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on Microeconomics |
| By: | Debasis Mishra; Sanket Patil; Alessandro Pavan |
| Abstract: | We study procurement design when the buyer is uncertain about both the value of the good and the seller's cost. The buyer has a conjectured model but does not fully trust it. She first identifies mechanisms that maximize her worst-case payoff over a set of plausible models, and then selects one from this set that maximizes her expected payoff under the conjectured model. Robustness leads the buyer to increase procurement from the least efficient sellers and reduce it from those with intermediate costs. We also study monopoly regulation and identify conditions under which quantity regulation outperforms price regulation. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.08177 |
| By: | Kemal Ozbek |
| Abstract: | We study optimal auction design in an independent private values environment where bidders can endogenously -- but at a cost -- improve information about their own valuations. The optimal mechanism is two-stage: at stage-1 bidders register an information acquisition plan and pay a transfer; at stage-2 they bid, and allocation and payments are determined. We show that the revenue-optimal stage-2 rule is the Vickrey--Clarke--Groves (VCG) mechanism, while stage-1 transfers implement the optimal screening of types and absorb information rents consistent with incentive compatibility and participation. By committing to VCG ex post, the pre-auction information game becomes a potential game, so equilibrium information choices maximize expected welfare; the stage-1 fee schedule then transfers an optimal amount of payoff without conditioning on unverifiable cost scales. The design is robust to asymmetric primitives and accommodates a wide range of information technologies, providing a simple implementation that unifies efficiency and optimal revenue in environments with endogenous information acquisition. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.07798 |
| By: | Preker, Jurek (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We investigate and axiomatize preferences that display indifference between deterministic states, but exhibit strict orderings over lotteries over these states. Such preferences might be due to the ability to adopt to states, or a (dis)taste for uncertainty. We derive a representation theorem for preferences that are symmetric—that is, a decision maker is indifferent between a lottery and its permutations over the set of states—, continuous, and satisfy a weakened version of independence. We then describe when these preferences exhibit a taste or distaste for uncertainty. Finally, we characterize pairs of lotteries for which every uncertainty-averse decision maker prefers one of the lotteries over the other one. |
| Keywords: | Expected Utility, Induced Preferences, Mixture Aversion |
| Date: | 2026–01–28 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:761 |
| By: | Laurenz Marstaller (University of Bonn) |
| Abstract: | Heterogeneous search costs enable price discrimination, which I study in the canonical Wolinsky (1986) sequential search setting. Firms observe a public signal of a consumer’s search cost before posting a personalized price. The welfare effects of search-cost-based price discrimination depend on the distribution of search costs. For sufficiently small search costs, all consumers participate, and price discrimination reduces consumer surplus. When search costs are sufficiently dispersed, price discrimination reduces participation; its effect on consumer surplus is ambiguous and decomposed into three forces. This decomposition guides optimal information design: the consumer-surplus-maximizing policy is a binary signal that separates low- and high-search-cost consumers. |
| Keywords: | Privacy, Price Discrimination, Search Costs, Consumer Search Market |
| JEL: | D83 L13 D18 D43 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:387 |
| By: | Bohan Zhang |
| Abstract: | This paper develops a theoretical model of platform competition where user-generated content (UGC) quality arises endogenously from the composition of the user base. Users differ in their relative preferences for content quality and network size, and platforms compete by choosing advertising intensity, which affects user utility through perceived quality. We characterize equilibrium platform choice, identifying conditions under which equilibria are stable. The model captures how platforms' strategic decisions shape user allocation and market outcomes, including coexistence and dominance scenarios. We consider two types of equilibria in advertising levels: Nash equilibria and Stackelberg equilibria, and discuss the industry and policy implications of our results. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.08876 |
| By: | Wojciech Olszewski; Yutong Zhang |
| Abstract: | When customers must visit a seller to learn the valuation of its product, sellers potentially benefit from charging a lower price on the first visit and a higher price when a buyer returns. Armstrong and Zhou (2016) show that such price discrimination can arise in equilibrium when buyers learn a seller's pricing policy only upon visiting. We depart from this assumption by supposing that sellers commit to observable pricing policies that guide consumer search and buyers can choose whom to visit first. We show that no seller engages in price discrimination in equilibrium. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.08136 |
| By: | Bin Liu; Jingfeng Lu; Xianwen Shi |
