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on Microeconomics |
| By: | Gonzalez Morin, Javier; Martimort, David |
| Abstract: | We consider the following screening model of procurement. An agent (the seller) has private information on his cost parameter. A principal (the buyer) learns an ex post signal on this parameter. The signal is private information to the principal and proper incentives to reveal this signal must be designed. In related contexts, money burning, i.e., the ex post destruction of some of the gains from trade, has shown to be useful to provide such incentives. We demonstrate that money burning allows the principal to implement the first-best output with zero information rent for the agent; although it is never optimal to do so since output distortions are less costly. More generally, money burning is rarely optimal, and only used as a tool of last resort if output distortions are no longer feasible. In particular, when output must be chosen before the non-verifiable signal realizes, money burning becomes more attractive. |
| Keywords: | Optimal contracting; asymmetric information; ex post signal; money burning |
| JEL: | D82 |
| Date: | 2026–04–22 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131687 |
| By: | Jeon, Doh-Shin; Drugov, Mikhail |
| Abstract: | This paper studies the incentives of a subscription-funded platform that offers both proprietary and third-party content to bias its recommendations about which con tent users should consume. Consistent with Netflix’s practice, we consider fixed-fee bargaining between the platform and a content provider, which eliminates any static incentive to bias recommendations. However, our dynamic model identifies two dis tinct incentives to bias recommendations: improving the platform’s future bargain ing position and increasing users’ expected surplus. The former favors first-party content, while the latter favors the ex ante superior content. As a result, biased recommendations may lead to either self-preferencing or third-party preferencing. |
| JEL: | D83 L42 |
| Date: | 2026–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131694 |
| By: | Ohnishi, Kazuhiro |
| Abstract: | This study investigates a quantity-setting duopoly model in which two partially cooperating firms coexist. The following three-stage game is considered. In the first stage, each owner decides whether to hire a manager. In the second stage, the owners who hired managers select incentive parameters for them. In the third stage, the managers or, in their absence, the owners simultaneously and independently choose the firms’ outputs. The study adopts subgame perfection as an equilibrium concept and solves the game by backward induction. The study demonstrates that, in the subgame-perfect equilibrium, both firms hire managers. |
| Keywords: | Managerial delegation; Mixed duopoly; Cournot model; Partially cooperating firm |
| JEL: | C72 D21 D43 L13 |
| Date: | 2026–04–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128718 |
| By: | Sebastiano Della Lena; Luca Paolo Merlino; Yves Zenou |
| Abstract: | We study opinion dynamics in a social network consisting of two groups. Agents update their opinions by conforming to members of their own group while rejecting the views of the opposing group (affective polarization), and by listening to a media outlet that may provide biased information. We characterize the long-run opinions and identify when affective polarization and media bias lead to ideological polarization, persistent disagreement, or failures of learning. We also derive when information interventions or censorship improve learning and reduce disagreement, and when they backfire: better information helps only under specific media bias configurations and when directed to the agents we identify as most effective at propagating it through the network. |
| Keywords: | Signed Networks, Opinion Dynamics, Affective Polarization, Group Antagonism, Information Campaigns, Targeting. |
| JEL: | C7 D7 D85 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26001 |
| By: | Volker Nocke; Nicolas Schutz |
| Abstract: | We develop a potential games approach to study multiproduct-firm pricing games.We introduce the new concept of transformed potential and characterize the classes of demand systems that give rise to pricing games admitting such a potential. The resulting demand systems may contain nests (of closer substitutes) or baskets (of products that are purchased jointly), or combinations thereof. These demand systems allow for flexible substitution patterns, and can feature product complementarities arising from joint purchases and substitution away from the outside option. Combining the potential games approach with a competition-in-utility approach, we derive powerful results on existence of pure-strategy Nash equilibria. |
| Keywords: | Multiproduct firms, potential game, oligopoly pricing, complementary goods, joint purchases, nests, equilibrium existence, equilibrium uniqueness |
| JEL: | L13 D43 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_644_v3 |
| By: | Arthur Campbell; C. Matthew Leister; Philip Ushchev; Yves Zenou |
| Abstract: | We develop a simple model of content filtering-the tendency of individuals to selectively forward information that aligns with their ideological preference-to study how network structure shapes the distribution of political content. In our framework, individuals and content are horizontally differentiated into three types (left, middle, right). We show that content filtering can amplify the middle or the extremes and may result in only centrist content (full moderation) or only extreme content (full polarization). The outcome depends on the interaction between two forces: a preference advantage from the relative prevalence of types in the population, and a pairwise comparison advantage that systematically favors centrist content. Network density plays a critical role. Sparse networks robustly yield moderation, even when extreme types dominate the population, while dense networks replicate the population's type distribution. Intermediate densities generate non-monotonic comparative statics, including sharp transitions between moderation and polarization. These findings complement existing empirical results that emphasize the types of connections individuals have on social media by highlighting how the number of connections, holding their composition fixed, may fundamentally shape the information environment in ways that foster/mitigate populism and polarization. |
| Keywords: | Social networks, network density, content filtering, polarization |
| JEL: | D83 D85 L82 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2582 |
| By: | Zhang, Chuyuan; Lee, Sang-Ho |
