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on Microeconomics |
| By: | Jos\'e Ignacio Rivero-Wildemauwe |
| Abstract: | Two agents trade an item in a simultaneous offer setting, where the exchange takes place if and only if the buyer's bid price weakly exceeds the seller's ask price. Each agent is randomly assigned the buyer or seller role. Both agents are characterized by a certain degree of Kantian morality, whereby they pick their bidding strategy behind a Veil of Ignorance, taking into account how the outcome would be affected if their trading partner adopted their strategy. I consider two variants with asymmetric information, respectively allowing buyers to have private information about their valuation or sellers to be privately informed about the item's quality. I show that when all trades are socially desirable, even the slightest degree of morality guarantees that the outcome is fully efficient. In turn, when quality is uncertain and some exchanges are socially undesirable, full efficiency is only achieved with sufficiently high moral standards. Moral concerns also ensure equal ex-ante treatment of the two agents in equilibrium. Finally, I show that if agents are altruistic rather than moral, inefficiencies persist even with a substantial degree of altruism. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.20551 |
| By: | Ignacio Esponda; Demian Pouzo |
| Abstract: | We introduce Berk--Nash rationalizability, a new solution concept for misspecified learning environments. It parallels rationalizability in games and captures all actions that are optimal given beliefs formed using the model that best fits the data in the agent's misspecified model class. Our main result shows that, with probability one, every \emph{limit action} -- any action played or approached infinitely often -- is Berk--Nash rationalizable. This holds regardless of whether behavior converges. We apply the concept to known examples and identify classes of environments where it is easily characterized. The framework provides a general tool for bounding long-run behavior without assuming convergence to a Berk--Nash equilibrium. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.20708 |
| By: | Kiho Yoon |
| Abstract: | With a multilateral vertical contracting model of media markets, we examine upstream competition and contractual arrangements in content provision. We analyze the trade of content by the Nash bargaining solution and the downstream competition by the Hotelling location model. We characterize the equilibrium outcomes and the contractual arrangements for various vertical structures. We show that the possibility of exclusive contracts rises when the value of the premium content increases, the degree of horizontal differentiation in the downstream market decreases, the importance of advertising revenue decreases, and the relative bargaining power of upstream firm decreases. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15063 |
| By: | Yi-Chun Chen; Zhengqing Gui |
| Abstract: | We apply marginal analysis \`a la Bulow and Roberts (1989) to characterize the revenue-maximizing selling mechanism for a multiproduct monopoly. Specifically, we derive the revenue change due to a price perturbation on any subset of bundles holding the prices of other bundles fixed. In an optimal mechanism, total revenue must not increase with any small price change for bundles with positive demand, nor with a small price decrease for bundles with zero demand. For any symmetric two-dimensional type distribution satisfying mild regularity conditions, the marginal analysis fully characterizes the optimal mechanism, whether the buyer's valuations are additive or exhibit complementarity or substitutability. For general type distributions, the analysis identifies which bundles must carry positive or zero demand and provides conditions under which randomization is necessary. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.06763 |
| By: | Raphael Boleslavsky; Silvana Krasteva |
| Abstract: | This paper examines competitive information disclosure in search markets with a mix of savvy consumers, who search costlessly, and inexperienced consumers, who face positive search costs. Savvy consumers incentivize truthful disclosure; inexperienced consumers, concealment. With both types, equilibrium features partial disclosure, which persists despite intense competition: in large markets, firms always conceal low valuations. Inexperienced consumers may search actively, but only in small markets. While savvy consumers benefit from increased competition, inexperienced consumers may be harmed. Changes in search costs have non-monotone effects: when costs are low, sufficient reductions increase informativeness and welfare; when costs are high, the opposite. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.06319 |
| By: | Cristian Chica; Yinglong Guo; Gilad Lerman |
