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on Microeconomics |
| By: | Salvador Candelas; Nicole Immorlica; Brendan Lucier |
| Abstract: | We study markets where firms compete for consumer attention by subsidizing costly product inspection. These subsidies do not change product quality, but they alter the order in which consumers search by lowering inspection costs. We establish a subsidy-sorting principle: in any equilibrium, higher-quality firms provide weakly larger subsidies, leading consumers to search in descending subsidy order. A unique equilibrium survives forward-induction reasoning in the spirit of the Intuitive Criterion: low-quality firms are never inspected, intermediate-quality firms separate with strictly increasing subsidies, and high-quality firms pool at the full subsidy. This equilibrium maximizes information revelation among all possible outcomes and ensures efficient inspection. We then extend the analysis to AI-mediated platforms that can create and price inspection tokens. The platform's optimal linear pricing leads to excessive inspection relative to the social optimum. While this distortion does not reduce consumer welfare, it reallocates surplus from sellers to the platform and consumers. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.28985 |
| By: | Ran Spiegler; Stephan Waizmann |
| Abstract: | We study strategic interaction when players delegate belief formation to predictive machine learning (ML). In a static Bayesian game, each player's ML agent predicts a payoff-relevant outcome variable as a function of the player's type. The ML agent's training sample is endogenous: it is drawn from the outcome distribution generated by players' ML-guided behavior. In Cross-Validation Equilibrium (CVE), each player's ML agent selects a predictive model to minimize expected out-of-sample squared error, given its realized training sample, and each player best-replies to the belief generated by the model her ML agent selected. We analyze CVE and relate it to other equilibrium concepts. We apply CVE to jury voting, speculative betting, and games with linear-quadratic payoffs. E.g., in a team-effort game, endogenous model selection can give rise to multiple equilibria. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.12571 |
| By: | Benjamin Blumenthal |
| Abstract: | I study a model of delegated experimentation in which actions signal agents’ underlying type—careerist or partisan. I show that careerist agents pander to the future by choosing the action mostlikely to be preferred ex post by the principal. I discuss when and why this behaviour differsfrom selecting the principal’s ex ante preferred action, which balances static and dynamic learningbenefits. I conclude my analysis by considering implications for agents’ responsiveness to changesin actions’ popularity, for the benefits and costs of transparency, and for the role of partisanshipstructures. |
| Keywords: | delegation; experimentation; transparancy; accountability |
| JEL: | D72 D82 D83 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/407815 |
| By: | Robin Ng; Greg Taylor |
| Abstract: | We study how content moderation facilitates communication on online platforms. A sender transmits information to a receiver, exerting effort to signal their truthfulness. Communication fails without moderation because the effort required is prohibitive. Moderation resolves this problem by making effort a more powerful signal of veracity. However, moderation crowds out sender effort, decreasing engagement value of content on the platform. A socially optimal policy may therefore involve limited moderation, but platforms often have an incentive to allow too much false content. We study the interaction between moderation and other strategic platform choices, including a platform’s decision to share revenue with creators, the decision to be a content-hosting platform, and the enablement of AI features. |
| Keywords: | user-generated content, content moderation, creator economy, media platforms, misinformation |
| JEL: | D83 L82 L86 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_698v3 |
| By: | Yuxin Liu; M. Amin Rahimian |
| Abstract: | Information sharing among competing suppliers can improve decision-making under uncertainty, yet strategic concerns regarding rival exploitation often deter voluntary disclosure. We study information-sharing mechanisms in a Cournot oligopoly with uncertain demand, where a platform aggregates suppliers' signals through privacy-preserving channels and may also possess an exogenous external signal. The central challenge is to balance strategic safety with informational utility: privacy noise reduces the exposure of individual signals, but also lowers the value of the shared information pool. We first characterize a baseline setting in which access to aggregated information is contingent on participation. In a two-firm market without an external signal, firms refuse to share regardless of the privacy level. In an \(n\)-firm market, sharing may arise even without privacy safeguards because non-participating firms lose access to the aggregated signal. Building on this baseline, we show that privacy protection alone is insufficient to incentivize disclosure; it must be combined with a sufficiently informative external signal. We further show that firms with more accurate private signals require stronger privacy protection. Overall, our results characterize the sharing-feasible region and highlight the complementarity between privacy design and the external information environment. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.02348 |
| By: | Alexander Matros (University of South Carolina); Constantine Sorokin (University of Glasgow) |
| Abstract: | We study a tractable two-player contest built on a truncated cubic contest success function. Its defining feature is a strategic-feedback parameter whose sign determines whether a leading player's effort lowers (suppression) or raises (empowerment) the marginal effectiveness of the trailing player's effort; standard lottery contests impose suppression by construction. The benchmark yields closed-form mixed equilibria under complete information and a unique affine Bayesian Nash equilibrium under IID private information. Expected effort is typically single-peaked in the feedback parameter. Uncertainty lowers effort under suppression but raises it under empowerment, and the same asymmetry governs information disclosure: an effort-maximizing designer withholds information under suppression and discloses fully under empowerment. Several familiar conclusions of contest theory turn out to reflect suppressive benchmarks rather than contests as such. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.26639 |
