nep-mic New Economics Papers
on Microeconomics
Issue of 2025–02–24
sixteen papers chosen by
Jing-Yuan Chiou, National Taipei University


  1. Too Domestic to Fail: Liquidity Provision and National Champions By Emmanuel Farhi; Jean Tirole
  2. Signaling Design By Matteo Camboni; Mingzi Niu; Mallesh M. Pai; Rakesh Vohra
  3. Randomization and the Robustness of Linear Contracts By Ashwin Kambhampati; Bo Peng; Zhihao Gavin Tang; Juuso Toikka; Rakesh Vohra
  4. (Pro-)Social Learning and Strategic Disclosure By Roland Bénabou; Nikhil Vellodi
  5. Neo-Optimum: A Unifying Solution to the Informed-Principal Problem By Tymofiy Mylovanov; Thomas Tröger
  6. Hoping for the best while preparing for the worst in the face of uncertainty: a new type of incomplete preferences By Bardier, Pierre; Dong, Xuan Bach; Nguyen, Van-Quy
  7. Oligopoly, Complementarities, and Transformed Potentials By Volker Nocke; Nicolas Schutz
  8. Sharing Model Uncertainty By Chiaki Hara; Sujoy Mukerji; Frank Riedel; Jean-Marc Tallon
  9. Data Sharing or Analytics Sharing? By Carballa-Smichowski, Bruno; Lefouili, Yassine; Mantovani, Andrea; Reggiani, Carlo
  10. Mergers and Investments: Where Do We Stand? By Lefouili, Yassine; Madio, Leonardo
  11. Repeated Majority Voting By Antonin Macé; Rafael Treibich
  12. Alpha-maxmin as an aggregation of two selves By Alain Chateauneuf; José Heleno Faro; Jean-Marc Tallon; Vassili Vergopoulos
  13. Cooperative games with types, outside options, and the egalitarian value By Florian Navarro
  14. A Theory of Self-Prospection By Polina Borisova; Nikhil Vellodi
  15. On the limitations of data‐based price discrimination By Xie, Haitian; Zhu, Ying; Shishkin, Denis
  16. How do coalitions break down? An alternative view* By Raouf Boucekkine; Carmen Camacho; Weihua Ruan; Benteng Zou

  1. By: Emmanuel Farhi (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IAST - Institute for Advanced Study in Toulouse); Jean Tirole (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IAST - Institute for Advanced Study in Toulouse)
    Abstract: Authorities' support policies shape the location and continuation of industrial and banking activity on their soil. Firms' locus of activity depends on their prospect of receiving financial assistance in distress and therefore on factors such as countries' relative resilience. We predict that global firms are global in life and national in death; and that they become less global when competition is more intense, times are turbulent, and international risk sharing (say, through swap lines) weak. We analyse the competitive benefits of industrial and banking policies as well as their limitations, such as currency appreciation.
    Keywords: Exhorbitant duty, Hegemon, Economic geography, National champions, Cross-border banking, Liquidity support, Too domestic to fail, Home bias
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:hal:journl:hal-04906462
  2. By: Matteo Camboni; Mingzi Niu; Mallesh M. Pai; Rakesh Vohra
    Abstract: We revisit the classic job-market signaling model of \cite{spence1973job}, introducing profit-seeking schools as intermediaries that design the mapping from candidates' efforts to job-market signals. Each school commits to an attendance fee and a monitoring policy. We show that, in equilibrium, a monopolist school captures the entire social surplus by committing to low information signals and charging fees that extract students' surplus from being hired. In contrast, competition shifts surplus to students, with schools vying to attract high-ability students, enabling them to distinguish themselves from their lower-ability peers. However, this increased signal informativeness leads to more wasteful effort in equilibrium, contrasting with the usual argument that competition enhances social efficiency. This result may be reversed if schools face binding fee caps or students are credit-constrained.
