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on Microeconomics |
| By: | Michele Crescenzi |
| Abstract: | An axiomatic characterization of Nash equilibrium is provided for games in normal form. The Nash equilibrium correspondence is shown to be fully characterized by four simple and intuitive axioms, two of which are inspired by contraction and expansion consistency properties from the literature on abstract choice theory. The axiomatization applies to Nash equilibria in pure and mixed strategies alike, to games with strategy sets of any cardinality, and it does not require that players' preferences have a utility or expected utility representation. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.03930 |
| By: | Michele Bisceglia (Center for Algorithms, Data, and Market Design at Yale (CADMY)); Alessandro Bonatti (MIT Sloan School of Management); Fiona Scott Morton (Yale School of Management) |
| Abstract: | We study how privacy regulation affects menu pricing by a monopolist platform that collects and monetizes personal data. Consumers differ in privacy valuation and sophistication: naive users ignore privacy losses, while sophisticated users internalize them. The platform designs prices and data collection options to screen users. Without regulation, privacy allocations are distorted and naive users are exploited. Regulation through privacy-protecting defaults can create a market for information by inducing payments for data; hard caps on data collection protect naive users but may restrict efficient data trade. |
| Date: | 2025–11–14 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2474 |
| By: | Federico Echenique; Anqi Li |
| Abstract: | We study misspecified Bayesian learning in principal-agent relationships, where an agent is assessed by an evaluator and rewarded by the market. The agent's outcome depends on their innate ability, costly effort -- whose effectiveness is governed by a productivity parameter -- and noise. The market infers the agent's ability from observed outcomes and rewards them accordingly. The evaluator conducts costly assessments to reduce outcome noise, which shape the market's inferences and provide implicit incentives for effort. Society -- including the evaluator and the market -- holds dogmatic, inaccurate beliefs about ability, which distort learning about effort productivity and effort choice. This, in turn, shapes the evaluator's choice of assessment. We describe a feedback loop linking misspecified ability, biased learning about effort, and distorted assessment. We characterize outcomes that arise in stable steady states and analyze their robust comparative statics and learning foundations. Applications to education and labor market reveal how stereotypes can reinforce across domains -- sometimes disguised as narrowing or even reversals of outcome gaps -- and how policy interventions targeting assessment can help. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.01129 |
| By: | Steven Kivinen (University of Graz, Austria); Norovsambuu Tumennasan (Dalhousie University, Canada) |
| Abstract: | Generalized median voter (GMV) rules on the single-peaked preference domain are group strategy-proof. We show that if incomplete information coexists with the ability to commit to coalitional agreements, then GMV rules can be susceptible to insincere voting by groups with heterogeneous beliefs. We identify strategic compromise as a novel source of insincere voting in this environment. Our two main results characterize the set of fair, efficient, and robust voting rules: those that ensure sincere voting under asymmetric information and coalition formation. Each result uses a different notion of robustness, and both give (at most) two alternatives special treatment, with the remaining alternatives chosen according to a type of consensus. |
| Keywords: | robust group strategy-proofness, voting, median voter |
| JEL: | C71 C78 D70 D80 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2025-15 |
| By: | Pietro Salmaso; Bernardo Moreno; Dolors Berga |
| Abstract: | We assume that a finite set of alternatives can be described by an ordered set of characteristics and offer a general version of lexicographicity that incorporates the possibility that agents' preferences over characteristics are not separable (the desirability of a characteristic does not depend on other characteristics). We first characterize all strategy-proof rules as a family of sequential rules by committees, with the particularity that the committee used in the decision over each characteristic may depend on the decision about previous ones. Our characterization does not require imposing voter sovereignty and the rules may incorporate restrictions over the alternatives to be selected. Then, we obtain the subclass of anonymous rules that where the committees are quota committees. Finally, we demonstrate that the only anonymous and strategy-proof rules that select a Condorcet winner are the subclass of sequential rules by majority (quota) committees. |
| Keywords: | anonymity, Condorcet winner, lexicographic preferences, sequential rules by committee, strategy-prooofnes |
| JEL: | D71 D72 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1541 |
| By: | Ashwin Kambhampati |
| Abstract: | Equilibrium predictions in games of incomplete information are sensitive to the assumed information structure. Monderer and Samet (1996) and Kajii and Morris (1998) define topological notions of proximity for common prior information structures such that two information structures are close if and only if (approximate) equilibrium payoffs are close. However, Monderer and Samet (1996) fix a common prior and define their topology on profiles of partitions over a state space, whereas Kajii and Morris (1998) define their topology on common priors over the product of a state space and a type space. We prove the open conjecture that two partition profiles are close in the Monderer and Samet (1996) topology if and only if there exists a labeling of types such that the associated common priors are close in the Kajii and Morris (1998) topology. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.03982 |