| Abstract: | This study considers a vertically related market where an upstream firm supplies an intermediate good to competing downstream firms that may adopt environmental corporate social responsibility (ECSR). When downstream firm owners, guided by common ownership, appoint green managerial delegation contract, we investigate strategic interaction between common ownership and ECSR, demonstrating that downstream firms may engage in ECSR, which can reduce intermediate prices, while common ownership may increase market competition through ECSR. Our analysis shows that Cournot firms adopt ECSR only when common ownership is sufficiently high or product substitutability is sufficiently low, whereas Bertrand firms always adopt ECSR. Cournot competition can yield higher welfare than Bertrand competition when the degree of common ownership is sufficiently high (low) and product substitutability is sufficiently low (high). As environmental damage increases, Cournot competition yields much higher welfare than Bertrand competition. Finally, we compare outcomes under discriminatory input prices and mandatory ECSR guidelines, and discuss the policy implications. |
| Keywords: | Common ownership; Environmental corporate social responsibility; Green managerial delegation; Vertically related market |
| JEL: | D43 L2 L21 L44 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128009 |
| By: | Canta, Chiara; Madio, Leonardo; Mantovani, Andrea; Reggiani, Carlo |
| Abstract: | Online platforms connecting physicians and patients are increasingly com-mon and often operate in heavily regulated contexts. We consider a platform that provides cost-reducing services for physicians and quality-enhancing ser-vices for patients. The platform also improves the matching between patients and physicians, thereby increasing competition among the latter. When prices are unregulated, physicians charge different prices online and offline, yet not all join the platform, which is suboptimal in terms of social welfare. The platform may also under- or over-invest in the quality level offered to patients, making their participation suboptimal as well. We then analyze price regulation. Un-der a single regulated price for medical visits, regardless of the booking channel, all physicians join the platform. However, the first-best allocation cannot be implemented: patient participation remains inefficiently low because patients do not internalize the platform’s cost-reducing effect. In contrast, allowing two regulated prices, one for offline visits and one for platform bookings, re-stores the first best. Overall, our findings suggest that an optimal pricing or reimbursement mechanism should differentiate across booking channels. |
| Keywords: | Healthcare online platforms; Price regulation; Patient-physician matching. |
| JEL: | I11 I18 L51 H75 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131693 |
| By: | Galdino, Manoel (Universidade de São Paulo) |
| Abstract: | When and why would a hegemon prefer consensus to majority rule in an international organization? I argue that consensus can be a technology of hegemonic power rather than a constraint upon it. In a formal model, a hegemon privately observes the value of cooperation and uses Bayesian persuasion to influence weaker states' entry decisions. Under majority rule, weak states can bypass the hegemon, eliminating any screening problem. Under unanimity, weak states must include the hegemon in every bargaining coalition without knowing its type, creating a screening cutoff at which their behavior changes discretely. This generates an upward jump in the hegemon's value function---a non-convexity that Bayesian persuasion exploits. The institutional comparison has a single-crossing property: there is a unique prior threshold, in closed form, above which the hegemon prefers unanimity and below which majority can dominate by making entry easier. The mechanism reframes institutional design as a trade-off between informational leverage under unanimity and easier participation under majority, providing a distributive explanation for consensus rules in organizations like the GATT/WTO. |
| Date: | 2026–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:ca8vj_v1 |
| By: | Matthias Fahn; Jin Li; Chang Sun |
| Abstract: | We study how AI affects compensation and job design when performance depends on workers' non-contractible effort. In a principal–agent model with limited liability, AI reduces effort costs but disproportionately lowers the cost of achieving satisfactory performance. This raises the incentive cost of sustaining high effort and can induce firms to replace high-wage, high-effort good jobs with low-wage, low-effort bad jobs, even when good jobs create more total surplus. As a result, AI can lower wages, reduce worker welfare, and even depress profits. If workers can adopt AI unilaterally, adoption occurs even when the resulting equilibrium harms both parties; when adoption requires worker cooperation, resistance is strongest where AI erodes rents embodied in good jobs. In a search-and-matching extension, endogenous outside options amplify these forces, reinforcing a bad-job economy and potentially reducing employment. |
| Keywords: | artificial intelligence, agency costs, job design, labor contracts, limited liability, incentives, search and matching |
| JEL: | D86 J41 O33 L23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12612 |
| By: | Burkhard C. Schipper (Department of Economics, University of California Davis) |
| Abstract: | Heifetz, Meier, and Schipper (2013) introduced dynamic games with unawareness consisting of a partially ordered set of games in extensive form. Here, we study the normal form of dynamic games with unawareness. The generalized normal form associated with a dynamic game with unawareness consists of a partially ordered set of games in normal form. We characterize strong rationalizability (resp., prudent rationalizability) in dynamic games with unawareness by iterated conditional strict (resp., weak) dominance in the associated generalized normal form. We also show that the analogue to iterated admissibility for dynamic games with unawareness depends on the extensive form. This is because, under unawareness, a player's information set not only determines which nodes she considers possible but also which game tree(s) she is aware of. |
| Keywords: | Awareness, unknown unknowns, extensive form, normal form, strong rationalizabity, extensive-form rationalizability, prudent rationalizability, iterated conditional dominance, iterated admissibility |
| JEL: | C72 D83 |
| Date: | 2026–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:cda:wpaper:380 |
| By: | GHOSH, Arghya; HODAKA, Morita; SATO, Susumu |
| Abstract: | Firms compete in both product and labor markets by making decisions about hiring, training, and poaching workers. We develop a theoretical model in which firm-sponsored training links product and labor market competition. Changes in labor, product, or overall market power influence firms' incentives to invest in training, which can lead to clear-cut welfare improvements benefiting all relevant parties. The distinction between under- vs. overinvestment in training, a unique feature that emerges from the interaction between the two markets, plays a critical role in determining whether or not such welfare improvements are possible, enriching welfare and policy implications. |
| Keywords: | product market competition, oligopoly, market power, labor mobility, training, welfare, antitrust implications |
| JEL: | D21 L13 L40 M50 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hitcei:2025-04 |