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:arx:papers:2502.02328
  3. By: Ashwin Kambhampati (United States Naval Academy); Bo Peng (Shanghai University of Finance and Economics); Zhihao Gavin Tang (Shanghai University of Finance and Economics); Juuso Toikka (University of Pennsylvania); Rakesh Vohra (University of Pennsylvania)
    Abstract: We consider a principal-agent model with moral hazard, bilateral risk-neutrality, and limited liability. The principal knows only some of the actions the agent can take and evaluates contracts by their guaranteed payoff over possible unknown actions. We show that linear contracts are a robustly optimal way to incentivize the agent: any randomization over contracts can be improved by making each contract in its support linear. We then identify an optimal random linear contract characterized by a single parameter that bounds its continuous support. Several corollaries arise: the gain from randomization can be arbitrarily large; optimal randomization does not require commitment; and screening cannot improve the principal’s guarantee.
    Date: 2025–02–06
    URL: https://d.repec.org/n?u=RePEc:pen:papers:25-004
  4. By: Roland Bénabou (Princeton University, NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research, CEPR - Center for Economic Policy Research, IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics, BREAD); Nikhil Vellodi (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We study a sequential experimentation model with endogenous feedback. Agents choose between a safe and risky action, the latter generating stochastic rewards. When making this choice, each agent is selfishly motivated (myopic). However, agents can disclose their experiences to a public record, and when doing so are pro-socially motivated (forward-looking). Disclosure is both polarized (only extreme signals are disclosed) and positively biased (no feedback is bad news). The extent of disclosure is non-monotone in prior uncertainty. Subsidizing disclosure costs can paradoxically lead to less disclosure, but more experimentation.
    Keywords: Social learning, Experimentation, Dynamic disclosure, Consumer reviews, Time-inconsistent preferences, Motivated beliefs
    Date: 2024–10
    URL: https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04721035
  5. By: Tymofiy Mylovanov; Thomas Tröger
    Abstract: A mechanism proposal by a privately informed principal is a signal. The agents' belief updating endogenizes their incentives in the mechanism, implying that such design problems cannot be solved via optimizing subject to incentive constraints. We propose a solution, neo-optimum, that can be interpreted as principal-preferred perfect-Bayesian equilibrium. Its neologism-based definition allows an intuitive computation, as we demonstrate in several applications. Neo-optimum connects the two main established approaches to the problem, by Myerson and by Maskin-Tirole. Any Myerson neutral optimum is a neo-optimum, implying that a neo-optimum generally exists. In private-values environments, neo-optimum is equivalent to strong unconstrained Pareto optimum (Maskin-Tirole) and strong neologism-proofness (Mylovanov-Tröger). In information-design settings, any interim-optimum (Koessler-Skreta) is a neo-optimum. Our methods can be used to reconstruct the perfect-Bayesian equilibria in the informed-principal literature.
    Keywords: mechanism-design, informed-principal, neologism
    JEL: D47 D82
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_643
  6. By: Bardier, Pierre (Center for Mathematical Economics, Bielefeld University); Dong, Xuan Bach (Center for Mathematical Economics, Bielefeld University); Nguyen, Van-Quy (Center for Mathematical Economics, Bielefeld University)
    Abstract: We propose and axiomatize a new model of incomplete preferences under uncertainty, which we call *hope-and-prepare preferences*. An act is considered more desirable than another when, and only when, both an optimistic evaluation, computed as the welfare level attained in a best-case scenario, and a pessimistic one, computed as the welfare level attained in a worst-case scenario, rank the former above the latter. Our comparison criterion involves multiple priors, as best and worst cases are determined among sets of probability distributions. We make the case that, compared to existing incomplete criteria under ambiguity, hope-and-prepare preferences address the trade-off between conviction and decisiveness in a new way, which is more favorable to decisiveness.
    Keywords: Decision theory, Incomplete preference, Multiple-selves, Non-obvious manipulability
    Date: 2025–02–18
    URL: https://d.repec.org/n?u=RePEc:bie:wpaper:701
  7. By: Volker Nocke; Nicolas Schutz
    Abstract: We adopt a potential games approach to study multiproduct-firm pricing games where products can be local complements or substitutes. We show that any such game based on an IIA demand system admits an ordinal potential, giving rise to a simple proof of equilibrium existence. We introduce the concept of transformed potential, and characterize the class of demand systems that give rise to multiproduct-firm pricing games admitting such a potential, as well as the associated transformation functions. The resulting demand systems allow for substitutability or complementarity patterns that go beyond IIA, and can resemble those induced by "one-stop shopping" behavior.
