Economics

An equilibrium is communication-proof if it is unaffected by new opportunities to communicate and renegotiate. We characterize the set of equilibria of coordination games with pre-play communication in which players have private preferences over the feasible coordinated outcomes. Communication-proof equilibria provide a narrow selection from the large set of qualitatively diverse Bayesian Nash equilibria in such games. Under a communication-proof equilibrium, players never miscoordinate, play their jointly preferred outcome whenever there is one, and communicate only the ordinal part of their preferences. Moreover, such equilibria are robust to changes in players' beliefs, interim Pareto efficient, and evolutionarily stable.

We propose a multivariate extension of a well-known characterization by S. Kusuoka of regular and coherent risk measures as maximal correlation functionals. This involves an extension of the notion of comonotonicity to random vectors through generalized quantile functions. Moreover, we propose to replace the current law invariance, subadditivity and comonotonicity axioms by an equivalent property we call strong coherence and that we argue has more natural economic interpretation. Finally, we reformulate the computation of regular and coherent risk measures as an optimal transportation problem, for which we provide an algorithm and implementation.

We study the relationship between invariant transformations on extensive game structures and backward dominance procedure (BD), a generalization of the classical backward induction introduced in Perea (2014). We show that behavioral equivalence with unambiguous orderings of information sets, a critical property that guarantees BD's applicability, can be characterized by the classical Coalescing and a modified Interchange/Simultanizing in Battigalli et al. (2020). We also give conditions on transformations that improve BD's efficiency. In addition, we discuss the relationship between transformations and Bonanno (2014)'s generalized backward induction.

McCall (1970) examines the search behaviour of an infinitely-lived and risk-neutral job seeker maximizing her lifetime earnings by accepting or rejecting real-valued scalar wage offers. In practice, job offers have multiple attributes, and job seekers solve a multicriteria search problem. This paper presents a multicriteria search model and new comparative statics results.

Recently dozens of school districts and college admissions systems around the world have reformed their admission rules. As a main motivation for these reforms the policymakers cited strategic flaws of the rules: students had strong incentives to game the system, which caused dramatic consequences for non-strategic students. However, almost none of the new rules were strategy-proof. We explain this puzzle. We show that after the reforms the rules became more immune to strategic admissions: each student received a smaller set of schools that he can get in using a strategy, weakening incentives to manipulate. Simultaneously, the admission to each school became strategy-proof to a larger set of students, making the schools more available for non-strategic students. We also show that the existing explanation of the puzzle due to Pathak and Sönmez (2013) is incomplete.

Agents compete to acquire an asset whose value depends on how well they can predict an unknown variable. Agents are Bayesian, observe identical data, but have different models: they use different subsets of explanatory variables to make their predictions. The winning model crucially depends on the sample size. With small samples, we present a number of results suggesting it is an agent using a low-dimensional model, in the sense of using a smaller number of variables relative to the true data generating process. With large samples, we show that it is generally an agent with a high-dimensional model, possibly including irrelevant variables, but never excluding relevant ones.

We study a Bayesian Persuasion game with multiple senders employing conditionally independent experiments. Senders have zero-sum preferences over what information is revealed. We characterize when a set of states cannot be pooled in any equilibrium, and in particular, when the state is (fully) revealed in every equilibrium. The state must be fully revealed in every equilibrium if and only if sender utility functions are sufficiently nonlinear. In the binary-state case, the state is fully revealed in every equilibrium if and only if some sender has nontrivial preferences. Our takeaway is that `most' zero-sum sender preferences result in full revelation.

Firms strategically disclose product information in order to attract consumers, but recipients often find it costly to process all of it, especially when products have complex features. We study a model of competitive information disclosure by two senders, in which the receiver may garble each sender's experiment, subject to a cost increasing in the informativeness of the garbling. For a large class of parameters, it is an equilibrium for the senders to provide the receiver's first best level of information - i.e. as much as she would learn if she herself controlled information provision. Information on one sender substitutes for information on the other, which nullifies the profitability of a unilateral provision of less information. Thus, we provide a novel channel through which competition with attention costs encourages information disclosure.

In this paper, we show that the presence of the Archimedean and the mixture-continuity properties of a binary relation, both empirically non-falsifiable in principle, foreclose the possibility of consistency (transitivity) without decisiveness (completeness), or decisiveness without consistency, or in the presence of a weak consistency condition, neither. The basic result can be sharpened when specialized from the context of a generalized mixture set to that of a mixture set in the sense of Herstein-Milnor (1953). We relate the results to the antecedent literature, and view them as part of an investigation into the interplay of the structure of the choice space and the behavioral assumptions on the binary relation defined on it; the ES research program due to Eilenberg (1941) and Sonnenschein (1965), and one to which Schmeidler (1971) is an especially influential contribution.

Perfect Bayesian equilibrium is the classic solution concept for games with incomplete information, where players optimize under given beliefs over states. We introduce a new concept called perfect compromise equilibrium, where players find compromise decisions that are good in all states. This solution concept is tractable even if states are high dimensional as it does not rely on priors, and it always exists. We demonstrate the power of our solution concept in prominent economic examples, including Cournot and Bertrand markets, Spence's signaling, and bilateral trade with common value.