This paper investigates the conditions under which mergers between corporate social responsibility (CSR) firms are both privately profitable and socially desirable. We develop a Cournot model of quantity competition with product differentiation, featuring both CSR and non-CSR firms. CSR firms engage in observable CSR investment, which affects consumer willingness to pay depending on the level of CSR cognition in the market. We analyse a two-stage game in which CSR firms decide whether to propose a merger and a (myopic) Antitrust Authority (AA) determines whether to authorise it. Our results show that the profitability and approval of such mergers crucially depend on the degree of product differentiation and consumer sensitivity to CSR. When products are sufficiently complementary (or weakly substitutable) and CSR awareness is high, the merger increases both firm profits and consumer surplus, leading to regulatory approval. However, when the merger induces the exit of non-CSR competitors and products are homogeneous, a divergence emerges between private and social incentives, with the AA often blocking otherwise profitable mergers. These findings provide novel insights into merger policy design in settings where ethical competition and market power coexist.
In multi-winner elections, the goal is to select a pre-given size committee of members from a given set of candidates. We define the concept of T-power of a majority-group of voters (Total majority-power or Total tyranny-power) as the ability of the group to guarantee, under a given voting rule, that all the committee members belong to its favorite candidates, regardless of the preferences of the other voters. In this case, we say also that such a voting rule is exposed to T-power. This situation can be considered extreme and worrying in democracy. In this paper, we examine the T-power under classes of multi-winner scoring rules. We focus on some common rules, and it turns out that BLOC rule (k-k-Approval) is totally exposed to T-power, that is, any majority-group of any size has T-power under this rule. On the other hand, CCR, k-Plurality and k-Inverse-Plurality rules are almost notexposed to it, that is, no majority of any size has T-power. These last rules may provide some protection for minority groups in the sense of preventing T-power.
We consider auctions with N “weak-valued” bidders and an N+1 -th bidder who is “strong.” The auction is a “tournament” in which the weaker players bid to win the right to compete with the strong bidder. The sealed bids of all players are binding and the winning bid of the weaker players is entered in a second-price contest with the bid of the strong player. As we already noted in Anderlini and Kim (2024a), the tournament design of the auction generates “overbidding” by the weaker bidders. This is due to the fact that the only way for a weak bidder to win the auction is to win among the weak bidders. We let the values of the strong bidder converge in distribution to an atom above the upper end of the distribution of the weak bidders. If the rest of the distribution is drained away from low values sufficiently slowly, the auction’s expected revenue is arbitrarily close to the one obtained in a Myerson (1981) optimal auction. The auction design is “detail free” — no specific knowledge of the distributions is needed in addition to the identity of the stronger bidder. No information about the actual value of the limit large atom is required. This is important since mis-calibrating by a small amount an attempt to implement the optimal auction can lead to large losses in revenue.
A variation of a cheap talk game is considered in which the preferences of a special interest group conflict with those of a policymaker if she is benevolent; however, she may be corrupt. The interest group, which knows the state of the world, sends a message to the policymaker and may also exert costly lobbying effort for its preferred policy to be adopted. We show that expected welfare, which is the same in all PBE, is decreasing in the probability that the policymaker is corrupt. Surprisingly, it decreases faster when this probability is above one-half, suggesting that corrupt behavior will be tolerated only up to a certain level.
Human beings often combat the free-riding tendency by establishing punishment institutions in social dilemmas. This paper investigates the interaction between formal and informal punishment institutions and explores how their combination affects cooperation. The experiment incorporates the Formal Punishment Treatment (FT), Informal Punishment Treatment (IPT), and their combination (F IPT) to analyze their impact on contributions to public goods. The results show that the combination of formal and informal punishment (F IPT) leads to significantly higher contributions compared to both the formal punishment institution (FT) and the informal punishment institution (IPT) alone, demonstrating a complementary relationship between the two. This study highlights the complementary relationship between formal and informal punishment mechanisms in sustaining higher levels of cooperation in public goods provision.
In this paper, we investigate the implementation problem that arises when the designer is uncertain about the agents’ rationality. We discuss double implementation in Nash and ε -Nash equilibria. We fully characterize the social choice rules which can be doubly implemented in Nash and ε-Nash equilibria.