    Keywords: Multiproduct firms, potential game, oligopoly pricing, IIA demand, complementary goods
    JEL: L13 D43
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_644
  8. By: Chiaki Hara (Kyoto University); Sujoy Mukerji (QMUL - Queen Mary University of London); Frank Riedel (Universität Bielefeld = Bielefeld University, UJ - University of Johannesburg [South Africa]); Jean-Marc Tallon (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We study efficient allocations when consumers have heterogeneous smooth ambiguity preferences, face model uncertainty, and consider a common set of identifiable models. Aggregate endowment is ambigu- ous. We characterize economies where the representative consumer is of the smooth ambiguity type and find efficient sharing rules. With heterogeneous ambiguity aversion, sharing rules exhibit systematic de- partures from those in vNM-economies and the representative consumer's nature departs from the typical single-consumer assumption, making for more compelling asset-pricing predictions. We focus on the case where models are point-identified but show that the insights extend when models are only partially-identified.
    Keywords: Ambiguity sharing, Model uncertainty, Ambiguity aversion, Identifiability, Linear risk tolerance, Pricing kernel
    Date: 2024–06
    URL: https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04598577
  9. By: Carballa-Smichowski, Bruno; Lefouili, Yassine; Mantovani, Andrea; Reggiani, Carlo
    Abstract: Data combination and analytics can generate valuable insights for firms and society as a whole. Firms can seize these opportunities by joining platforms that either allow them to access the data contributed by other firms or provide the result of the analytics performed on such data, depending on whether the platform adopts ''data sharing'' or "analytics sharing" technologies. The former technology enables firms to exploit their data endowment together with the data contributed by others, whereas the latter offers advantages in terms of privacy and security by reducing data transmission. We present a model that allows us to study the economic and managerial incentives generated by these technologies for both firms and a platform. First, we find that the platform chooses analytics sharing only when the security advantage of this technology is sufficiently large. Second, we show that analytics sharing results in a higher total data contribution than data sharing under general and reasonable conditions. Third, we determine the optimal data-combination technology from the perspective of consumers and discuss potential misalignments between the platform's and consumers' preferred technology. Our findings carry relevant policy and managerial implications, offering a pathway to enhance both data provision and security.
    Keywords: Data sharing; analytics sharing; data platforms
    JEL: D43 K21 L11 L13 L41 L86 M21 M31
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:tse:wpaper:130300
  10. By: Lefouili, Yassine; Madio, Leonardo
    Abstract: In this paper, we review recent studies on the impact of mergers on investments. First, we examine how mergers among competing incumbents influence firms' incentives to develop new products and undertake cost-reducing or quality-enhancing investments. Second, we analyze how an incumbent's acquisition of an innovative entrant affects the investment incentives of both parties. Third, we discuss the effects of vertical mergers on the investment decisions of both upstream and downstream firms. Finally, we outline a few directions for future research.
    Keywords: Competition; Investments; Innovation; Mergers, Entry
    JEL: D43 L13 L40
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:tse:wpaper:130332
  11. By: Antonin Macé (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Rafael Treibich (SDU - University of Southern Denmark)
    Abstract: We propose a general model of repeated voting in committees and study equilibrium behavior under alternative majority rules. We find that repetition may significantly increase the efficiency of majority voting through a mechanism of intertemporal logrolling, agents sometimes voting against their immediate preference to benefit the group's long-term interest. In turn, this affects the comparison of majority rules, which may differ significantly relative to the static setting. The model provides a rationale for the use of super-majority rules, while accounting for the prevalence of consensus in committee voting.
    Keywords: Logrolling, Repeated games, Majority voting, Preference intensities, Consensus
    Date: 2024–06
    URL: https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04610689
  12. By: Alain Chateauneuf (UP1 - Université Paris 1 Panthéon-Sorbonne); José Heleno Faro (Instituto de Ensino e Pesquisa (Brazil) - Insper Institute of Education and Research); Jean-Marc Tallon (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Vassili Vergopoulos (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - Université Paris-Panthéon-Assas)
    Abstract: This paper offers a novel perspective on the α-maxmin model, taking its components as originating from distinct selves within the decision maker. Drawing from the notion of multiple selves prevalent in inter-temporal decision-making contexts, we present an aggregation approach where each self possesses its own preference relation. Contrary to existing interpretations, these selves are not merely a means to interpret the decision maker's overall utility function but are considered as primitives. Through consistency requirements, we derive an α-maxmin representation as an outcome of a convex combination of the preferences of two distinct selves. We first explore a setting involving objective information and then move on to a fully subjective derivation.
