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on Microeconomics |
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Issue of 2012‒09‒16
thirteen papers chosen by Jing-Yuan Chiou IMT Lucca Institute for Advanced Studies |
| By: | Yi-Chun Chen (Dept. of Economics, National University of Singapore); Alfredo Di Tillio (IGIR and Dept. of Economics, Universita Luigi Bocconi); Eduardo Faingold (Cowles Foundation, Yale University); Siyang Xiong (Dept. of Economics, Rice University) |
| Abstract: | Previous research has established that the predictions made by game theory about strategic behavior in incomplete information games are quite sensitive to the assumptions made about the players' infinite hierarchies of beliefs. We evaluate the severity of this robustness problem by characterizing conditions on the primitives of the model -- the players’ hierarchies of beliefs -- for the strategic behavior of a given Harsanyi type to be approximated by the strategic behavior of (a sequence of) perturbed types. This amounts to providing characterizations of the strategic topologies of Dekel, Fudenberg, and Morris (2006) in terms of beliefs. We apply our characterizations to a variety of questions concerning robustness to perturbations of higher-order beliefs, including genericity of common priors, and the connections between robustness of strategic behavior and the notion of common p-belief of Monderer and Samet (1989). |
| Keywords: | Games with incomplete information, Rationalizability, Higher-order beliefs, Robustness |
| JEL: | C70 C72 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1875&r=mic |
| By: | Francoise Forges (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine); Vincent Iehlé (LEDa - Laboratoire d'Economie de Dauphine - Université Paris IX - Paris Dauphine, CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - CNRS : UMR7534 - Université Paris IX - Paris Dauphine) |
| Abstract: | According to a minimalist version of Afriat's theorem, a consumer behaves as a utility maximizer if and only if a feasibility matrix associated with his choices is cyclically consistent. An essential experiment consists of observed consumption bundles (x_1,..., x_n) and a feasibility matrix \alpha. Starting with a standard experiment, in which the economist has access to precise budget sets, we show that the necessary and sufficient condition for the existence of a utility function rationalizing the experiment, namely, the cyclical consistency of the associated feasibility matrix, is equivalent to the existence, for any budget sets compatible with the deduced essential experiment, of a utility function rationalizing them (and typically depending on them). In other words, the conclusion of the standard rationalizability test, in which the economist takes budget sets for granted, does not depend on the full specification of the underlying budget sets but only on the essential data that these budget sets generate. Starting with an essential experiment (x_1,..., x_n; alpha) only, we show that the cyclical consistency of alpha, together with a further consistency condition involving both (x_1,..., x_n) and alpha, guarantees the existence of a budget representation and that the essential experiment is rationalizable almost robustly, in the sense that there exists a single utility function which rationalizes at once almost all budget sets which are compatible with (x_1,..., x_n; alpha). The conditions are also trivially necessary. |
| Keywords: | Afriat's theorem, budget sets, cyclical consistency, rational choice, revealed preference |
| Date: | 2012–07–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00727806&r=mic |
| By: | Ilan Yaniv; Shoham Choshen-Hillel |
| Abstract: | We investigated how perspective-taking might be used to overcome bias and improve advice-based judgments. Decision makers often tend to underweight the opinions of others relative to their own, and thus fail to exploit the wisdom of others. We tested the idea that decision makers taking the perspective of another person engage a less egocentric mode of processing of advisory opinions and thereby improve their accuracy. In Studies 1-2, participants gave their initial opinions and then considered a sample of advisory opinions in two conditions. In one condition (self-perspective), they were asked to give their best advice-based estimates. In the second (other-perspective), they were asked to give advice-based estimates from the perspective of another judge. The dependent variables were the participants’ accuracy and indices that traced their judgment policy. In the self-perspective condition participants adhered to their initial opinions, whereas in the other-perspective condition they were far less egocentric, weighted the available opinions more equally and produced more accurate estimates. In Study 3, initial estimates were not elicited, yet the data patterns were consistent with these conclusions. All the studies suggest that switching perspectives allows decision makers to generate advice-based judgments that are superior to those they would otherwise have produced. We discuss the merits of perspective-taking as a procedure for correcting bias, suggesting that it is theoretically justifiable, practicable, and effective. |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp622&r=mic |
| By: | Tsakas Elias (METEOR) |
| Abstract: | We provide epistemic conditions for correlated rationalizability, which are considerably weakerthan the ones by Zambrano (2008). More specifically, we simultaneously replace mutual knowledge ofrationality and mutual knowledge of the event that every player deems possible only strategyprofiles that belong to the support of her actual conjecture, with strictly weaker epistemicconditions of pairwise mutual knowledge of these events.Moreover, we show that our epistemic foundation for correlated rationalizability does not implymutual knowledge of rationality. |
| Keywords: | microeconomics ; |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2012031&r=mic |
| By: | Méder Zsombor; Flesch János; Peeters Ronald (METEOR) |
