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on Microeconomics |
| By: | Andrea Di Giovan Paolo; Jose Higueras |
| Abstract: | We study information disclosure in competitive markets with adverse selection. Sellers privately observe product quality, with higher quality entailing higher production costs, while buyers trade at the market-clearing price after observing a public signal. Because sellers' participation in trade conveys information about quality, the designer faces endogenous constraints in the set of posteriors that she can induce. We reformulate the designer's problem as a martingale optimal transport exercise with an additional condition that rules out further information transmission through sellers' participation decisions, and characterize the optimal signals. When the designer maximizes trade volume, the solution features negative-assortative matching of inefficient and efficient sellers. When the objective is a weighted combination of price and surplus, optimal signals preserve this structure as long as the weight on the price is high enough, otherwise they fully reveal low-quality types while pooling middle types with high-quality sellers. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.01413 |
| By: | Mariann Ollár; Antonio Penta |
| Abstract: | We study a framework for robust mechanism design that can accommodate various degrees of robustness with respect to agents’ beliefs, which encompasses both the belief-free and Bayesian settings as special cases. For general belief restrictions, we characterize the set of incentive compatible direct mechanisms in general environments with interdependent values. Our main results, which we obtain based on a first-order approach, inform the design of transfers via ‘belief-based’ terms to attain incentive compatibility. In environments that satisfy a property of generalized independence, our results imply a robust version of revenue equivalence in non-Bayesian settings. Instead, under a notion of comovement between types and beliefs, which extends the idea of correlated information to non-Bayesian settings, we show that any allocation rule can be implemented, even if standard single-crossing and monotonicity conditions do not hold. Yet, unless the environment is Bayesian, information rents typically remain, and they decrease monotonically as the robustness requirements are weakened. |
| Keywords: | incentive compatibility , moment conditions , interdependent values , belif restrictions , robust mechanism design |
| JEL: | D62 D82 D83 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1918 |
| By: | Masayuki Odora (Global Education Center, Waseda University) |
| Abstract: | I study the role of fact-checking in a two-period strategic communication game between a decision maker and a media outlet. The decision maker relies on the outlet’s article to take a binary action, while the outlet may exert costly effort to acquire information before publishing. The decision maker is uncertain about the outlet’s motive: the outlet might be opportunistic, caring only about attracting clicks. Fact-checking probabilistically reveals the payoff-relevant state. I highlight a trade-off between the diagnostic effect and the discipline effect that arises when the probability of fact-checking successfully revealing the state increases. Consequently, introducing fact-checking or increasing its success probability may, in some parameter ranges, reduce the decision maker’s welfare. |
| Keywords: | Fact-checking, Information acquisition, Cheap-talk |
| JEL: | C72 D83 L82 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2521 |
| By: | Ivan Rendo (Toulouse School of Economics, University of Toulouse Capitole) |
| Abstract: | Unregulated online platforms often host extreme and socially undesirable content. As mainstream platforms tighten moderation, some users shift to unmoderated alternatives, leading to a leakage of extreme content. I develop a duopoly model where an ad-funded mainstream platform competes with an unmoderated fringe. Heterogeneous users choose platforms and create content reflecting their views. The mainstream platform trades off attracting fringe users with making content safer for advertisers. With strong network effects, the socially optimal moderation is more lenient than the profit-maximizing one. Therefore, regulation mandating stricter moderation may backfire by increasing overall content unsafety. |
| Keywords: | content moderation, platforms, social media, user-generated content. |
| JEL: | L86 L82 L51 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2502 |
| By: | Leandro Arozamena; Juan José Ganuza; Federico Weinschelbaum |
| Abstract: | A sponsor –e.g. a government agency– uses a procurement auction to select a supplier who will be in charge of the execution of a contract. That contract is incomplete: it may be renegotiated once the auction's winner has been chosen. We examine a setting where one firm may bribe the agent in charge of monitoring contract execution so that the former is treated preferentially if renegotiation actually occurs. If a bribe is accepted, the corrupt firm will be more aggressive at the initial auction and thus win with a larger probability. We show that the equilibrium probability of corruption is larger when the initial contract is less complete, when the corrupt firm's cost is more likely to be similar to her rivals', and when it faces fewer competitors. |