| By: | Avidit Acharya; Kyungtae Park; Tomer Zaidman |
| Abstract: | If agents engage in motivated reasoning, how does that affect the aggregation of information in society? We study the effects of motivated reasoning in two canonical settings - the Condorcet jury theorem (CJT), and the sequential social learning model (SLM). We define a notion of motivated reasoning that applies to these and a broader class of other settings, and contrast it to other approaches in the literature. We show for the CJT that information aggregates in the large electorate limit even with motivated reasoning. When signal quality differs across states, increasing motivation improves welfare in the state with the more informative signal and worsens it in the other state. In the SLM, motivated reasoning improves information aggregation up to a point; but if agents place too little weight on truth-seeking, this can lead to worse aggregation relative to the fully Bayesian benchmark. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10125 |
| By: | Dirk Bergemann; Tibor Heumann; Stephen Morris |
| Abstract: | How should a buyer design procurement mechanisms when suppliers' costs are unknown, and the buyer does not have a prior belief? We demonstrate that simple mechanisms - that share a constant fraction of the buyer utility with the seller - allow the buyer to realize a guaranteed positive fraction of the efficient social surplus across all possible costs. Moreover, a judicious choice of the share based on the known demand maximizes the surplus ratio guarantee that can be attained across all possible (arbitrarily complex and nonlinear) mechanisms and cost functions. Similar results hold in related nonlinear pricing and optimal regulation problems. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.09129 |
| By: | Paul Heidhues (Heinrich-Heine-Universität Düsseldorf); Johannes Johnen (CORE/LIDAM, Université catholique de Louvain); Botond Kőszegi (University of Bonn) |
| Abstract: | We investigate the effects of consumer-protection regulations limiting post-purchase harm when there are many markets and consumers have limited attention to examine prices or product features. Such regulation lowers the attention necessary for valuable purchases, which can allow a consumer to purchase in more markets, or serve to induce competition. The first benefit is most important when few markets are regulated, while the second emerges when regulatory scope is sufficiently broad to create “spare” — i.e., in equilibrium unused — attention. Because little spare attention can enforce competition in many markets, consumer welfare can be highly non-linear in regulatory scope. The benefits of regulating a market often accrue in other markets, and there is a sense in which overly tight regulation outperforms overly lax regulation. Broad consumer protection can help the economy reach productive efficiency, and when this is achieved less regulation may suffice. |
| Keywords: | Consumer protection, regulation, competition, participation, limited attention |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:383 |
| By: | Sjaak Hurkens; Matthew Ellman |
| Abstract: | This paper examines crowdfunding of a risky project with constant returns to scale. The crowdfunder's chosen threshold and interest rate jointly determine profit and welfare via information aggregation and investors' information acquisition and bidding decisions. At fixed investor strategies, a higher threshold funds fewer projects but raises the ratio of good to bad quality among those funded – a "crowdblessing" or positive selection lacking in standard finance. This also reduces incentives to acquire and use private information, as do interest rate increases. Optimal design trades off the scale of investment against the level of crowdblessing. Surprisingly, profit-maximizers induce excessive information acquisition to limit investor rent. Comparative statics show that information acquisition falls with its cost, rises with its precision and falls with prior optimism. Costs reduce welfare but may raise profits by facilitating rent-extraction. |
| Keywords: | costly information, crowdfunding, P2P finance, rent extraction |
| JEL: | C72 D82 G23 L12 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1540 |
| By: | Benjamin Heymann |
| Abstract: | We model a procurement scenario in which two \textit{imperfect} bidders act simultaneously on behalf of a single buyer, a configuration common in display advertising and referred to as \textit{side-by-side bidding} but largely unexplored in theory. We prove that the iterated best response algorithm converges to an equilibrium under standard distributional assumptions and provide sufficient condition for uniqueness. Beyond establishing existence and convergence, our analysis provides a tractable numerical method for quantitative studies of side-by-side procurement. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.04850 |
| By: | Nizar Riane |
| Abstract: | In this paper, we study the public procurement market through the lens of game theory by modeling it as a strategic game with discontinuous and non-quasiconcave payoffs. We first show that the game admits no Nash equilibrium in pure strategies. We then analyze the two-player case and derive two explicit mixed-strategy equilibria for the symmetric game and for the weighted $(p, 1-p)$ formulation. Finally, we establish the existence of a symmetric Nash equilibrium in the general $N$-player case by applying the diagonal disjoint payoff matching condition, which allows us to extend equilibrium existence to the mixed-strategy setting despite payoff discontinuities. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10109 |
| By: | Christian Basteck; Ulysse Lojkine |