| Abstract: | We study bilateral trade when private information arrives sequentially: the buyer learns her signal before the seller. In private values, this timing asymmetry restores efficiency: the efficient trade rule is implementable by a direct mechanism that is incentive compatible, exact budget balanced, and individually rational (interim for the buyer and ex ante for the seller). With interdependent values, efficiency can fail. We give primitive feasibility conditions and show that they hinge on how the seller’s cost responds to the buyer’s signal in the trading region. Allowing disclosure of the buyer’s report does not expand implementability. |
| Keywords: | Bilateral Trade, Mixed Participation, Efficiency, Disclosure |
| JEL: | D82 D61 |
| Date: | 2026–01–26 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-816 |
| By: | Joshua Kavner |
| Abstract: | Many multiagent systems rely on collective decision-making among self-interested agents, which raises deep questions about coalition formation and stability. We study social choice with endogenous, outcome-contingent transfers, where agents voluntarily form contracts that redistribute utility depending on the collective decision, allowing fully strategic, incentive-aligned coalition formation. We show that under consensus rules, individually rational strong Nash equilibria (IR-SNE) always exist, implementing welfare-maximizing outcomes with feasible transfers, and provide a simple, efficient algorithm to construct them. For more general anonymous, monotonic, and resolute rules, we identify necessary conditions for profitable deviations, sharply limiting destabilizing coalitions. By bridging cooperative and noncooperative perspectives, our approach shows that transferable utility can achieve core-like stability, restoring efficiency and budget balance even where classical impossibility results apply. Overall, this framework offers a practical and robust way to coordinate large-scale strategic multiagent systems. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.15563 |
| By: | Wesley H. Holliday |
| Abstract: | We prove that there is no preferential voting method satisfying the Condorcet winner and loser criteria, positive involvement (if a candidate $x$ wins in an initial preference profile, then adding a voter who ranks $x$ uniquely first cannot cause $x$ to lose), and resolvability (if $x$ initially ties for winning, then $x$ can be made the unique winner by adding a single voter). In a previous note, we proved an analogous result assuming an additional axiom of ordinal margin invariance, which we now show is unnecessary for an impossibility theorem, at least if the desired voting method is defined for five-candidate elections. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.10506 |
| By: | Keita Kuwahara |
| Abstract: | Second-hand markets have expanded rapidly with the growth of online consumer-to-consumer (C2C) platforms. A key feature of C2C markets is that sellers are typically non-professionals and often face uncertainty about the quality of the goods they sell. This creates scope for platforms to introduce systems that reduce sellers' uncertainty about quality. However, an important question remains: is it socially desirable for sellers to have more precise quality information? We present results showing that while improved information always benefits sellers, it can either benefit or harm buyers. We derive a necessary and sufficient condition under which buyers benefit, and show that this condition holds in many cases, especially when buyers' valuations are not too large relative to sellers' costs. These findings suggest that platforms should consider reducing sellers' uncertainty about quality as a means of improving market efficiency. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.04942 |
| By: | Nicholas H. Kirk |
| Abstract: | We introduce the Sustainable Exploitation Equilibrium (SEE), a refinement of Markov Perfect Equilibrium (MPE) for dynamic games with an exploiter-exploitee structure. SEE imposes two additional discipline conditions: (i) viability, requiring state trajectories to remain inside a sustainability set; and (ii) renegotiation-proofness with exploiter-optimal selection, to retain only those viable equilibria that are immune to Pareto-improving renegotiations, with ties resolved in favor of the exploiter. In our base formulation the exploitee cannot exit the relationship (no outside option), but retains a strategic effort margin that affects dynamics and payoffs. We establish existence under appropriate conditions and illustrate SEE in a hegemon-client model of foreign politics, where tribute demands trade off against the client's governance effort. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.07629 |
| By: | Juan Wu (James); Zhe (James); Zhang; Amit Mehra |
| Abstract: | Generative artificial intelligence (Gen-AI) is reshaping content creation on digital platforms by reducing production costs and enabling scalable output of varying quality. In response, platforms have begun adopting disclosure policies that require creators to label AI-generated content, often supported by imperfect detection and penalties for non-compliance. This paper develops a formal model to study the economic implications of such disclosure regimes. We compare a non-disclosure benchmark, in which the platform alone detects AI usage, with a mandatory self-disclosure regime in which creators strategically choose whether to disclose or conceal AI use under imperfect enforcement. The model incorporates heterogeneous creators, viewer discounting of AI-labeled content, trust penalties following detected non-disclosure, and endogenous enforcement. The analysis shows that disclosure is optimal only when both the value of AI-generated content and its cost-saving advantage are intermediate. As AI capability improves, the platform's optimal enforcement strategy evolves from strict deterrence to partial screening and eventual deregulation. While disclosure reliably increases transparency, it reduces aggregate creator surplus and can suppress high-quality AI content when AI is technologically advanced. Overall, the results characterize disclosure as a strategic governance instrument whose effectiveness depends on technological maturity and trust frictions. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.18654 |