Cooperative game theory has proposed different notions of powerful players. For example, big-boss games (Muto et al. 1988) and clan games (Potters et al. 1989) are particular cases of veto games (Bahel 2016). The present paper extends these veto games by assuming that there is a given subset of powerful (or essential) players, but only a few (as opposed to all) essential players are required for a coalition to have a positive group value. The resulting games, which are called r-essential games, encompass convex games (Shapley 1971) and veto games. We show that r-essential games have a nonempty core. We give a recursive description of the core. Moreover, it is shown that the core and the bargaining set are equivalent for r-essential games. An application to networks is provided.
In this paper, we revisit the classical question of how partial passive cross-ownership (PPCO) influences competition in network industries. Contrary to conventional wisdom, our findings reveal that PPCO benefits firms only when ownership shares are of limited size, and in some cases, it may reduce profitability. These unconventional results are more likely to hold with higher network externality intensity and lower product compatibility. The work characterises the conditions on the model’s parameters and provides empirical and policy implications.
We consider strategy-proof social choice correspondences (SCCs) –mappings from preference profiles to sets of alternatives– when individuals are endowed with single-peaked preferences over alternatives. We interpret the selected sets of alternatives as the basis for lotteries that determine the final social choice, and consider that agents’ preferences over sets are consistent with Expected Utility Theory and Bayesian updating from an initial probability assessment over the full set of alternatives. We exploit the relation between SCCs and probabilistic decision schemes –mappings from preference profiles to lotteries over alternatives–, to characterize the family of SCCs that satisfy strategy-proofness and unanimity for arbitrary initial probability assessments. We extend the analysis to multi-dimensional convex spaces of alternatives under the uniform initial probability assessment.
Research on managerial delegation typically suggests that firms in a Cournot duopoly compete more aggressively in the product market post-delegation, causing their profits to decline. This paper investigates the profitability of delegation by incorporating a sales-delegation strategy into a spatial barbell model, where consumers are asymmetrically distributed at the two endpoints of a line segment. We find that the firm located closer to the more populated market may benefit from delegation. Notably, this occurs when the locational equilibrium shifts from agglomeration to separation following delegation. Although the firms compete more intensely under delegation, social welfare decreases when the locational equilibrium changes from separation to agglomeration and the transport rate is sufficiently high.
Preference reversal (PR) occurs when individuals reverse their preferences between safe and risky bets depending on the elicitation method (e.g., direct choice vs. certainty equivalence). Although prior research has rarely examined the influence of relative payoff ratios between bets on choice preferences and PR, this meta-analysis synthesizes data from 22 experiments or treatments across 13 studies, comprising 326 unique scenarios (N = 1,947). The mean effect sizes were close to zero, but substantial heterogeneity emerged across studies. Several idiosyncratic moderators-including probability and payoff structures and design features-appear to shape when choice preferences and PR are more likely to occur.
We analyze the re-placement mechanism implemented in Türkiye for reassigning doctors to residency programs after scoring errors were realized. By law, initial placements based on faulty scores are acquired rights, prohibiting re-placement to less favorable programs. This setup requires balancing fairness for doctors with improved rankings, preserving acquired rights, and adhering to program capacities. Our analysis focuses on the two-step serial dictatorship mechanism implemented by the Center for Assessment, Selection, and Placement (CASP) to address this problem. We show that the CASP mechanism violates fairness, such that higher-scoring doctors may justifiably envy the assignments of lower-scoring peers. Yet, when doctors adopt a weakly dominant strategy and truncate preferences below their initial placements, a more lenient notion of q-fairness is satisfied. Additionally, we show how manipulation incentives under the CASP mechanism lead to excessive deviations from target capacities. We propose the Acquired Rights Adjusted Serial Dictatorship (AR-SD) mechanism to prevent strategic manipulation and minimize deviations. Furthermore, we describe simple modifications to the CASP mechanism that render it equivalent to AR-SD. Finally, simulations using total deviations as a metric show that AR-SD consistently achieves fewer deviations than the CASP mechanism.
How can we assess the diversity of a group of decision makers? Identifying decision makers with their preferences, we address this question by applying the multi-attribute approach developed by Nehring and Puppe (2002) to sets of preferences. Specifically, we provide a repertoire of alternative models to measure the diversity of sets of preferences. The proposed models are purely ordinal and are characterized in terms of the different properties that a preference order need to satisfy in order to contribute to the diversity of a given set of preference orderings.