| Keywords: | Auctions , procurement , corruption , renegotiation , cost overruns |
| JEL: | C72 D44 D82 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1906 |
| By: | Francesc Dilmé (University of Bonn); Aaron Kolb (Kelley School of Business, Indiana University) |
| Abstract: | We revisit the classic chain-store paradox by introducing a novel element: the arrival of exogenous, public signals about the incumbent’s private type over time. As the horizon lengthens, two opposing forces come into play. On one hand, standard reputational incentives grow stronger; on the other, the increasing availability of information makes it more difficult to sustain a reputation. We show that full deterrence can still emerge as the horizon grows arbitrarily long, though not always, and we provide a complete characterization of the conditions under which it arises. |
| Keywords: | Entry deterrence, reputation, chain-store paradox |
| JEL: | C72 C73 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:374 |
| By: | Li, Bingbing (Center for Mathematical Economics, Bielefeld University); Förster, Manuel (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | In our principal-agent model, the principal can repeatedly delegate authority to an agent with uncertain preferences or take the decisions himself. The principal learns the state at the end of each period and then updates his belief about the agent’s bias based on the decision implemented if he delegated authority. We demonstrate that equilibria are characterized by an “imitation” interval of agent types (biases) who mimic less biased types in order to be retained. Interestingly, the principal generally benefits from the agent’s imitation compared to a benchmark. Furthermore, comparative statics reveal that, surprisingly, the principal may be worse off with better information. Finally, an extension to finitely many periods shows that the imitation interval gradually shifts, such that agent types within the interval imitate less biased types. |
| Keywords: | Delegation, preference uncertainty, private information, dynamic game, organizational design |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:753 |
| By: | Maria Titova; Kun Zhang |
| Abstract: | This paper studies a game in which an informed sender with state-independent preferences uses verifiable messages to convince a receiver to choose an action from a finite set. We characterize the equilibrium outcomes of the game and compare them with commitment outcomes in information design. We provide conditions under which a commitment outcome is an equilibrium outcome and identify environments in which the sender does not benefit from commitment power. Our findings offer insights into the interchangeability of verifiability and commitment in applied settings. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.08251 |
| By: | Anand Chopra; Malachy James Gavan; Antonio Penta |
| Abstract: | Safe Implementation (Gavan and Penta, 2025) combines standard implementation with the requirement that the implementing mechanism is such that, if up to k agents deviate from the relevant solution concept, the outcomes that are induced are still ‘acceptable’ at every state of the world. In this paper, we study Safe Implementation of social choice correspondences in mixed Nash Equilibrium. We identify a condition, Set-Comonotonicity, which is both necessary and (under mild domain restrictions) almost sufficient for this implementation notion. |
| Keywords: | Implementation, mechanism design, robustness, safe implementation, mixed implementation, Set-Comonotonicity |
| JEL: | C72 D82 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1911 |
| By: | Francesc Dilmé (University of Bonn) |
| Abstract: | We analyze limiting equilibrium behavior along perturbations of a game in which both nature and strategic players tremble with small probability. We show that allowing nature to tremble to zero-probability actions expands the set of sequential equilibria and contracts the set of sequentially stable outcomes while preserving their existence. By extending a game through adding initial zero-probability moves by nature, we identify conditions for the existence of reputation effects, that is, changes in the model’s predictions due to the presence of payoff types. Finally, we discuss the relationship between reputation effects and forward induction arguments |
| Keywords: | Sequential equilibria, purification, mixed strategies |
| JEL: | C72 C73 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:373 |
| By: | Shota Ichihashi (Department of Economics, Queen's University, Kingston, ON, Canada) |
| Abstract: | I study a model of platform-enabled algorithmic pricing. Sellers offer identical products, to which consumers have heterogeneous values. Sellers can post a uniform price outside the platform or join the platform and delegate their pricing decision to the platform's algorithm. I show that the platform can offer a pricing algorithm to attract sellers, stifle off-platform competition, and earn a positive profit. Prohibiting the platform from using consumer data for its algorithm increases consumer surplus but decreases total surplus. A transparency requirement, which mandates the platform to share its data and algorithms with sellers, restores the first-best outcome for consumers. |