| Abstract: | We introduce pricing formulas for competition and collusion models of two-sided markets with an outside option. For the competition model, we find conditions under which prices and consumer surplus may increase or decrease if the outside option utility increases. Therefore, neglecting the outside option can lead to either overestimation or underestimation of these equilibrium outputs. Comparing collusion to competition, we find that in cases of small cross-side externalities, collusion results in decreased normalized net deterministic utilities, reduced market participation and increased price, on both sides of the market. Additionally, we observe that as the number of platforms increases in the competition model, market participation rises. Profits, however, decrease when the net normalized deterministic utility is sufficiently low but increase when it is high. Furthermore, we identify specific conditions that quantify the change of price and consumer surplus when the competition increases. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.06109 |
| By: | D. Carlos Akkar |
| Abstract: | A seller offers an asset in a decentralised market. Buyers have private signals about their common value. I study whether the market becomes allocatively more efficient with (i) more buyers, (ii) better-informed buyers. Both increase the information available about buyers' common value, but also the adverse selection each buyer faces. With more buyers, trade surplus eventually increases and converges to the full-information upper bound if and only if the likelihood ratios of buyers' signals are unbounded from above. Otherwise, it eventually decreases and converges to the no-information lower bound. With better information about trades buyers would have accepted, trade surplus increases. With better information about trades they would have rejected, trade surplus decreases--unless adverse selection is irrelevant. For binary signals, a sharper characterisation emerges: stronger good news increase total surplus, but stronger bad news eventually decrease it. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.06848 |
| By: | Nicolas Schutz; Anton Sobolev |
| Abstract: | We study the competitve effects of dual pricing, a vertical restraint that involves charging a distributor different prices for units intended to be resold online versus offline. We develop a model in which a manufacturer contracts with hybrid retailers selling both in-store and online. We find that, by eliminating wasteful price dispersion, dual pricing allows the manufacturer to induce the industry monopoly outcome, whereas uniform pricing does not. Despite this, a ban on dual pricing has negative welfare effects if the online market is small, if the offline consumers' search costs are high, and if the monopoly pass-through is high. |
| Keywords: | dual pricing, price dispersion, consumer search, vertical restraints |
| JEL: | L13 L42 D43 D83 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_678v2 |
| By: | Ulrike Schmidt-Kraepelin; Warut Suksompong; Markus Utke |
| Abstract: | We study a budget aggregation setting where voters express their preferred allocation of a fixed budget over a set of alternatives, and a mechanism aggregates these preferences into a single output allocation. Motivated by scenarios in which the budget is not perfectly divisible, we depart from the prevailing literature by restricting the mechanism to output allocations that assign integral amounts. This seemingly minor deviation has significant implications for the existence of truthful mechanisms. Specifically, when voters can propose fractional allocations, we demonstrate that the Gibbard-Satterthwaite theorem can be extended to our setting. In contrast, when voters are restricted to integral ballots, we identify a class of truthful mechanisms by adapting moving-phantom mechanisms to our context. Moreover, we show that while a weak form of proportionality can be achieved alongside truthfulness, (stronger) proportionality notions derived from approval-based committee voting are incompatible with truthfulness. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.05708 |
| By: | Shinnosuke Kawai; Kuninori Nakagawa |
| Abstract: | This paper explores price competition with exogenous product differentiation in a spatial model similar to that of Nakagawa (2023). Nakagawa examines product differentiation within the framework of Varian (1980). Nakagawa integrates Varian's concept of uninformed consumers, who lack complete price information, into a spatial model based on Hotelling (1929). While Nakagawa placed informed consumers at the center of the Hotelling line and used quadratic transportation costs, our study employs a uniform distribution of informed consumers and linear transportation costs. This approach enables a more direct comparison with established spatial competition literature, particularly Osborne and Pitchik (1987). We classify equilibrium candidates and characterize the parameter regions corresponding to each equilibrium. There is no pure equilibrium in the region where we construct mixed strategy equilibria. Furthermore, we compare the expected profit in the equilibrium of our model with the findings of Osborne and Pitchik (1987). Finally, we discuss the impact of captive buyers on the nature of spatial competition. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.06961 |