| By: | Lahiri, Somdeb |
| Abstract: | We provide a necessary and sufficient condition for a salient action profile to be a focal point for 2x2 pay-off salient games. In view of the necessary and sufficient condition for the existence of a focal point, we are able to provide an exact criteria that selects the focal point if it exists. We introduce the concepts of dominant salient action and dominant for 2x2 strongly pay-off salient games and provide a necessary and sufficient condition for a dominant salient action profile to be a dominant focal point. We also provide a procedure to implement a dominant focal point when one exists. |
| Keywords: | 2x2 bimatrix games, pay-off salient actions, focal point, strongly pay-off salient, dominant focal point |
| JEL: | C72 D81 |
| Date: | 2026–03–07 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128758 |
| By: | Rui Sun; Junfei Guo |
| Abstract: | This paper introduces state-robust equilibrium (SRE), a local validity test for Nash predictions in finite-strategy population games when the payoff-relevant aggregate state may be misspecified. The reported prescription and payoff map are held fixed; only the state used to evaluate payoff comparisons varies. SRE is equivalent to local best-response invariance, absence of structural exposure, and validity along every vanishing interior aggregate-state error. In affine games, the tangent-cone, normal-cone, and linear-program tests characterize exposure and identify the exposing population, the pure strategy, and the aggregate-state direction. The main implication is a sharp negative result: robust mixing requires local payoff identity on the support; in generic affine games, SRE reduce to strict pure Nash equilibria, although weak boundary equilibria can survive through feasible-set protection. In affine games with polyhedral local uncertainty regions, the same inequalities yield a deterministic finite diagnostic for reported-state validity. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.26516 |
| By: | Pieroni, Luca; Roig, Melcior Rossellò |
| Abstract: | This paper studies the ex ante design of costly reform architectures. Before the welfare environment is realised, an institution chooses a directed graph of admissible public reasons over a finite set of institutional meanings. Re form proceeds along maintained edges via welfare non-decreasing steps. The main result characterises reform completeness through a trap-cut condition: the architecture must contain a welfare-improving exit from every upper-contour trap. On the unrestricted welfare domain this forces the complete directed graph; on a tree-single-peaked domain the unique minimum-cost architecture is the bidirected tree, reducing the language from quadratic to linear. Under ambiguity about the domain, only three architectures are optimal—no costly language, the bidirected tree, or the complete graph—and the sparse intermediate regime collapses discontinuously to the complete language above a critical ambiguity threshold. The analysis extends to finite lattices, where the bidi rected cover graph is the unique minimum-cost architecture for domains with cover-connected upper contours. |
| Keywords: | public reasons; institutional design; reform; single-peakedness; graph theory; costly language; path dependence; lattice. |
| JEL: | C61 C72 C78 D71 D83 |
| Date: | 2026–05–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129163 |
| By: | Yakov Babichenko |
| Abstract: | A decision-maker (DM) repeatedly makes choices under uncertainty in a bandit environment, where only the realization of the chosen arm is observed. Another competing agent, the adviser (AD), repeatedly provides recommendations, but the realizations of these recommendations are unobserved unless they coincide with the DM's choice. Both agents possess partial information about the arms' realizations. The central question we focus on is whether, in the long run, an outside observer can identify which agent is more informed based solely on the observed decisions, recommendations, and arm realizations. A test selects one of the agents based on the observed data. We focus primarily on the class of scoring tests, which assign a numerical score to each observation and select the agent according to the average score. We study strategic agents whose objective is to be selected by the test. For simultaneous arm choices, we show that there exists a scoring test that successfully identifies the more-informed agent. For sequential arm choices, however, no such scoring test exists. Finally, we explore the tension between identifying the more-informed agent and maximizing welfare. A DM whose objective is to pass the test may not necessarily make welfare-maximizing decisions. In a binary-arm environment, we show that no scoring test can simultaneously identify the more informed agent and achieve more than half of the welfare attained by welfare-maximizing decisions. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.02095 |
| By: | Mikhail Anufriev; Kirill Borisov; Mikhail Pakhnin |
| Abstract: | We develop a model of social interaction in which agents hold private beliefs but communicate public statements. We distinguish between two networks: an audience network shaping statements through social pressure, and an influence network governing belief updating. This separation drives a wedge between public statements and underlying beliefs, so that agents may persistently communicate opinions they do not hold. We provide necessary and sufficient network conditions for the emergence of such hypocrisy. The model generates rich patterns of opinion propagation, including the amplification of messages that agents themselves do not believe, and sheds light on phenomena such as propaganda diffusion, the spiral of silence, and political correctness. |
| Keywords: | social learning, network theory, hypocrisy, political correctness, dissonance minimization, propaganda |
| JEL: | D83 D85 D91 Z13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12700 |
| By: | Pegoraro, Stefano (University of Notre Dame) |