    Keywords: Maxmin, Dual self, Aggregation
    Date: 2024–05
    URL: https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04589094
  13. By: Florian Navarro (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement)
    Abstract: This article introduces a new axiom of sub-game order preservation for TUgames as well as a model of cooperative games with types. The axiom, alongside efficiency, characterizes the egalitarian value. The model addresses situations where players of different types are needed. Each player has a specific type and coalitions are feasible only if it contains at most one player of each type. We use the new characterization of the egalitarian value for TU-games to obtain the following result in our class of problems: the egalitarian value is the only sharing rule that ensures that each player of the most productive group is better o joining this most productive group. We characterize the egalitarian value without fairness requirement and show that, for this new class of problems, egalitarianism can provide some form of incentives towards optimal cooperation.
    Keywords: Cooperative game theory, shapley value, equal division, egalitarian value, role structure, incentives
    Date: 2025–01–22
    URL: https://d.repec.org/n?u=RePEc:hal:journl:hal-04324424
  14. By: Polina Borisova (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Nikhil Vellodi (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: A present-biased decision maker (DM) faces a two-armed bandit problem whose risky arm generates random payoffs at exponentially distributed times. The DM learns about payoff arrivals through informative feedback. At the unique stationary Markov perfect equilibrium of the multi-self game, positive feedback supports greater equilibrium welfare than both negative and transparent feedback. Regardless of the form of feedback, the DM's behavior exhibits indecision, deriving from their desire to procrastinate. We relate our findings to the theory of self-prospection -the process of imagining future goals and outcomes when seeking motivation in the present.
    Keywords: Present-bias, Strategic experimentation, Motivational feedback, Self-confidence
    Date: 2024–10
    URL: https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04721098
  15. By: Xie, Haitian; Zhu, Ying; Shishkin, Denis
    Abstract: The classic third degree price discrimination (3PD) model requires the knowledge of the distribution of buyer valuations and the covariate to set the price conditioned on the covariate. In terms of generating revenue, the classic result shows that 3PD is at least as good as uniform pricing. What if the seller has to set a price based only on a sample of observations from the underlying distribution? Is it still obvious that the seller should engage in 3PD? This paper sheds light on these fundamental questions. In particular, the comparison of the revenue performance between 3PD and uniform pricing is ambiguous overall when prices are set based on samples. This finding is in the nature of statistical learning under uncertainty: a curse of dimensionality, but also other small sample complications.
    Keywords: Economics, Applied Economics, Economic Theory, Applied economics, Economic theory
    Date: 2025–01–01
    URL: https://d.repec.org/n?u=RePEc:cdl:ucsdec:qt4xt2c4ts
  16. By: Raouf Boucekkine (ESC [Rennes] - ESC Rennes School of Business, CUT - Centre for Unframed Thinking - ESC [Rennes] - ESC Rennes School of Business); Carmen Camacho (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Weihua Ruan (Purdue University Northwest, CUT - Centre for Unframed Thinking - ESC [Rennes] - ESC Rennes School of Business); Benteng Zou (uni.lu - Université du Luxembourg = University of Luxembourg = Universität Luxemburg)
    Abstract: We propose an alternative dynamic theory of coalition breakdown. Motivated by recent coalition splitting events through unilateral countries' withdrawals, we assume that: i) the payoff sharing rule within coalitions is not necessarily set according to any optimality and/or stability criterion, and, ii) players initially behave as if the coalition will last forever. If the sharing rule is non-negotiable or if renegotiation is very costly, compliance to these rules may become unbearable for a given member
    Keywords: Coalition splitting, Environmental agreements, Constitutional vs technological heterogeneity, Differential games, Multistage optimal control
    Date: 2023–11–15
    URL: https://d.repec.org/n?u=RePEc:hal:psewpa:hal-04287200

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