| By: | Pinaki Mandal |
| Abstract: | In the object reallocation problem, achieving Pareto-efficiency is desirable, but may be too demanding for implementation purposes. In contrast, pair-efficiency, which is the minimal efficiency requirement, is more suitable. Despite being a significant relaxation, however, pair-efficiency ensures Pareto-efficiency for any strategy-proof and individually rational rule when agents' preferences are unrestricted. What if agents' preferences have specific restricted structures, such as single-peakedness or single-dippedness? We often encounter such situations in real-world scenarios. This study aims to investigate whether pair-efficiency is sufficient to ensure Pareto-efficiency in such cases. Our main contribution in this paper is establishing the equivalence between pair-efficiency and Pareto-efficiency when dealing with single-peaked or single-dipped preference profiles. This equivalence holds without needing to assume any other properties of the rule. We further show that both the single-peaked domain and the single-dipped domain are the "maximal" domains where this equivalence holds. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15169 |
| By: | Mohammad T. Hajiaghayi; Piotr Krysta; Mohammad Mahdavi; Suho Shin |
| Abstract: | We study the problem of delegated choice with inspection cost (DCIC), which is a variant of the delegated choice problem by Kleinberg and Kleinberg (EC'18) as well as an extension of the Pandora's box problem with nonobligatory inspection (PNOI) by Doval (JET'18). In our model, an agent may strategically misreport the proposed element's utility, unlike the standard delegated choice problem which assumes that the agent truthfully reports the utility for the proposed alternative. Thus, the principal needs to inspect the proposed element possibly along with other alternatives to maximize its own utility, given an exogenous cost of inspecting each element. Further, the delegation itself incurs a fixed cost, thus the principal can decide whether to delegate or not and inspect by herself. We show that DCIC indeed is a generalization of PNOI where the side information from a strategic agent is available at certain cost, implying its NP-hardness by Fu, Li, and Liu (STOC'23). We first consider a costless delegation setting in which the cost of delegation is free. We prove that the maximal mechanism over the pure delegation with a single inspection and an PNOI policy without delegation achieves a $3$-approximation for DCIC with costless delegation, which is further proven to be tight. These results hold even when the cost comes from an arbitrary monotone set function, and can be improved to a $2$-approximation if the cost of inspection is the same for every element. We extend these techniques by presenting a constant factor approximate mechanism for the general setting for rich class of instances. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.07162 |
| By: | Nicolas Eschenbaum; Nicolas Greber |
| Abstract: | We analyze the vulnerability of decentralized autonomous organizations (DAOs) to speculative exploitation via their redemption mechanisms. Studying a game-theoretic model of repeated auctions for governance shares with speculators, we characterize the conditions under which -- in equilibrium -- an exploitative exit is guaranteed to occur, occurs in expectation, or never occurs. We evaluate four redemption mechanisms and extend our model to include atomic exits, time delays, and DAO spending strategies. Our results highlight an inherent tension in DAO design: mechanisms intended to protect members from majority attacks can inadvertently create opportunities for costly speculative exploitation. We highlight governance mechanisms that can be used to prevent speculation. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.21296 |
| By: | Basak, Debasmita |
| Abstract: | It is commonly believed that common ownership deters entry by internalizing market competition which warrants pro-competitive entry regulations. Using a successive oligopoly model with common ownership, we challenge this conventional wisdom. We show that if the downstream sector alone operates under common ownership, entry is always socially excessive, i.e., more firms enter the market than is socially optimal. In contrast, when the upstream sector alone operates under common ownership, entry is socially excessive (insufficient) if the degree of common ownership in the upstream market is reasonably low (high). Finally, when both sectors are characterized by common ownership, entry is socially excessive if the degree of ownership in the downstream market is stronger than that in the upstream market. Therefore, our findings provide a rationale for anti-competitive, rather than pro-competitive entry regulations. |
| Keywords: | Common Ownership, Excessive Entry, Insufficient Entry, Successive Oligopoly |
| JEL: | D43 L11 L13 L22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:319538 |