| Keywords: | price discrimination, algorithmic pricing, competition, collusion, algorithm |
| JEL: | D43 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2503 |
| By: | Nathan Hancart |
| Abstract: | I provide a sufficient condition under which a principal does not benefit from committing to a mechanism in economic models represented by a maximisation problem under constraints. These problems include mechanism design, principal-agent models or sender-receiver games. In principal-agent problems, this condition holds if the agent has a finite strategy space and the principal's value function is continuous in the mechanism. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.07994 |
| By: | Holmberg, Pär; Willems, Bert; Ruddell, Keith |
| Abstract: | We characterize Nash equilibria in multi-product markets in which producers commit to vectors of supply functions contingent on all prices. The framework accommodates (dis)economies of scope in production, and goods may be substitutes or complements in demand. We show that equilibrium allocations of underlying goods and payoffs are invariant under bundling. With quadratic costs and linear demand, this invariance reduces the multi-product problem to an equivalent set of single-product markets that can be analyzed independently. We introduce Lerner and pass-through matrices to capture markups and welfare losses; their eigenvalues summarize fundamental market properties, remain invariant under bundling, and lend themselves to comparative statics analysis. |
| Keywords: | Supply function equilibrium; multi-product pricing; divisible-good auction;; bundling; pass-through; welfare |
| JEL: | C62 C72 D43 D44 L94 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130961 |
| By: | Emiliano Cantonini; Antonio Penta |
| Abstract: | Backward Induction is only defined for games with perfect information, but its logic is also invoked in many equilibrium concepts for games with imperfect or incomplete information. Yet, the meaning of 'backward induction reasoning' is unclear in these settings, and we lack a way to apply its simple logic to general games. We remedy this by introducing a solution concept, Backwards Rationalizability, that satisfies several properties normally ascribed to backward induction reasoning, foremost the possibility of being computed via a tractable backwards procedure. We also show that Backwards Rationalizability characterizes the robust predictions of a 'perfect equilibrium' notion that introduces the backward induction logic and nothing more into equilibrium analysis. We discuss a few applications, including a new version of peer-confirming equilibrium (Lipnowski and Sadler (2019)) that, thanks to Backwards Rationalizability, restores in dynamic games the natural comparative statics that the original concept only displays in static settings. |
| Keywords: | backward induction, backwards procedure, backwards rationalizability, incomplete information, interim perfect equilibrium, perfect bayesian equilibrium rationalizability, robustness |
| JEL: | C72 C73 D82 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1894 |
| By: | Francesc Dilmé (University of Bonn) |
| Abstract: | An equilibrium outcome of a game in extensive form is fully self-justifiable if it is supported by justifiable equilibria (McLennan, 1985) regardless of the order in which actions implausible under the given outcome are excluded. We show that the set of fully self-justifiable outcomes is non-empty and contains the set of sequentially stable outcomes (Dilmé, 2024). In signaling games, fully self-justifiable outcomes pass all the selection criteria in Cho and Kreps (1987). Full self-justifiability allows for the systematic use of the logic of selection criteria in signaling games to select equilibria in any finite extensive form game. |
| Keywords: | Justifiable equilibria, selection criteria |
| JEL: | C72 C73 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:375 |
| By: | Walter Bossert; Salvador Barberà |
| Abstract: | In his 1958 classic, The Theory of Committees and Elections, Duncan Black proposed the following lexicographic rule: for any set of feasible alternatives, and any pro- file of voters' goodness relations, choose the strong Condorcet winner if it exists, and select the set of Borda winners otherwise. We provide what we think is the first axiomatic characterization of this rule. We do so through the intermediary study of the generalized social welfare functions that underlie the rule's choices, and the use of axioms that emphasize what is common and what is different in the spirit of the amply debated proposals made by these two 18th-century authors. |
| Keywords: | Black’s voting rule, Borda count, Social choice correspondences, strong Condorcet winners |
| JEL: | D71 D72 D63 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1515 |
| By: | Sebastian Bervoets (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Mathieu Faure (Aix-Marseille Univ., CNRS, AMSE, Marseille, France); Ludovic Renou (ASU, QMUL and CEPR) |
| Abstract: | Deviations from Bayesian updating are traditionally categorized as biases, errors, or fallacies, thus implying their inherent “sub-optimality.” We offer a more nuanced view. In learning problems with misspecified models, we show that some non-Bayesian updating can outperform Bayesian updating. |
| Keywords: | learning, Bayesian, consistency |