We analyze optimal budget institutions for local governments in a scenario where local public goods generate positive interregional externalities, such as environmental protection. There is a central government (referred to as the center) and two regions. Each region possesses private information regarding the extent of beneficial spillovers it experiences from the public goods provided by the other region. To achieve constrained efficiency, it is necessary to address these externalities while also tackling the center's self-selection issue in the presence of asymmetric information. One way to implement the optimal solution under asymmetric information is through a simultaneous-move equilibrium. The center can set a minimum debt level for the region that generates higher spillovers and impose a Pigouvian tax on the region benefiting more from spillovers, subsequently transferring the revenue as a subsidy to the other region. Alternatively, a sequential-move equilibrium can implement the asymmetric information optimum with the additional condition that the follower region's optimal debt choice is concave in the leader region's debt choice.
This paper uses a multi-recipient dictator game to examine whether in-group favoritism increases donations to in-group institutions but decreases donations to out-group institutions. By comparing individual donations to in-group institutions, out-group institutions, and total donations in different treatments, I find that the total donations are similar in different treatments, but the donations each institution receives are different. Individuals donate equally when they encounter two out-group institutions, but, they tend to donate a larger amount to the in-group institution and a smaller amount to the out-group institution. These results demonstrate that donations to the in-group institution due to the effect of in-group favoritism increase at the expense of donations to the out-group institution.
We study matching markets in which each man has a common value for all women and a private value specific to each woman. We introduce a new class of procedures, which is a novel way of studying the deferred acceptance mechanism. These procedures can be replicated by another procedure, in which a woman proposes to a random man in each step. Envy in a matching market is bounded by envy in this class of procedures, in which there is just one woman and two types of men. In large markets, envy goes to zero; moreover, the deferred acceptance mechanism is approximately strategy-proof.
We investigate the Pareto-efficiency of ordinal multiwinner voting rules, that is, voting rules based on ordinal preference profiles over candidates. Defining Pareto-optimality of a committee requires relating the voters' rankings over individual candidates to their preferences over committees. We consider two well-known extension principles that extend rankings over candidates to preferences over committees: the responsive extension and the lexicographic extension. As the responsive extension outputs partial orders, we consider two Pareto-optimality notions: a committee is possibly (respectively, necessary) Pareto-optimal if it is Pareto-optimal for some (respectively, every) completion of these partial orders. As the lexicographic extension principle outputs a total order, it leads to only one Pareto-optimality notion. We then define several notions of Pareto-efficiency of multiwinner rules, depending on whether some (respectively, all) committees in the output are Pareto-optimal for one of the latter notions. We review what we believe to be a complete list of ordinal multiwinner rules that have been studied in the literature, and identify which Pareto-efficiency notions they satisfy. Our finding is that, somewhat surprisingly, these rules show a huge diversity: some satisfy the strongest notion, some do not even satisfy the weakest one, with many other rules at various intermediate levels.
In recent years, governments worldwide have implemented various environmental policies to combat environmental degradation. Most of these policies use either emission taxes or tradable permits, sometimes in combination. This paper employs a Cournot oligopoly model to compare the effects of these two policy instruments, focusing on emissions from both polluting (brown) and clean (green) firms. Our findings indicate that i) taxing emissions leads to higher social welfare than tradable permits, especially in concentrated markets; ii) both policy instruments are superior to a no-policy scenario in competitive markets; iii) the welfare gap between these regimes increases when differences in abatement technology diminish or when there are fewer clean firms; iv) imposing taxes on polluting firms results in a higher average markup, particularly in more concentrated markets.
We analyze how overconfidence affects behavior in multistage elimination contests. Our findings reveal a nuanced interplay between overconfidence and effort exertion. An overconfident player exerts less effort in the final stage than a rational rival. However, this pattern can be inverted in the semifinals stage, where an overconfident player can exert more effort than a rational rival. We also uncover that an overconfident player can have the highest probability of winning an elimination contest. Our results offer a novel perspective on CEO overconfidence and highlight that high executive compensation renders the pursuit of CEO positions exceptionally appealing to overconfident managers.