| By: | H\'ector Hermida-Rivera; Toygar T. Kerman |
| Abstract: | This paper introduces a novel binary stability property for voting rules-called binary self-selectivity-by which a society considering whether to replace its voting rule using itself in pairwise elections will choose not to do so. In Theorem 1, we show that a neutral voting rule is binary self-selective if and only if it is universally self-selective. We then use this equivalence to show, in Corollary 1, that under the unrestricted strict preference domain, a unanimous and neutral voting rule is binary self-selective if and only if it is dictatorial. In Theorem 2 and Corollary 2, we show that whenever there is a strong Condorcet winner; a unanimous, neutral and anonymous voting rule is binary self-selective (or universally self-selective) if and only if it is the Condorcet voting rule. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15265 |
| By: | Daron Acemoglu; Asuman Ozdaglar; James Siderius |
| Abstract: | We consider the political consequences of the use of artificial intelligence (AI) by online platforms engaged in social media content dissemination, entertainment, or electronic commerce. We identify two distinct but complementary mechanisms, the social media channel and the digital ads channel, which together and separately contribute to the polarization of voters and consequently the polarization of parties. First, AI-driven recommendations aimed at maximizing user engagement on platforms create echo chambers (or “filter bubbles”) that increase the likelihood that individuals are not confronted with counter-attitudinal content. Consequently, social media engagement makes voters more polarized, and then parties respond by becoming more polarized themselves. Second, we show that party competition can encourage platforms to rely more on targeted digital ads for monetization (as opposed to a subscription-based business model), and such ads in turn make the electorate more polarized, further contributing to the polarization of parties. These effects do not arise when one party is dominant, in which case the profit-maximizing business model of the platform is subscription-based. We discuss the impact regulations can have on the polarizing effects of AI-powered online platforms. |
| JEL: | L10 M37 P40 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33892 |
| By: | Md Mahadi Hasan |
| Abstract: | I develop a continuous-time model in which an incumbent batch-service provider faces stochastic passenger arrivals and must decide when to dispatch under the threat of customer defection to a faster entrant. The incumbent's problem is formalized as a trade-off between departure frequency and load maximization, with the option to accept mid-route pickups. I characterize the equilibrium dispatch strategy and show that increased competitive pressure strictly reduces the feasible departure threshold, leading to more frequent departures with smaller passenger loads. Longer travel times tend to raise the unconstrained optimal threshold, but realized dispatch behavior also depends on passenger tolerance for delay. Endogenizing demand by letting the arrival rate fall with expected waiting time yields an interior optimum, rationalizing why incumbents now (i) depart partially full and (ii) accept mid-route riders. Comparative statics show that the optimal threshold tends to increase with travel time under a mild regularity condition and decreases with competitive intensity. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.20554 |
| By: | H\'ector Hermida-Rivera |
| Abstract: | In this paper, I introduce a novel stability axiom for stochastic voting rules, called self-equivalence, by which a society considering whether to replace its voting rule using itself will choose not do so. I then show that under the unrestricted strict preference domain, a voting rule satisfying the democratic principles of anonymity, optimality, monotonicity, and neutrality is self-equivalent if and only if it assigns to every voter equal probability of being a dictator (i.e., uniform random dictatorship). Thus, any society that desires stability and adheres to the aforementioned democratic principles is bound to either employ the uniform random dictatorship or decide whether to change its voting rule using a voting rule other than itself. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15310 |
| By: | H\'ector Hermida-Rivera |
| Abstract: | In this paper, I characterize minimal stable voting rules and minimal self-stable constitutions (i.e., pairs of voting rules) for societies in which only power matters. To do so, I first let players' preference profiles over voting rules satisfy four natural axioms commonly used in the analysis of power: non-dominance, anonymity, null player and swing player. I then provide simple notions of minimal stability and minimal self-stability, and show that the families of minimal stable voting rules and minimal self-stable constitutions are fairly small. Finally, I conclude that political parties have evolved to ensure the minimal self-stability of otherwise not minimal self-stable constitutions. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15323 |