| Abstract: | This paper lays down conceptual groundwork for optimal choice of a decision maker facing afinite-state Markov decision problem on an infinite horizon. We distinguish two notions of astrategy being favored on the limit of horizons, and examine the properties of the emerging binaryrelations. After delimiting two senses of optimality, we define a battery of optimal strategy sets– including the Ramsey-Weizäcker overtaking criterion – and analyze their relationships andexistence properties. We also relate to the work on pointwise limits of strategies by Fudenbergand Levine (1983). |
| Keywords: | mathematical economics; |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2012024&r=mic |
| By: | Athanasiou Efthymios; Dey Santanu; Valletta Giacomo (METEOR) |
| Abstract: | We put forward a model of private goods with externalities. Agents derive benefit fromcommunicating with each other. In order to communicate they need to have a language in common.Learning languages is costly. In this setting no individually rational and feasible Grovesmechanism exists. We characterize the best-in-class feasible Groves mechanism and thebest-in-class individually rational Groves mechanism. |
| Keywords: | public economics ; |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2012016&r=mic |
| By: | Omer Edhan |
| Abstract: | We prove that every continuous value on a space of vector measure market games $Q$, containing the space of nonatomic measures $NA$, has the \textit{conic property}, i.e., if a game $v\in Q$ coincides with a nonatomic measure $\nu$ on a conical diagonal neighborhood then $\varphi(v)=\nu$. We deduce that every continuous value on the linear space $\mathcal M$, spanned by all vector measure market games, is determined by its values on $\mathcal{LM}$ - the space of vector measure market games which are Lipschitz functions of the measures. |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp623&r=mic |
| By: | Omer Edhan |
| Abstract: | We prove that a single-valued solution of perfectly competitive TU economies underling nonatomic exact market games is uniquely determined as the Mertens value by four plausible value-related axioms. Since the Mertens value is always a core element, this result provides an axiomatization of the Mertens value as a core-selection. Previous works in this direction assumed the economies to be either di erentiable (e.g., Dubey and Neyman [9]) or of uniform nite-type (e.g., Haimanko [14]). Our work does not assume that, thus it contributes to the axiomatic study of payo s in perfectly competitive economies (or values of their derived market games) in general. In fact, this is the rst contribution in this direction. |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp627&r=mic |
| By: | Yehuda (John) Levy |
| Abstract: | We study non-zero-sum continuous-time stochastic games, also known as continuous-time Markov games, of fixed duration. We concentrate on Markovian strategies. We show by way of example that equilibria need not exist in Markovian strategies, but they always exist in Markovian public-signal correlated strategies. To do so, we develop criteria for a strategy profile to be an equilibrium via differential inclusions, both directly and also by modeling continuous-time stochastic as differential games and using the Hamilton-Jacobi-Bellman equations. We also give an interpretation of equilibria in mixed strategies in continuous-time, and show that approximate equilibria always exist. |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp617&r=mic |
| By: | Abraham Neyman |
| Abstract: | Every continuous-time stochastic game with finitely many states and actions has a uniform and limiting-average equilibrium payoff. |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp616&r=mic |
| By: | Mikel Alvarez-Mozos; Ziv Hellman; Eyal Winter |
| Abstract: | Assuming a `spectrum' or ordering on the players of a coalitional game, as in a political spectrum in a parliamentary situation, we consider a variation of the Shapley value in which coalitions may only be formed if they are connected with respect to the spectrum. This results in a naturally asymmetric power index in which positioning along the spectrum is critical. We present both a characterisation of this value by means of properties and combinatoric formulae for calculating it. In simple majority games, the greatest power accrues to `moderate' players who are located neither at the extremes of the spectrum nor in its centre. In supermajority games, power increasingly accrues towards the extremes, and in unaninimity games all power is held by the players at the extreme of the spectrum. |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp618&r=mic |
| By: | Herings P. Jean-Jacques; Britz Volker; Predtetchinski Arkadi (METEOR) |
| Abstract: | We consider non-cooperative multilateral bargaining games with endogenous bargaining protocols.Under an endogenous protocol, the probability with which a player becomes the proposer in a roundof bargaining depends on the identity of the player who previously rejected. An important exampleis the frequently studied rejector-becomes-proposer protocol. We focus on subgame perfectequilibria in stationary strategies which are shown to exist and to be efficient. Equilibriumproposals do not depend on the probability to proposeconditional on the rejection by another player, though equilibrium acceptance sets do depend onthese probabilities. Next we consider the limit, as the bargaining friction vanishes. In case noplayer has a positive probability to propose conditional on his rejection, each player receiveshis utopia payoff conditional on being recognized and equilibrium payoffs are in general Paretoinefficient. Otherwise, equilibrium proposals of all players converge to a weighted NashBargaining Solution, where the weights are determined by the probability to propose conditional ona rejection. |
| Keywords: | microeconomics ; |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2012030&r=mic |
| By: | Tom POTTOMS; Luc LAUWERS |
| Abstract: | We characterize a new quasi-ordering on the collection of opportunity (or choice) sets. This new rule combines two criteria: the individual preferences on the universal set of options and the number of maximal options in the opportunity set. This new rule is compared with the indirect utility approach, and is further refined towards the leximax rule defined by Bossert, Pattanaik, and Xu (Journal of Economic Theory, 63, 1994). |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces12.13&r=mic |