| Abstract: | In a strategy-proof mechanism, the influence of an agent may be measured as the set of outcomes an agent can bring about by varying her (reported) type. More specifically, we refer to an agent's influence on her own relevant outcomes as her freedom, and to the influence on outcomes relevant for other agents as her power over others. The framework generalises both the notion of opportunity set from the freedom of choice literature, and established power indices for binary voting. It identifies constrained efficient mechanisms as those that maximise agents' freedom. Applying our framework to the analysis of assignment rules, we provide novel characterisations of the top trading cycles rule and bipolar serial dictatorships in terms of their freedom and power properties. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10112 |
| By: | Marc Kaufmann (Central European University); Malte Kornemann (University of Bonn); Botond Kőszegi (University of Bonn) |
| Abstract: | We study how secondary markets for durable goods interact with consumers’ social-responsibility motives to mitigate environmentally harmful new production. On the positive side, secondary markets may allow responsible consumers to acquire used goods that would otherwise be discarded, reducing premature waste. On the negative side, secondary markets introduce two major harmful forces. First, the possibility of buying used goods and thereby causing less harm can raise the demand of responsible consumers, often increasing the production necessary to serve the market. Second, said demand can increase the price of used goods, encouraging purchases of new goods. These forces imply that if used goods have positive private consumption value, then secondary markets always erode the benefits of social responsibility. If, instead, used goods may have negative private value, then secondary markets can enhance or erode the benefits of social responsibility. |
| Keywords: | Socially responsible consumers, climate change, externalities, secondary markets, durable goods, used goods |
| JEL: | D01 D11 D50 D62 D64 D91 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:382 |
| By: | Maija Halonen-Akatwijuka; Evagelos Pafilis |
| Abstract: | We examine restitution of cultural goods and its optimal form, i.e. whether restitution should be definite or take the form of a loan. We show that loan can be optimal when the source country becomes indispensable due to its cultural significance, while full restitution is optimal when the host country completes restoration. Valuation changes can lead to restitution, but do not pin down its optimal form. Finally, restitution is not always optimal despite source country’s higher valuation for the cultural good. We apply our analysis to the restitution of Icelandic manuscripts and the proposed loan or restitution of Benin bronzes. |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:25/805 |
| By: | Job Boerma; Andrea Ottolini; Aleh Tsyvinski |
| Abstract: | In sorting literature, comparative statics for multidimensional assignment models with general output functions and input distributions is an important open question. We provide a complete theory of comparative statics for technological change in general multidimensional assignment models. Our main result is that any technological change is uniquely decomposed into two distinct components. The first component (gradient) gives a characterization of changes in marginal earnings through a Poisson equation. The second component (divergence-free) gives a characterization of labor reallocation. For U.S. data, we quantify equilibrium responses in sorting and earnings with respect to cognitive skill-biased technological change. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10853 |
| By: | Kfir Eliaz; Ran Spiegler |
| Abstract: | A profit-maximizing monopolist curates a database for users seeking to learn a parameter. There are two user types: "Nowcasters" wish to learn the parameter's current value, while "forecasters" target its long-run value. Data storage involves a constant marginal cost. The monopolist designs a menu of contracts described by fees and data-access levels. The profit-maximizing menu offers full access to historical data, while current data is fully provided to nowcasters but may be withheld from forecasters. Compared to the social optimum, the monopolist keeps too much historical data, too little current data, and may store too much data overall. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.00897 |
| By: | Kudo, Shiko |
| Abstract: | We describe cross dominance, a bilateral strengthening of weak dominance: switching B->A is never worse for either player. Cross dominance is strictly stronger than weak dominance yet orthogonal to strict dominance; within the Pareto-monotone slice we have SD => CD => WD. This yields a shared-interest ladder (weak -> cross -> strict-cross) that runs in parallel to the classical self-interest ladder (weak -> strict), offering a simple, outcome-agnostic rationale for pruning strategies like B in the motivating 2x2 game. |
| Keywords: | game theory; weak dominance; strict dominance; cross dominance; Pareto-monotone; strategy elimination |
| JEL: | C70 C72 |
| Date: | 2025–11–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126766 |
| By: | Kerry Xiao |
| Abstract: | I relax the standard assumptions of transitivity and partition structure in economic models of information to formalize vague knowledge: non-transitive indistinguishability over states. I show that vague knowledge, while failing to partition the state space, remains informative by distinguishing some states from others. Moreover, it can only be faithfully expressed through vague communication with blurred boundaries. My results provide microfoundations for the prevalence of natural language communication and qualitative reasoning in the real world, where knowledge is often vague. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.05833 |
| By: | Alejandro Corvalan |