| JEL: | C73 D82 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2513 |
| By: | Wanying Huang; J. Jude Kline; Priscilla Man |
| Abstract: | We propose a refinement of correlated equilibrium based on mediator errors, called correlated perfect equilibrium (CPE). In finite games, the set of CPE is nonempty and forms a finite union of convex sets. Like perfect equilibrium, a CPE never assigns positive probability to any weakly dominated strategy. We provide a dual representation of CPE and demonstrate how it differs from two existing refinements of correlated equilibrium--acceptable correlated equilibrium (Myerson, 1986) and perfect direct correlated equilibrium (Dhillon-Mertens, 1996)--through examples. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.07906 |
| By: | Migrow, Dimitri (University of Edinburgh); Park, Hyungmin (University of Warwick); Squintani, Francesco (University of Warwick) |
| Abstract: | We study a leader’s choice of advisors, balancing political alignment, informational competence, and diversity of views. The leader can consult one or two advisors : one is politically aligned but less informed or shares potentially redundant information; the other is better informed but more biased. The leader’s optimal strategy can exhibit reversals. If both advisors are initially consulted, increasing the bias of the more biased advisor may cause the leader to exclude the aligned advisor to preserve truthfulness from the informed one. As bias rises further, the leader ultimately replaces the informed advisor if his bias becomes too large. When the leader is uncertain about the bias of the more informed advisor, increasing the chance of alignment can justify consulting both advisors. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1582 |
| By: | Ritesh Jain; Michele Lombardi; Antonio Penta |
| Abstract: | We put forward a notion of implementation for Social Choice Functions (SCF) that is robust with respect to the solution concept used to model agents’ strategic interaction. Formally, we define implementation in Interim Correlated Rationalizability and its Refinements (ICRR implementation) as implementation in Interim Correlated Rationalizability (ICR), with the extra requirement that it be achieved by a mechanism in which all selections from ICR have the best-reply property. We provide a tight characterization in terms of a novel notion of monotonicity, Iterative Interim Monotonicity (IIM). Our condition relates the possibility of ICRR-implementation with a specific way in which the SCF is constrained by agents’ preference reversals. We provide several alternative formulations of IIM, that clarify both its connection with various parts of the literature (such as Oury and Tercieux (2012)’s Interim Rationalizable Monotonicity, and others), and the source of IIM’s ability to overcome several limitations of the previous conditions in the literature. |
| JEL: | C79 D82 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1893 |
| By: | Emilie Dargaud (Université Lumière Lyon 2, CNRS, Université Jean Monnet Saint Etienne, EMLyon Business School, GATE, 69007 Lyon, France); Mickaël Lallouche (Université Lumière Lyon 2, Université Claude Bernard Lyon 1, ERIC, 69007, Lyon, France); Petros G. Sekeris (TBS Business School, 1 Place A. Jourdain, 31000 Toulouse, France) |
| Abstract: | We analyze corporate groups managing horizontally differentiated, substitutable firms that share cost externalities yet compete strategically. Using a model with two groups each owning two firms producing goods under distinct brands, we study the choice between centralized and decentralized management. Our results show that when cost externalities are low, decentralization can emerge as equilibrium despite centralization being Pareto superior, due to strategic incentives resembling the “merger paradox”. With stronger cost synergies, centralization dominates, though product differentiation creates multiple equilibria. The findings refine our understanding of corporate organizational design in imperfectly competitive markets. |
| Keywords: | Organizational design, Strategic delegation, Horizontal differentiation |
| JEL: | L13 L22 L25 D21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2520 |
| By: | Tushar Shankar Walunj; Veeraruna Kavitha; Jayakrishnan Nair; Priyank Agarwal |
| Abstract: | We study a recommendation system where sellers compete for visibility by strategically offering commissions to a platform that optimally curates a ranked menu of items and their respective prices for each customer. Customers interact sequentially with the menu following a cascade click model, and their purchase decisions are influenced by price sensitivity and positions of various items in the menu. We model the seller-platform interaction as a Stackelberg game with sellers as leaders and consider two different games depending on whether the prices are set by the platform or prefixed by the sellers. It is complicated to find the optimal policy of the platform in complete generality; hence, we solve the problem in an important asymptotic regime. The core contribution of this paper lies in characterizing the equilibrium structure of the limit game. We show that when sellers are of different strengths, the standard Nash equilibrium does not exist due to discontinuities in utilities. We instead establish the existence of a novel equilibrium solution, namely `$\mu$-connected equilibrium cycle' ($\mu$-EC), which captures oscillatory strategic responses at the equilibrium. Unlike the (pure) Nash equilibrium, which defines a fixed point of mutual best responses, this is a set-valued solution concept of connected components. This novel equilibrium concept identifies a Cartesian product set of connected action profiles in the continuous action space that satisfies four important properties: stability against external deviations, no external chains, instability against internal deviations, and minimality. We extend a recently introduced solution concept equilibrium cycle to include stability against measure-zero violations and, by avoiding topological difficulties to propose $\mu$-EC. