Economic Theory Bulletin最新文献

I consider a standard two-stage game of divisionalization in which, in the first stage, two firms choose the number of divisions and, in the second stage, divisions compete independently à la Cournot. Two important assumptions are made. The creation of a division involves a fixed cost, and all divisions sell symmetrically differentiated goods. I obtain that differentiation stimulates the creation of divisions in equilibrium. This effect is so important that prices decrease with the level of product differentiation. As far as welfare is concerned, I obtain that the equilibrium number of divisions is lower than the one that it would maximize social welfare if no intervention at the market stage is feasible.

This study establishes two equilibrium existence results for large economies with infinitely many commodities. The novel results allow for nontransitive, incomplete, discontinuous, and price-dependent preferences and do not require an interiority condition on initial endowments. The first result is an existence result when the positive cone of the commodity space has a nonempty interior. The second result is an existence result under a nonsatiation condition, including the case of the empty interior of the positive cone. The second result covers infinite-dimensional commodity spaces which could not be covered before due to the interiority condition, such as the space of square integrable functions. Specifically, we employ a saturated measure space of agents to appeal to the convexifying effect of aggregation. The notion of the continuous inclusion property introduced for finite-agent economies is applied to large economies, enabling us to dispense with the continuity assumption regarding preferences. In addition, we provide examples of Walrasian equilibrium and infinite-dimensional commodity spaces newly covered by our results.

We study the relationship between imperfect discrimination, similarity, and stochastic transitivity in generalized versions of Perturbed Utility (Fudenberg et al. in Econometrica 83(6):2371–2409, 2015) and Fechnerian models (Debreu in Econometrica 26(3):440–444, 1958). We show that these models are equivalent and that, within them, the properties of a similarity function can characterize all notions of stochastic transitivity (as Weak, Moderate, and Strong). Specifically, He and Natenzon (Am Econ Rev Insights 6(2):176–195, 2024) have recently shown that choice probabilities are moderately transitive if and only if the similarity function is a metric. We provide a counterpoint and show that unless choice probabilities are strongly transitive, the similarity function can violate the triangle inequality.

The purpose of this paper is to disprove an old and interesting conjecture in the theory of cooperative games initially presented as a reasonable conjecture in the seminal work of Schmeidler (J Math Anal Appl 40:214–225, 1972): An exact capacity continuous at the empty set has a countably additive probability in its core. In this paper, we show that this conjecture is not true in general. More precisely, we give a large class of topological spaces for which the conjecture fails, even with the stronger assumption that the capacity is convex. However, on (({mathbb {N}}, 2^{{mathbb {N}}})) the conjecture holds for convex capacities, as it is easy to show. We prove that in its original form, that is for exact capacities, it fails.

This paper establishes a link between endowments, patience types, and the parameters of the HARA Bernoulli utility function that ensure equilibrium uniqueness in an economy with two goods and two impatience types with additive separable preferences. We provide sufficient conditions that guarantee uniqueness of equilibrium for any possible value of (gamma ) in the HARA utility function (frac{gamma }{1-gamma }left( b+frac{a}{gamma }xright) ^{1-gamma }). The analysis contributes to the literature on uniqueness in pure exchange economies with two-goods and two agent types and extends the result in Loi and Matta (2022).

We consider stochastic choice problems. The “attraction effect” is a commonly observed and attested behavioral bias in experimental and empirical studies. For stochastic choice problems, we propose a model incorporating this effect in addition to status quo bias and compromise effect, which we call the “Focal Luce Model with Status Quo” (FLM-SQ). In the FLM-SQ, the decision-maker is only drawn to alternatives that are better than the status quo alternative, and focal alternatives are relatively more likely to be chosen. We characterize the FLM-SQ in terms of four properties.

This paper shows the usefulness of the Perov contraction theorem, which is a generalization of the classical Banach contraction theorem, for solving Markov dynamic programming problems. When the reward function is unbounded, combining an appropriate weighted supremum norm with the Perov contraction theorem yields a unique fixed point of the Bellman operator under weaker conditions than existing approaches. An application to the optimal savings problem shows that the average growth rate condition derived from the spectral radius of a certain nonnegative matrix is sufficient and almost necessary for obtaining a solution.

In this paper, we study a neoclassical growth model with a (productivity inhibiting) pollution effect. In particular, we obtain a necessary and sufficient condition for the existence of a topological chaos. We investigate how the condition changes as the strength of the pollution effect changes. This is a new application of a recent result characterising the existence of a topological chaos for a unimodal interval map by Deng et al. (J Econ Theory 201:Article 105446, 2022).

This article investigates a two-period lived overlapping-generations (OLG) model that incorporates financial intermediation. A risk-neutral bank offers loan and deposit contracts that insure risk-averse agents against idiosyncratic income shocks. Agents prefer financial intermediation to capital markets if it provides efficient risk sharing. The analysis demonstrates that in any two-period lived OLG model in which productive capital is increasing in investment levels, financial intermediation, when implemented for the purpose of efficient risk sharing, cannot instigate business cycles or complex dynamics. The resulting dynamics is monotonic and qualitatively indistinguishable from the dynamics of the classical OLG model by Diamond (Am Econ Rev 55(5):1126–1150, 1965). Business cycles may only occur if banks offer inefficient contracts. Efficient contracts will, in general, not induce dynamically efficient growth paths.

Abstract

Adaptive learning explains how conventions emerge in populations in which players sample a sufficiently small portion of the recent plays and best reply to those samples. We establish that in (2times 2) coordination games any degree of incomplete sampling is sufficient for a convention to be established and that the degree of sampling does not affect which conventions are most likely to emerge in the long run. Thus, the bound that players sample at most half of the plays available to them, which is prevalent in the large body of work that uses adaptive learning to examine which conventions emerge in a variety of games, is unnecessarily strict.