| By: | Christian Ewerhart; Haoyuan Zeng |
| Abstract: | This paper studies mediation in infinitely repeated games with perfect monitoring. In departure from the literature, we assume that all private messages and internal records are publicly revealed at the end of each stage. We call the resulting equilibrium concept mediated subgame perfect equilibrium (MSPE). It is shown that the revelation principle holds. We introduce an effective correlated minimax value, which can be conveniently determined as the solution of a linear program, and use it to derive necessary and sufficient conditions for the implementability of payoffs under an MSPE. These conditions are standard for two-player games with a sufficient degree of patience but are, in general, strictly more permissive. Examples illustrate the impact of effective correlated minimax profiles and the subtle role of internal records. |
| Keywords: | Infinitely repeated games, mediation, revelation principle, perfect folk theorem, effective minimax value, correlated equilibrium, threat points |
| JEL: | C72 C73 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:zur:econwp:484 |
| By: | Peter J. Hammond |
| Abstract: | In normative models a decision-maker is usually assumed to be Bayesian rational, and so to maximize subjective expected utility, within a complete and correctly specified decision model. Following the discussion in Hammond (2007) of Schumpeter's (1911, 1934) concept of entrepreneurship, as well as Shackle's (1953) concept of potential surprise, we consider enlivened decision trees whose growth over time cannot be accurately modelled in full detail. An enlivened decision tree involves more severe limitations than a mis-specified model, unforeseen contingencies, or unawareness, all of which are typically modelled with reference to a universal state space large enough to encompass any decision model that an agent may consider. We consider a motivating example based on Homer's classic tale of Odysseus and the Sirens. Though our novel framework transcends standard notions of risk or uncertainty, for finite decision trees that may be truncated because of bounded rationality, an extended and refined form of Bayesian rationality is still possible, with real-valued subjective evaluations instead of consequences attached to terminal nodes where truncations occur. Moreover, these subjective evaluations underlie, for example, the kind of Monte Carlo tree search algorithm used by recent chess-playing software packages. They may also help rationalize the contentious precautionary principle. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.06405 |
| By: | Aggey Simons (Semenov) (Department of Economics, University of Ottawa, Canada); Jean Baptiste Tondji (Department of Economics, The University of Texas Rio Grande Valley, USA) |
| Abstract: | We develop an oligopoly theory of brand authenticity as a belief-based credence attribute valued by only a subset of consumers. Firms choose prices and costly authenticity efforts, while managers may derive private non-pecuniary benefits from being perceived as intrinsically motivated. Heterogeneity in consumer preferences and managerial motivations jointly determines equilibrium authenticity provision, pricing, and consumer sorting. Firms led by more authenticity-driven managers invest more and, under standard complementarity conditions, charge price premia. Authenticity is privately unsustainable when the attentive audience is small, viable when it is large, and fragile at intermediate sizes. In this fragile region, laissez-faire equilibrium exhibits inefficient exit despite socially valuable participation, reflecting an extensive-margin inefficiency that can be addressed by participation support or belief-based certification. |
| Keywords: | Authenticity, Authenticity-Driven Motivations, Market Segmentation, Oligopoly Pricing, Non-price Competition, Welfare |
| JEL: | C72 D21 D42 D60 L13 L15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ott:wpaper:2601e |
| By: | Andr\'es Espitia |
| Abstract: | Miscalibrated beliefs are widely viewed as compromising the quality of employees' decisions. Why, then, might an organization prefer to hire an individual known to be overconfident? This paper develops a theory of organizational demand for employees' levels of confidence when private information interacts with conflicts of interest. I study a model in which an employee uses private information to make decisions on behalf of the organization and analyze the belief design problem, namely, how the organization would like the employee to interpret his observations. I show that organizations prefer employees whose actions reflect a constant expected conflict of interest across observations. A well-calibrated employee is optimal if and only if private information does not affect this conflict. When the conflict varies with information, organizations optimally select employees whose confidence distorts their responses to information. Overconfidence is optimal when the organization seeks stronger adjustments to information than a well-calibrated employee would provide. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.05206 |
