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on Microeconomics |
| By: | Ahmadzadeh, Amirreza |
| Abstract: | This paper examines a principal-agent model that the princi-pal mandates actions and conducts costly inspections without transfers. The principal prefers lower actions, while the agent prefers higher ac-tions and has private information about his type. The agent is protected by ex-post participation and rejects any action below his private type. The principal faces a trade-off between mandating lower actions and the risk the the agent rejects actions and chooses his outside option. We analyze various levels of the principal’s commitment ability. If the principal can commit to both inspections and actions when no inspec-tion is performed, and if the principal’s fear of ruin is greater than the agent’s, then a deterministic inspection policy is optimal. Additionally, if the principal cannot commit to either inspections or actions, the highest equilibrium payoff does not involve non-deterministic inspec-tion strategies. Finally, if the inspection cost is low and the principal commits to inspecting whenever requested by the agent, the principal can achieve the payoff of the optimal deterministic inspection policy.. |
| Keywords: | Costly state verification; mechanism design; cheap talk; inspection, limited commitment, regulation. |
| JEL: | D82 D86 M48 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129712 |
| By: | D’Annunzio, Anna; Russo, Antonio |
| Abstract: | We study transaction fees applied by marketplace platforms where sellers (e.g., app developers) adopt freemium pricing. An ad valorem transaction fee reduces quality distortions introduced by the price-discriminating seller, thereby increasing consumer surplus. Moreover, a small fee increases welfare, implying that the agency model may be socially preferable to integration between platform and seller. However, the platform may set the equilibrium fee above the socially optimal level. Providing devices needed to access the marketplace (e.g., phones) induces the platform to raise the fee, whereas providing a product that competes with the seller induces a lower fee. |
| JEL: | D4 D21 L11 H22 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129704 |
| By: | Martin Peitz; Anton Sobolev |
| Abstract: | A seller can offer an experience good directly to consumers and indirectly through an intermediary. When selling indirectly, the intermediary provides recommendations based on the consumer’s match value and the prices at which the product is sold. The intermediary faces the trade-off between extracting rents from consumers who strongly care about the match value versus providing less informative recommendations but also serving consumers who do not. We analyze the allocative and welfare effects of prohibiting price parity clauses and/or regulating the intermediary’s recommender system. Prohibiting price parity clauses is always welfare decreasing in our model. |
| Keywords: | intermediation, digital platforms, price parity, recommender system, MFN clause, e-commerce |
| JEL: | L12 L15 D21 D42 M37 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_595 |
| By: | Liu, Tingjun (The University of Hong Kong); Bernhardt, Dan (University of Illinois & University of Warwick) |
| Abstract: | We consider a classical auction setting in which an asset/project is sold to buyers who privately receive signals about expected payoffs, and payoffs are more sensitive to the signal of the bidder who controls the asset. We show that a seller can increase revenues by sometimes allocating cash-flow rights and control to different bidders, e.g., with the highest bidder receiving cash flows and the second-highest receiving control. Separation reduces a bidder’s information rent, which depends on the importance of his private information for the value of his awarded cash flows. As project payoffs are most sensitive to the information of the bidder who controls the project, allocating cash flow to another bidder lowers bidders’ informational advantage. As a result, when signals are close, the seller can increase revenues by splitting rights between the top two bidders. |
| Keywords: | Control and cash flow rights ; separation of rights ; mechanism design ; interdependent valuations JEL Codes: D44 ; D82 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1516 |
| By: | Marie Laclau; Péter Vida; Helmuts Azacis (CY Cergy Paris Université, THEMA) |
| Abstract: | We show that essentially every correlated equilibrium of any finite game with complete information with four players can be implemented as a perfect Bayesian equilibrium of an extended game, in which before choosing actions in the underlying game, players exchange cheap talk messages. In particular, we improve on the result of B´ar´any (1992) and Gerardi (2004). And our result generalizes to sequential equilibria and to games with incomplete information, i.e. to the set of (regular) communication equilibria. |
| Keywords: | nmediated communication; sequential rationality; correlated equilibria; communication equilibria; communication protocols |
| JEL: | C72 D82 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ema:worpap:2024-07 |