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.13462 |
| By: | Joseph E. Stiglitz; Maxim Ventura-Bolet |
| Abstract: | We develop a tractable model to study how AI and digital platforms impact the information ecosystem. News producers — who create truthful or untruthful content that becomes a public good or bad — earn revenue from consumer visits. Consumers search for information and differ in their ability to distinguish truthful from untruthful information. AI and digital platforms influence the ecosystem by: improving the efficiency of processing and transmission of information, endangering the producer business model, changing the relative cost of producing misinformation and altering the ability of consumers to screen quality. We find that in the absence of adequate regulation (accountability, content moderation, and intellectual property protection) the quality of the information ecosystem may decline, both because the equilibrium quantity of truthful information declines and the share of misinformation increases; and polarization may intensify. While some of these problems are already evident with digital platforms, AI may have different, and overall more adverse, impacts. |
| JEL: | D8 D83 O33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34318 |
| By: | Linus Thierry Nana Noumi; Roland Pongou; Bertrand Tchantcho (CY Cergy Paris Université, THEMA) |
| Abstract: | Understanding how individuals and groups differ in their opinions and preferences is central to analyzing disagreement, measuring polarization, designing institutions, and predicting collective outcomes. Yet comparing preferences requires more than observing how each person ranks alternatives—it requires a method for comparing preference orderings themselves. This paper develops a formal framework to infer how individuals might rank different preference orderings based solely on their observed preferences. We introduce a set of natural and behaviorally plausible axioms—Independence (I), Disagreement Aversion (DA), and Symmetry (S)—and show that they uniquely characterize a class of hyperpreference relations and their associated utility representations. We apply this framework to the study of aggregation mechanisms, deriving necessary and sufficient conditions on utility structures that induce truthful preference reporting in equilibrium and guarantee efficiency. Our results yield new insights into strategyproof mechanism design under deep preference heterogeneity and clarify when differences of opinion can be meaningfully and reliably measured. KEYWORDS. Preference, Hyperpreference, Hyperutility, Strategy-proofness, Efficiency |
| Keywords: | Preference, Hyperpreference, Hyperutility, Strategy-proofness, Efficiency |
| JEL: | D01 D04 D71 D78 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2025-11 |
| By: | Gerson Personnat; Tao Lin; Safwan Hossain; David C. Parkes |
| Abstract: | In a multi-follower Bayesian Stackelberg game, a leader plays a mixed strategy over $L$ actions to which $n\ge 1$ followers, each having one of $K$ possible private types, best respond. The leader's optimal strategy depends on the distribution of the followers' private types. We study an online learning version of this problem: a leader interacts for $T$ rounds with $n$ followers with types sampled from an unknown distribution every round. The leader's goal is to minimize regret, defined as the difference between the cumulative utility of the optimal strategy and that of the actually chosen strategies. We design learning algorithms for the leader under different feedback settings. Under type feedback, where the leader observes the followers' types after each round, we design algorithms that achieve $\mathcal O\big(\sqrt{\min\{L\log(nKA T), nK \} \cdot T} \big)$ regret for independent type distributions and $\mathcal O\big(\sqrt{\min\{L\log(nKA T), K^n \} \cdot T} \big)$ regret for general type distributions. Interestingly, those bounds do not grow with $n$ at a polynomial rate. Under action feedback, where the leader only observes the followers' actions, we design algorithms with $\mathcal O( \min\{\sqrt{ n^L K^L A^{2L} L T \log T}, K^n\sqrt{ T } \log T \} )$ regret. We also provide a lower bound of $\Omega(\sqrt{\min\{L, nK\}T})$, almost matching the type-feedback upper bounds. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.01387 |
| By: | Eugene Lim; Tzeh Yuan Neoh; Nicholas Teh |
