Multidimensional Monotonicity and Economic Applications , (WP)
by Frank Yang and Kai Hao YangSAL Morishima Room
Presenter: Joseph Basford
LSE Economic Theory Reading Group
Welcome to the webpage for the economic theory reading group at LSE. Here you can find a list of future and past papers we will/have covered in the group, along with links to the papers and slides from the presentations.Upcoming
Past
Persuasion Meets Delegation , (Ecta, 2025)
by Anton Kolotilin and Andriy ZapechelnyukSAL Morishima Room
Presenter: Hongting Leng
Abstract
A principal can restrict an agent's information (the persuasion problem) or discretion (the delegation problem). We study these two problems under standard single‐crossing assumptions on the agent's marginal utility. We show that these problems are equivalent on the set of monotone stochastic mechanisms, implying, in particular, the equivalence of deterministic delegation and monotone partitional persuasion. We also show that the monotonicity restriction is superfluous for linear persuasion and linear delegation, implying their equivalence on the set of all stochastic mechanisms. Finally, using tools from the persuasion literature, we characterize optimal delegation mechanisms, thereby generalizing and extending existing results in the delegation literature.A Characterization for Optimal Bundling of Products with Nonadditive Values , (AER: Insights, 2023)
by Soheil GhiliSAL Morishima Room
Presenter: Laure Anique
Abstract
This paper studies the optimal bundling of products with nonadditive values. Under monotonic preferences and single-peaked profits, I show that a monopolist finds pure bundling optimal if and only if the optimal sales volume for the grand bundle is larger than the optimal sales volume for any smaller bundle. I then detail how my analysis relates to ratio monotonicity results on bundling and describe the implications for nonlinear pricing.Keeping the Listener Engaged: A Dynamic Model of Bayesian Persuasion , (JPE, 2023)
by Yeon-Koo Che, Kyungmin Kim, and Konrad MierendorffSAL Morishima Room
Presenter: Alex Newton
Abstract
We consider a dynamic model of Bayesian persuasion in which information takes time and is costly for the sender to generate and for the receiver to process, and neither player can commit to their future actions. Persuasion may totally collapse in a Markov perfect equilibrium of this game. However, for persuasion costs sufficiently small, a version of a folk theorem holds: outcomes that approximate Kamenica and Gentzkow’s sender-optimal persuasion as well as full revelation and everything in between are obtained in Markov perfect equilibrium as the cost vanishes.Waiting for News in the Market for Lemons , (Ecta, 2012)
by Brendan Daley and Brett GreenSAL LG.15
Presenter: Christopher Sandmann
Abstract
We study a dynamic setting in which stochastic information (news) about the value of a privately informed seller’s asset is gradually revealed to a market of buyers. We construct an equilibrium that involves periods of no trade or market failure. The no-trade period ends in one of two ways: either enough good news arrives, restoring confidence and markets reopen, or bad news arrives, making buyers more pessimistic and forcing capitulation that is, a partial sell-off of low-value assets. Conditions under which the equilibrium is unique are provided. We analyze welfare and efficiency as they depend on the quality of the news. Higher quality news can lead to more inefficient outcomes. Our model encompasses settings with or without a standard static adverse selection problem—in a dynamic setting with sufficiently informative news, reservation values arise endogenously from the option to sell in the future and the two environments have the same equilibrium structure.From Design to Disclosure , (WP)
by S. Nageeb Ali, Andreas Kleiner, and Kun ZhangSAL LG.15
Presenter: Mars Leung
Abstract
This paper studies games of voluntary disclosure in which a sender discloses evidence to a receiver who then offers an allocation and transfers. We characterize the set of equilibrium payoffs in this setting. Our main result establishes that any payoff profile that can be achieved through information design can also be supported by an equilibrium of the disclosure game. Hence, our analysis suggests an equivalence between disclosure and design in these settings. We apply our results to monopoly pricing, bargaining over policies, and insurance markets.Implementation via Information Design in Binary-Action Supermodular Games , (Ecta, 2024)
by Stephen Morris, Daisuke Oyama, and Satoru TakahashiSAL LG.15
Presenter: Ed Plumb
Abstract
What outcomes can be implemented by the choice of an information structure in binary-action supermodular games? An outcome is partially implementable if it satisfies obedience (Bergemann and Morris (2016)). We characterize when an outcome is smallest equilibrium implementable (induced by the smallest equilibrium). Smallest equilibrium implementation requires a stronger sequential obedience condition: there is a stochastic ordering of players under which players are prepared to switch to the high action even if they think only those before them will switch. We then characterize the optimal outcome induced by an information designer who prefers the high action to be played, but anticipates that the worst (hence smallest) equilibrium will be played. In a potential game, under convexity assumptions on the potential and the designer’s objective, it is optimal to choose an outcome where actions are perfectly coordinated (all players choose the same action), with the high action profile played on the largest event where that action profile maximizes the average potential.Optimal Hotelling Auctions , (WP)
by Simon Loertscher and Ellen MuirSAL LG.15
Presenter: Joe Basford
Abstract
We derive the optimal mechanism for a designer with products at each end of the Hotelling line for sale. Buyers have linear transportation costs and private information about their locations. These are independent draws from a commonly known distribution. Two independent auctions are optimal if and only if two independent auctions are efficient. Otherwise, the problem exhibits countervailing incentives and worst-off types that are endogenous to the allocation rule. Combining a saddle point property with an appropriate ironing procedure allows us to characterize the optimal selling mechanism as a function of a single parameter and to derive associated comparative statics. The optimal mechanism is always ex post inefficient; it involves entering a set of types into a lottery with positive probability. This set and the associated ex post lotteries vary non-trivially with the problem parameters. A two-stage clock auction involving coarse bidding implements the optimal selling mechanism in dominant strategies.Selected Facts , (WP)
by Nemanja Antic and Archishman ChakrabortySAL B.13
Presenter: Raffi Blasone