| By: | Laurence Carassus; Mikl\'os R\'asonyi |
| Abstract: | We consider an investor who, while maximizing his/her expected utility, also compares the outcome to a reference entity. We recall the notion of personal equilibrium and show that, in a multistep, generically incomplete financial market model such an equilibrium indeed exists, under appropriate technical assumptions. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.08348 |
| By: | Sergiu Hart; Noam Nisan |
| Abstract: | We provide an elementary proof that revenue-maximizing mechanisms exist in multi-parameter settings whenever the distribution of valuations has finite expectation. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.01607 |
| By: | Junyao Zhao |
| Abstract: | In Bayesian single-item auctions, a monotone bidding strategy--one that prescribes a higher bid for a higher value type--can be equivalently represented as a partition of the quantile space into consecutive intervals corresponding to increasing bids. Kumar et al. (2024) prove that agile online gradient descent (OGD), when used to update a monotone bidding strategy through its quantile representation, is strategically robust in repeated first-price auctions: when all bidders employ agile OGD in this way, the auctioneer's average revenue per round is at most the revenue of Myerson's optimal auction, regardless of how she adjusts the reserve price over time. In this work, we show that this strategic robustness guarantee is not unique to agile OGD or to the first-price auction: any no-regret learning algorithm, when fed gradient feedback with respect to the quantile representation, is strategically robust, even if the auction format changes every round, provided the format satisfies allocation monotonicity and voluntary participation. In particular, the multiplicative weights update (MWU) algorithm simultaneously achieves the optimal regret guarantee and the best-known strategic robustness guarantee. At a technical level, our results are established via a simple relation that bridges Myerson's auction theory and standard no-regret learning theory. This showcases the potential of translating standard regret guarantees into strategic robustness guarantees for specific games, without explicitly minimizing any form of swap regret. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.03853 |
| By: | Gregorio Curello; Ludvig Sinander; Mark Whitmeyer |
| Abstract: | In choice under risk, there is a standard notion of 'less risk-averse than', due to Yaari (1969). In the theory of comparative statics, the single-crossing property is satisfied by all weighted averages of a family of single-crossing functions if and only if the family satisfies a property called signed-ratio monotonicity (Quah & Strulovici, 2012). We establish a close link between 'less risk-averse than' and signed-ratio monotonicity. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06005 |
| By: | Jiaming Wei; Dihan Zou |
| Abstract: | We study monopoly regulation under asymmetric information about costs when subsidies are infeasible. A monopolist with privately known marginal cost serves a single product market and sets a price. The regulator maximizes a weighted welfare function using unit taxes as sole policy instrument. We identify a sufficient and necessary condition for when laissez-faire is optimal. When intervention is desired, we provide simple sufficient conditions under which the optimal policy is a progressive price cap: prices below a benchmark face no tax, while higher prices are taxed at increasing and potentially prohibitive rates. This policy combines delegation at low prices with taxation at high prices, balancing access, affordability, and profitability. Our results clarify when taxes act as complements to subsidies and when they serve only as imperfect substitutes, illuminating how feasible policy instruments shape optimal regulatory design. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06525 |
| By: | Leo Kurata; Kensei Nakamura |
| Abstract: | This paper studies preference aggregation under risk. In our model, each agent has an incomplete preference relation represented by a set of expected utility functions. The classical Pareto principle is silent on agreement involving indecisiveness. To examine the implications of respecting such agreement, we introduce the Paretian principle that can be applied when some individuals reserve their judgment. Our main result shows that, under this principle, for each combination of individuals' utility functions, there exists a corresponding social utility function constructed as a weighted sum of the individual ones. These aggregation rules guarantee natural properties that the standard Pareto principle fails to ensure. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.01334 |
| By: | Collin Raymond; Yangwei Song |
| Abstract: | We extend well-known comparative results under expected utility to models of non-expected utility by providing novel conditions on local utility functions. We illustrate how our results parallel, and are distinct from, existing results for monotone comparative statics under expected utility, as well as risk preferences for non-expected utility. Our conditions generalize existing results for specific preferences (including expected utility) and allow us to verify monotone comparative statics for novel environments and preferences. We apply our results to portfolio choice problems where preferences or wealth might change, as well as precautionary savings. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.10664 |