1,721,020 research outputs found
Small Noise in Signaling Selects Pooling on Minimum Signal
Full text linkIn this paper we study how the presence of a small amount of noise in signaling games
impacts on the likelihood of separation and, hence, the likelihood of information transmission. We consider a variant of a standard signaling model where a source of exogenous noise affects the signals that agents observe. Noise, even if tiny, poses tight
constraints on beliefs by making all signals possible along the equilibrium path. We
show that separation cannot be obtained in equilibrium if the noise is small enough
– but not nil. In particular, for any separating profile, if noise is sufficiently small
then the sender has a profitable deviation consisting of a signal reduction. Instead, the
pooling equilibrium where all sender’s types pool on the minimum signal always exists,
independently of the level of noise. These results provide a new source of interest in
pooling equilibria
Social Coordination with Locally Observable Types
Full text linkIn this paper we study the typical dilemma of social coordination between a riskdominant convention and a payoff-dominant convention. In particular, we consider a model where a population of agents play a coordination game over time, choosing both the action and the network of agents with whom to interact. The main novelty with respect to the existing literature is that: (i) agents come in two distinct types, (ii) the interaction with a different type is costly, and (iii) an agent’s type is unobservable prior to interaction. We show that when the cost of interacting with a different type is small with respect to the payoff of coordination, then the payoff-dominant convention is the only stochastically stable convention; instead, when the cost of interacting with a different type is large, the only stochastically stable conventions are those where all agents of one type play the payoff-dominant action and all agents of the other type play the risk-dominant action
Preferences and Normal Goods: An Easy-to-Check Necessary and Sufficient Condition
Full text linkWe provide a necessary and sufficient condition for goods to be normal
when utility functions are differentiable and strongly quasi-concave.
Our condition is equivalent to the condition proposed by Alarie et al.
(1990), but it is easier to check: it only requires to compute the minors
associated with the border column (or row) of the bordered Hessian
matrix of the utility function
Signalling, Social Status and Labor Income Taxes
Full text linkWe investigate the effects of introducing a linear labor income tax under the assumptions that individuals
have concerns for social status, that they can signal their relative standing by spending on a conspicuous
good, and that the tax revenue is redistributed by means of lump sum transfers. We show that the way social
status is defined – i.e. how relative standing is computed and evaluated – crucially affects the desirability of
the tax policy. More precisely, if status is ordinal then a labor income tax can decrease waste in conspicuous
consumption only if the distribution of pre-tax incomes (or earning potentials) is not too unequal. The
same applies for the tax to induce a Pareto improvement, but with the bound on pre-tax inequality being
smaller. Instead, if status is cardinal then neither requirement applies: for any degree of pre-tax inequality
we can find a cardinal notion of status such that the introduction of a labor income tax induces both a
waste reduction and a strict Pareto improvement. However, under cardinal status a labor income tax is not
necessarily more desirable than under ordinal status. Indeed, if status is cardinal in the sense that the status
differential between being considered rich and being considered poor is strongly dependent on the income
of the rich, then a labor income tax is more likely to increase social waste than under ordinal status
Signaling with Costly Acquisition of Signals
Full text linkIn this paper we identify a novel reason why signaling may fail to separate types, which
is specific to cases where the receiver has to incur a cost to acquire the signal sent by the
sender. If the receiver chooses not to incur the acquisition cost, then all sender’s types
find it optimal to pool on the least costly signal; also, if all sender’s types pool on the
least costly signal, then the receiver finds it optimal not to incur the acquisition cost.
This kind of coordination failure makes the resulting pooling equilibrium extremely
robust, even when costs of signal acquisition are very small. Also, pooling is shown to
be robust to all refinements based on out-of-equilibrium beliefs, even when the sender
can engage in further signaling that can act as an “invitation” to acquire the main
signal, and when acquisition costs are smooth and depend on the receiver’s effort to
acquire the signal. These results provide a new source of interest in pooling equilibri
Dynamic Adverse Selection and the Supply Size
Full text linkIn this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller’s private information while the realized distribution of qualities is public information. We show that in equilibrium all goods can be traded if the size of the supply is publicly available to market participants. Moreover, we show that if exchanges can take place frequently enough, then agents roughly enjoy the entire potential surplus from exchanges. We illustrate these findings with a dynamic model of trade where buyers and sellers repeatedly interact over time. We also identify circumstances under which only full trade equilibria exist. Further, we give conditions for full trade to obtain when the realized distribution of qualities is not public information and when new goods enter the market at later stages
Strict Nash equilibria in large gameswith strict single crossing in types and actions
Full text linkIn this paper we study games where the space of player types is atomless, action spaces are second countable, and payoffs functions satisfy the property of strict single crossing in types and actions. Our main
finding is that in this class of games every Nash equilibrium is essentially strict. We briefly develop and
discuss the relevant consequences of our resul
Redistribution and the Notion of Social Status
Full text linkIn this paper we study the impact of redistributive policies when agents can signal their relative standing by spending on a conspicuous good. In particular, we analyze how the shape of the status function - i.e. how relative standing is computed and evaluated - may affect the equilibrium outcome of the model. Our main finding is that, if status depends in a cardinal way on individuals' relative standing, then a redistribution from the rich to the poor can be Pareto improving. We identify a necessary and suffcient condition for the latter case
Social value orientation and conditional cooperation in the online one-shot public goods game
Full text linkWe report two studies on the role of altruism and reciprocity in the online one-shot Public Goods Game (PGG). In study 1 we run an experiment to see whether the disposition to donate (altruistic/prosocial disposition according to the Social Value Orientation scale (SVO), Murphy et al., 2011) and the disposition to reciprocate (disposition to be a conditional cooperator measured with the strategy method (dCC), Fischbacher et al., 2012) explain contribution in the PGG. In study 2 we run a similar experiment where we add the manipulation of cognition by means of two treatments: time pressure (to induce less deliberative decisions) and motivated delay (to induce more deliberative decisions). Overall, we find that: (i) a higher SVO score goes with higher contributions; (ii) higher beliefs go with higher contributions; (iii) dCC does not appreciably account for contributions; (iv) conditional contributions elicited with the strategy method predict actual contribution for the stated belief; (v) while (i)-(iv) are unaffected by treatments, contributions under motivated delay are about 10% higher than under time pressure. Our experimental evidence suggests that altruism, beliefs and predicted contributions account for contributions regardless of the extent of deliberation, which however seems to impact positively and independently contributions. (C) 2022 Elsevier B.V. All rights reserved
Memory retrieval in the demand game with a few possible splits: Unfair conventions emerge in fair settings
Full text linkOur study examines the long-run evolutionary outcome emerging in scenarios where two populations engage in a demand game with three potential splits. These populations differ in the sample sizes used when best responding to retrieved information from the past. Our findings reveal the existence of a threshold in the setting's fairness (i.e., the fairness of unfair splits) such that, below the threshold (i.e., in an unfair setting), the emerging convention is the fair one, while above the threshold (i.e., in a fair setting), the emerging convention is unfair, favoring the agents with the longer sample size. The threshold gets lower as the difference in the sample sizes increases
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