different revenue effects depending on the direction of the perturbation: whereas slightly weakening one of the two bidders reduces expected revenue, slightly strengthening one of the two has an ambiguous effect. The explicit formula also turns some involved arguments in the literature into direct corollaries. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14041 |
| By: | Shubh Lashkery; Georgy Lukyanov |
| Abstract: | An adviser who warns that a task is difficult may become harder to evaluate when her advice is followed more thoroughly. We study a long-lived adviser and successive short-lived workers who choose between standard and intensive implementation. Standard implementation reveals whether the warning was correct and gives the next worker an opportunity to acquire cost-saving practical knowledge. Intensive implementation protects the project but produces only occasional evidence about the adviser. We construct a stationary sequential equilibrium in which the adviser initially accepts an informative implementation, withholds the next project after her reputation improves, and resumes recommendations once inherited know-how has been lost. The interruption is chosen because it changes the successor's implementation decision: preserving know-how reverses the adviser's preference at the relevant history. All realized evidence remains public. Weak subsequent evidence eventually ends the low-ability adviser's protection, but this can take a long time. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.17617 |
| By: | Jason Hartline |
| Abstract: | The article reviews the robust design and analysis of auctions, focusing on the predominant paradigm in the computer science literature, which quantifies robustness by the worst-case, over environments, ratio between the robust auction's performance and that of an optimal auction for the environment. Applications include robust analysis of canonical auctions such as the first-price auction for the welfare objective, prior-robust auction design for the revenue objective, and prior-robust design of exchange mechanisms for the gains-from-trade objective. Finally, the revelation principle is not without loss in robust mechanism design. The potential loss can be quantified by the revelation gap, the fraction of the optimal robust guarantee that is lost when restricting from all mechanisms to revelation mechanisms. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.01805 |
| By: | Michael Richter; Matan Tsur |
| Abstract: | We introduce and analyze the team search problem. A firm sequentially searches for workers to assemble a team containing a required combination of types. We characterize the expected search duration as a function of the team's and pool's compositions, and establish three main results. First, the search duration function is a linear combination of its forward marginals. Second, when the firm chooses where to search, the optimal pool is strictly more balanced than its team, generating a compositional mismatch between the firm's positions and the workers' skills. Third, when the firm can automate positions, the optimal policy is often all-or-nothing. |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:26/849 |
| By: | Drew Fudenberg; Andrew Koh |
| Abstract: | We study a continuous-time game in which two firms choose how quickly to advance their capabilities while an exogenous safety threshold advances at a fixed rate. When the capability frontier (max of firms' capabilities) exceeds the safety threshold, all firms are exposed to common disaster that arrives at a hazard rate increasing in the capability-safety difference. We characterize Markov perfect equilibria in terms of the disaster risk, how quickly safety advances, and flow payoffs: when they are low, only racing is an equilibrium; when they are intermediate, racing and pacing coexist; when they are high, only pacing survives. Across all subgame perfect equilibria, low risk induces perpetual racing while high risk rules it out and we bound the probability of disaster across all SPE. If internal capabilities are hidden with a fixed lag until deployment, it is harder to sustain pacing which highlights the importance of transparency about internal capabilities. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.28291 |
| By: | Andrea Bovo; Tiziano De Angelis; St\'{e}phane Villeneuve |
| Abstract: | We perform a detailed study of a principal--agent problem in a continuous time version of the celebrated Holmstr\"om--Milgrom model (Econometrica 55 (2), 1987) where we add limited liability for the Agent. We develop a probabilistic methodology to prove that the Principal's value function is the unique bounded classical solution to a fully nonlinear and fully degenerate partial differential equation (PDE) with Cauchy-Dirichlet boundary conditions on $[0, T]\times[0, \infty)$. Indeed, we also prove infinite continuous differentiability of the solution in the interior of the domain. The strength of our regularity result is such that we can ensure existence of optimal controls in strong form---a rare occurrence in dynamic contracting---and we obtain fine properties of the optimal control map, including a characterisation via a further nonlinear degenerate PDE. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.18287 |