| By: | Jonathan Lafky; Robin Ng |
| Abstract: | We examine how product ratings are interpreted in the presence of heterogeneous preferences among both raters and consumers. Raters with altruistic motives should rate for the benefit of future consumers, however an ambiguity arises when preferences are heterogeneous. Multiple equilibria exist in which ratings may reflect the preferences of raters or the preferences of future consumers. In an online experiment, we examine how ratings are selected by raters and interpreted by consumers, and how information about rater preferences or product attributes can influence equilibrium selection. We show how both raters and consumers update their evaluation of what a rating represents in each environment, doing so in similar ways. |
| Keywords: | Ratings and Reviews, Altruism |
| JEL: | C91 D64 D83 L86 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_594 |
| By: | Takuma Okura |
| Abstract: | In Terao [24], Hiroaki Terao defined and studied "admissible map", which is a generalization of "social welfare function" in the context of hyperplane arrangements. Using this, he proved a generalized Arrow's Impossibility Theorem using combinatorial arguments. This paper provides another proof of this generalized Arrow's Impossibility Theorem, using the idea of algebraic topology. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.14263 |
| By: | Martin W Cripps |
| Abstract: | We propose a measure of learning efficiency for non-finite state spaces. We characterize the complexity of a learning problem by the metric entropy of its state space. We then describe how learning efficiency is determined by this measure of complexity. This is, then, applied to two models where agents learn high-dimensional states. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.14949 |
| By: | Helm, Carsten; Neugart, Michael |
| Abstract: | With ideological parties being better informed about the state of the world than voters, the true motivation of policy proposals is hard to judge for the electorate. However, if reform proposals have to be agreed upon by government members with heterogeneous policy preferences, it may become possible for the government to signal to the voters its private information about the necessity of reforms. This provides a rationale why coalition governments may find it easier to implement reforms than single-party governments, why oversized coalitions are formed, and why governments sometimes have cabinet members from opposing parties. |
| Date: | 2024–09–16 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:149718 |
| By: | Wataru ISHIDA; Yusuke IWASE; Taro KUMANO |
| Abstract: | Matching markets often encounter admissibility issues due to social concerns and regulations that must be respected. A key situation that has not been thoroughly analyzed in the literature involves the market-clearing requirement, which ensures balance in allocations across multiple matching markets, similar to supply-and-demand dynamics. To address these admissibility issues, we introduce the concept of an admissible set for such problems. We propose two solutions. The first solution is the "fairness-guaranteed stable solution." We identify a requirement on admissible sets that is necessary and sufficient for the non-emptiness of this solution. This requirement ensures that an allocation where no agent is assigned any resources is admissible. We then conduct welfare analysis and comparative statics of this solution. The second solution is called "efficiency-guaranteed stability, " which focuses on maximizing efficiency within the constraints of the admissible set. We show that only specific admissible sets allow this solution to be non-empty. |
| Keywords: | Efficiency, Fairness, Matching |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-24-004 |
| By: | L. Elisa Celis; Amit Kumar; Nisheeth K. Vishnoi; Andrew Xu |
| Abstract: | This paper considers the scenario in which there are multiple institutions, each with a limited capacity for candidates, and candidates, each with preferences over the institutions. A central entity evaluates the utility of each candidate to the institutions, and the goal is to select candidates for each institution in a way that maximizes utility while also considering the candidates' preferences. The paper focuses on the setting in which candidates are divided into multiple groups and the observed utilities of candidates in some groups are biased--systematically lower than their true utilities. The first result is that, in these biased settings, prior algorithms can lead to selections with sub-optimal true utility and significant discrepancies in the fraction of candidates from each group that get their preferred choices. Subsequently, an algorithm is presented along with proof that it produces selections that achieve near-optimal group fairness with respect to preferences while also nearly maximizing the true utility under distributional assumptions. Further, extensive empirical validation of these results in real-world and synthetic settings, in which the distributional assumptions may not hold, are presented. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.04897 |