| Abstract: | This note examines the distributional implications of introducing a fast-track queue for accessing a service when agents are heterogeneous in both income and service valuation. Relative to a single free queue, I show that willingness to adopt the priority system is determined solely by income, regardless of service valuation. High-income individuals benefit from the fast-track access, while low-income individuals are worse off and remain in the free line. Middle-income individuals weakly prefer the single free queue; yet, under the priority regime, they pay for fast-track access. Thus, the use of the priority queue does not reveal preferences for the priority system. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.10594 |
| By: | Trockel, Walter (Center for Mathematical Economics, Bielefeld University); Duman, Papatya (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | This article addresses conceptual shortcomings in recent literature on coalitional TU-games. We revisit and partly redefine key notions such as coalition, coalition function, efficiency, and duality, emphasizing their dependence on the class of TU-games under scrutiny. Unlike approaches that exclude non-cohesive games or rely on imputations, we propose a broader framework grounded in aspiration. We also introduce a refined notion of a dual game, which aligns better with its typical interpretation and coincides with the classical version on superadditive games. Finally, we characterize the cohesive hull of a game via the duality theorem in linear programming, drawing parallels to the construction of the core via the Bondareva-Shapley theorem. |
| Keywords: | TU-games, duality, core, c-Core, cohesive games, complete game efficiency |
| Date: | 2025–12–10 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:757 |
| By: | Dietzenbacher, Bas (RS: GSBE other - not theme-related research, QE Math. Economics & Game Theory); Núñez Lugilde, Iago; Sánchez-Rodríguez, Estela |
| Abstract: | Streaming platforms offer subscribers unlimited access to content against a periodic subscription fee. To address the problem of dividing the revenues of the platform in a stable way among the content creators, we model these situations as cooperative streaming platform games and analyze the structure of the core. In particular, we study the construction of the core of a streaming platform game from the cores of its so-called marginal games, dominated games, and utopia games. |
| JEL: | C71 |
| Date: | 2025–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:unm:umagsb:2025009 |
| By: | C. Monica Capra; Charles A. Holt; Po-Hsuan Lin |
| Abstract: | When players make sequential decisions that are unobservable to one another, their behavior can nonetheless be influenced by knowing who moves first. This sequential structure, often referred to as "virtual observability, " suggests that timing alone can shape expectations and choices, even when no information is revealed. The original notion of virtual observability, however, is an equilibrium refinement based on the timing structure and has no bite in games with a unique equilibrium. In this paper, we experimentally examine whether timing still affects behavior in such games, using the Traveler's Dilemma and the Trust Game. We find that in the sequential Traveler's Dilemma without observability, first movers tend to behave closer to the equilibrium prediction than in the simultaneous version. In contrast, timing without observability has no effect on behavior in the Trust Game. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.01244 |
| By: | Marcus Pivato (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In recent work, the author has developed a general category-theoretic framework for decision theory. This paper applies this to the category of orthomodular lattices. Every Boolean algebra is an orthomodular lattice, so this yields a new ("syntactic") model of decision-making with classical uncertainty. The lattice of closed subspaces of a Hilbert space is also an orthomodular lattice, so this also yields a new model of decision-making with quantum uncertainty. |
| Keywords: | syntactic decision theory Boolean algebra quantum uncertainty, syntactic decision theory, Boolean algebra, quantum uncertainty |
| Date: | 2025–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-05398789 |
| By: | Benjamin C\^ot\'e; Ruodu Wang; Qinyu Wu |
| Abstract: | Risk aversion and insurance are two prominent and interconnected concepts in economics and finance. To explore their fundamental connection, we introduce risk-insurance parity, which associates various classes of insurance contracts with different notions of risk aversion. We show that the classic notions -- both weak and strong -- of risk aversion can be characterized by propensity to different classes of insurance contracts, generalizing recent results on propensity to full, proportional, and deductible-limit contracts in the literature. We obtain full characterizations of the classes of insurance indemnity functions that correspond to weak and strong risk aversion. Risk-insurance parity allows us to define two new notions of risk aversion, between weak and strong, characterized by insurance propensity to deductible-only and limit-only contracts respectively. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.09208 |
| By: | Alessandro De Chiara (Universitat de Barcelona); Ester Manna (Universitat de Barcelona); Shubhranshu Singh (Carey Business School, Johns Hopkins University) |
| Abstract: | We theoretically investigate whether AI developers or AI operators should be liable for the harm the AI systems may cause when they hallucinate. We find that the optimal liability framework may vary over time, with the evolution of the AI technology, and that making the AI operators liable can be desirable only if it induces monitoring of the AI systems. We also highlight non-trivial relationships between welfare and reputational concerns, human supervision ability, and the accuracy of the technology. Our results have implications for regulatory design and business strategies. |
| Keywords: | AI hallucinations, AI liability, AI supervision |
| JEL: | K2 L51 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:492web |