| By: | Enrico Mattia Salonia (Toulouse School of Economics) |
| Abstract: | I study the behaviour of individuals who have preferences for universalisation. When considering a course of action, they evaluate the consequence that would occur if everyone else acted equivalently, according to some criterion of equivalence. That is, they universalise their behaviour. I develop and axiomatise a model for individuals who value their choices in light of the consequences they induce when their action is universalised. The key behavioural prediction is that the independence axiom is satisfied only among actions that are universalised equivalently. I impose conditions to single out the most prominent models of universalisation, compare them, highlight and arguably overcome their limitations. I propose a unifying model of universalisation inspired by the equal sacrifice principle. |
| Keywords: | Universalisation reasoning, Non-consequentialism, Kantian preferences, Equal sacrifice principle, Axiomatic model |
| JEL: | C70 C72 D01 D03 D90 |
| Date: | 2025–06–06 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:603 |
| By: | Philip A. Ernst; Oleksii Mostovyi |
| Abstract: | We investigate a pricing rule that is applicable for streams of income or contingent claim liabilities and study how this rule changes under additional insider-type information that an investor might obtain. Considering a model where the risky asset might have jumps, we obtain an explicit form of the associated state price density for the three different types of agents considered in [ER20]: one who has no information about the jumps, one who knows in advance exactly when the each jump will occur, and one who has no information about the size of the jumps but has partial information about the size of each jump. For each of these agents, we provide characterizations of the pricing rule and establish a representation formula, allowing us to quantify the value of partial information for streams of labor income or contingent claim liabilities. Our work is motivated by finding and characterizing a pricing rule that, both with or without partial information about jumps, assigns different values of information for different income streams or contingent claim liabilities. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.08943 |
| By: | R. Pablo Arribillaga (CONICET/UNSL); Beatriz Millan (CONICET/UNSL/UNSJ); Eliana Pepa Risma (CONICET/UNSL) |
| Abstract: | In two-sided many-to-many matching markets under substitutable preferences —both with and without contracts— all stable-dominating mechanisms are manipulable. In light of this, we examine whether some of these mechanisms are at least not obviously manipulable (NOM). To this end, we discuss three established models that are encompassed by our general framework: the no-contract case, the unitary con tract case, and the multiple-contract case. Our results reveal fundamental differences among the three models. We transition from a no-contracts model, where all stable dominating mechanisms are NOM, to a multiple-contracts model, where all stable mechanisms and all efficient stable-dominating mechanisms are obviously manipulable (OM). In the intermediate case of unitary contracts the doctor-proposing DA mechanism remains NOM, but the hospital-proposing DA mechanism and all efficient stable-dominating mechanisms are OM. These findings reveal fundamental trade-offs between stability, efficiency, and NOM in these markets. |
| Keywords: | obvious manipulations, stability, efficiency, many-to-many matching, contracts. |
| JEL: | D71 D72 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:363 |
| By: | Benedikt Koch; Kosuke Imai |
| Abstract: | Classical statistical decision theory evaluates treatment choices based solely on observed outcomes. However, by ignoring counterfactual outcomes, it cannot assess the quality of decisions relative to feasible alternatives. For example, the quality of a physician's decision may depend not only on patient survival, but also on whether a less invasive treatment could have produced a similar result. To address this limitation, we extend standard decision theory to incorporate counterfactual losses--criteria that evaluate decisions using all potential outcomes. The central challenge in this generalization is identification: because only one potential outcome is observed for each unit, the associated risk under a counterfactual loss is generally not identifiable. We show that under the assumption of strong ignorability, a counterfactual risk is identifiable if and only if the counterfactual loss function is additive in the potential outcomes. Moreover, we demonstrate that additive counterfactual losses can yield treatment recommendations that differ from those based on standard loss functions, provided that the decision problem involves more than two treatment options. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.08908 |