| Abstract: | We study a sequential decision-making model where a set of items is repeatedly matched to the same set of agents over multiple rounds. The objective is to determine a sequence of matchings that either maximizes the utility of the least advantaged agent at the end of all rounds (optimal) or at the end of every individual round (anytime optimal). We investigate the computational challenges associated with finding (anytime) optimal outcomes and demonstrate that these problems are generally computationally intractable. However, we provide approximation algorithms, fixed-parameter tractable algorithms, and identify several special cases whereby the problem(s) can be solved efficiently. Along the way, we also establish characterizations of Pareto-optimal/maximum matchings, which may be of independent interest to works in matching theory and house allocation. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.04624 |
| By: | Pietro Dindo (Ca’ Foscari University of Venice); Filippo Massari (University of Bologna) |
| Abstract: | We study a dynamic financial economy with complete markets in which agents hold heterogeneous beliefs about dividends. Beliefs combine an exogenous agent-specific model, possibly misspecified, and an endogenous market-based model derived from state prices. We show that using prices to learn improves prediction and offers a hedge against model misspecification. With Bayesian learning, agents update model weights and survive on all paths. Market beliefs converge almost surely to the most accurate exogenous model, despite heterogeneity and misspecification, and so do individual beliefs of any agent who assigns positive prior weight to it. With non-Bayesian learning, where the weight on the market model is fixed, survival is not guaranteed. Yet market accuracy weakly improves, and can exceed that of any individual model when beliefs are diverse. In such cases, relying on prices helps approximate the truth, while ignoring the market leads to vanishing. Our results characterize how endogenous use of prices shapes learning, survival, and the predictive power of markets. |
| Keywords: | Heterogeneous Beliefs, Misspecification, Market Selection, Non-Bayesian Learning |
| JEL: | D53 D01 G1 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ven:wpaper:2025:17 |
| By: | Anna D’Annunzio (Tor Vergata University of Rome, CSEF and Toulouse School of Economics. Email:); Antonio Russo (Institut Mines-Telecom Business School.; University of Naples Federico II, Department of Economics and Statistics, and CSEF) |
| Abstract: | The adtech industry plays a key role in connecting digital publishers and advertisers. This industry is dominated by integrated ecosystems. We study how integration between an adtech intermediary and a major digital publisher affects the ad market and content production. Integration enables the intermediary to leverage exclusive access to data to monopolize the intermediation market and inflate the adtech taxon independent publishers. This depresses investment in content by independent publishers, but boosts the integrated firm’s investment. The net impact of integration on consumer surplus and welfare depends on which effect prevails. Prohibiting data sharing between firms within the ecosystem is not sufficient to restore the market outcome under vertical separation. |
| Keywords: | Online advertising, intermediaries, vertical integration, adtech tax, content quality |
| JEL: | D43 D62 L82 M37 |
| Date: | 2025–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:758 |
| By: | Jacopo Gambato; Bernhard Ganglmair; Julia Krämer |
| Abstract: | In a model of asymmetric regulation, a firm can comply with two regulatory targets, and a regulator can audit the firm for compliance. Inspection by the regulator is imperfect, and it assesses the firm’s compliance with the targets with different success probabilities. The firm fully complies only if compliance costs are low. Otherwise, the firm always prioritizes the requirement that is easier to enforce. Expanding regulatory capacity positively affects compliance with the easy-to-enforce target; however, a higher capacity can harm compliance with the hard-to-enforce target. |
| Keywords: | agency resources, asymmetric enforcement, compliance, multi-tasking, regulation |
| JEL: | H32 K20 L51 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_706 |
| By: | Antonio Penta; Larbi Alaoui |
| Abstract: | We revisit the long-lasting debate about the meaning of the utility function used in the standard Expected Utility (EU) model. Despite the common view that EU forces risk aversion and diminishing marginal utility of wealth to be pegged to one another, here we show that this is not the case. Marginal utility for money is an input into risk attitude, but it is not its sole determinant. The attitude towards ‘pure risk’ is also a contributing factor, and it is independent from the former. We discuss several theoretical implications of this result, for the following topics: (i) non-neutral risk attitudes for profit maximizing firms; (ii) risk-aversion over time lotteries in the presence of discounting; (iii) the equity premium puzzle. We also discuss matters of identification: (i) for firms; (ii) via proxies ; (iii) via standard MLE-methods under parametric restrictions; and (iv) cross-context elicitation in multi-dimensional settings, and its relationship with the methods and results from the psychology literature. |
| Keywords: | utility function, risk-aversion, marginal utility |
| JEL: | C72 C91 C92 D80 D91 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1909 |