| Abstract: | In a continuous-time model, a risk-neutral decision-maker chooses the volatility of a state variable and is terminated when the variable falls below a threshold. I provide economically interpretable conditions under which the decision-maker becomes risk averse endogenously and minimizes volatility near termination, even if she faces myopic incentives to gamble for resurrection. The conditions introduce forward-looking incentives to preserve economic rents. I show these conditions are met in a wide range of apparently unrelated models, thus identifying forward-looking rents as a unifying economic mechanism behind endogenous risk aversion. I also provide conditions for the decision-maker to become risk loving endogenously. |
| Date: | 2024–10–09 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:9tcjz_v1 |
| By: | Schnakenberg, Keith; Turner, Ian R (University of Pittsburgh) |
| Abstract: | Many policies require citizens to actively participate in their implementation in order to be successful, a situation referred to as citizen coproduction. Though citizen coproduction is necessary in many policy areas, it could create difficulties for democratic accountability because citizens and politicians share responsibility for policy failures and attribution of blame may be difficult. We analyze the problem of democratic accountability with citizen coproduction in the context of a model in which politicians, who vary with respect to their competence at selecting policies, choose whether to implement policies whose success depends on citizen coproduction choices. For citizens, the problem is one of attribution: when coproduction is low, it may be hard to select good incumbents because policy failures are frequent even when policy choices are good. Incumbents anticipate these effects, which sometimes implies that they are less likely to choose reforms when they are more likely to be successful. |
| Date: | 2026–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:gehwz_v2 |
| By: | Gilles Grolleau (CEREN - Centre de Recherche sur l'ENtreprise [Dijon] - BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC)); Alain Marciano (UNITO - Università degli studi di Torino = University of Turin); Naoufel Mzoughi (ECODEVELOPPEMENT - Ecodéveloppement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We argue that repugnance is not always a constraint but can, in some cases, be strategically used as a resource by some "entrepreneurs" who can leverage the 'veil of repugnance' itself to advance their own goals. To understand the conditions in which such a strategic use of repugnance is possible, and how these individuals can use it, we first propose a conceptual framework to characterize repugnance-related transactions and emphasize how concerned individuals devise narratives to manage these situations, increase (or even decrease) artificially their acceptability and ultimately justify their behavior. This framework, which combines relational proximity and the strength of social consensus surrounding a transaction, allows for predicting the costs of developing appropriate narratives. Then, we analyze four rationales by which entrepreneurial individuals exploit and use strategically repugnant dimensions. Repugnance can be strategically leveraged as a barrier to entry, a tool for niche differentiation, a mechanism of political and market polarization, and a means of attracting attention, thereby shaping competition, regulation, and visibility across markets and platforms. |
| Keywords: | strategic repugnance, taboo trade-offs, distastefulness, repugnance, narratives |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05631948 |
| By: | Rajiv Sethi (Barnard College, Columbia University and the Santa Fe Institute); Rohini Somanathan (Department of Economics, Delhi School of Economics, University of Delhi) |
| Abstract: | Meritocratic systems are commonly understood as those that assign tasks to individuals who can best perform them. But future performance is not known prior to assignment, and must be inferred from other traits. We consider a model in which performance depends on two attributes—ability and training—where ability is endowed and unobserved and training is acquired and observed. The potential to acquire training depends on ability and resource access, so ability affects performance through two channels: indirectly through training and directly through the performance function. The population consists of two groups, each with the same ability distribution, but with differential access to resources. We show that performance-maximizing allocations are not necessarily group-blind or monotonic in training, and can involve greater representation of groups with lower resource access than would arise if the only criteria for selection were past performance. If policies are constrained to be monotonic due to the possibility of strategic applicant behavior, these representation effects can be mitigated or ampli?ed, depending on the fraction of the population that is selected. |
| Keywords: | merit, af?rmative action, group inequality JEL codes: D82, I24 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cde:cdewps:363 |
| By: | Ethan Bueno de Mesquita; Wioletta Dziuda; Mattias Polborn |
| Abstract: | Concerns about the race to artificial general intelligence often assume that competition and resources increase risk by accelerating development. We study a model in which firms allocate scarce resources between speed and safety. Speed increases a firm's chance of reaching AGI first but leaves fewer resources for safety; safety lowers doom risk but slows arrival. Fragmentation increases total speed and conditional doom risk by shifting a fixed industry resource pool toward speed. The model also identifies a critical market size: below it, firms have positive expected payoff from achieving AGI, while above it, firms race even though achieving AGI has negative expected value. More per-firm resources always accelerate expected arrival, but their effect on conditional doom risk changes sign at this cutoff. Policy affects risk by changing equilibrium incentives: consolidation, resource regulation, commitment devices, and cautious public entry can improve welfare in some environments. The results show that AGI risk depends not only on technical considerations, but also on market structure, resource constraints, and institutions that shape the equilibrium allocation between speed and safety. |
| JEL: | D0 D20 D21 O3 O30 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35276 |