{"title":"Costly subjective learning","authors":"Youichiro Higashi , Kazuya Hyogo , Norio Takeoka","doi":"10.1016/j.jet.2025.105997","DOIUrl":"10.1016/j.jet.2025.105997","url":null,"abstract":"<div><div>We examine the behavioral foundation of rational inattention within a menu-choice framework. Unlike previous studies, our approach enables the unique identification of nonadditive information costs. The nonadditivity of information costs makes the effective cost inherently dependent on benefits of information. In contrast to additive cost models, this feature may lead to a violation of the preference for early resolution of menu uncertainty. Early resolution is typically preferable as it allows the agent to fine-tune information for relevant menus. However, if the effective cost function is convex in benefits of information, late resolution may reduce the effective information costs. The violation occurs when this cost-reduction effect outweighs the benefits of early resolution.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"226 ","pages":"Article 105997"},"PeriodicalIF":1.4,"publicationDate":"2025-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143792118","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Revenue effects of ambiguity in multi-unit auctions","authors":"Daniel Bougt , Gagan Ghosh , Heng Liu","doi":"10.1016/j.jet.2025.105996","DOIUrl":"10.1016/j.jet.2025.105996","url":null,"abstract":"<div><div>We study the effect of ambiguity on expected revenue in multi-unit auctions where bidders have independent private values, maxmin preferences, and single-unit demand. If the set of priors is suitably rich, we show that the discriminatory or ‘pay-as-bid’ auction has the highest expected revenue, followed by the sequential first-price auction and then the sequential second-price auction. The uniform price auction with the ‘highest losing bid’ pricing rule does the worst. Our results also extend to some open auction formats.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105996"},"PeriodicalIF":1.4,"publicationDate":"2025-03-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143687244","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The screening role of market tightness in a competitive search equilibrium with adverse selection","authors":"Hung-Chi Chang , Yiting Li","doi":"10.1016/j.jet.2025.105995","DOIUrl":"10.1016/j.jet.2025.105995","url":null,"abstract":"<div><div>This paper revisits Guerrieri, Shimer, and Wright (2010) (GSW) to study screening in a competitive search market with adverse selection. GSW show that there exists a unique separating equilibrium in which each type applies to a different contract, and their key sorting assumption involves a single-crossing property on agents' preferences. We show that GSW's main results hold under a weaker assumption on preference heterogeneity, called generalized sorting, and weakening the sorting assumption relies on explicitly considering the screening role of market tightness. The assumption can be weakened further if we assume that agents' matching probability strictly increases in market tightness. In addition to providing theoretical insights, we study examples to demonstrate how generalized sorting facilitates the study of market imperfections under search and informational frictions. In our examples, indivisibility, price limits, and the minimum wage violate GSW's sorting assumption but remain tractable under generalized sorting. Thus, an additional contribution of this paper is the expansion in applicability of GSW's approach.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105995"},"PeriodicalIF":1.4,"publicationDate":"2025-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143644113","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Offshoring and the distribution of skills","authors":"Hiroshi Goto , Yan Ma , Nobuyuki Takeuchi","doi":"10.1016/j.jet.2025.105994","DOIUrl":"10.1016/j.jet.2025.105994","url":null,"abstract":"<div><div>We develop a two-sector model to explore how skill distribution affects trade in final goods and offshoring. We show that when countries differ in skill abundance, wage disparities create opportunities for offshoring. In contrast, when countries vary in skill diversity but share the same median skill, symmetric skill distributions render offshoring infeasible. We also find that offshoring can result in the relative price under offshoring being lower than each country's autarky relative price if the gap between the median skill levels of the two countries is sufficiently large. Finally, we demonstrate that an individual's industry of employment primarily determines how they are affected by trade in final goods, whereas their occupation (tasks) shapes how they are impacted by offshoring.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105994"},"PeriodicalIF":1.4,"publicationDate":"2025-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143706398","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Information orders in screening problems","authors":"Andreas Asseyer","doi":"10.1016/j.jet.2025.105993","DOIUrl":"10.1016/j.jet.2025.105993","url":null,"abstract":"<div><div>This paper studies information orders in screening models. I amend a general screening problem with a signal about the agent's type. The principal prefers one signal to another for any preferences of principal and agent if and only if the signals are ranked by Blackwell's order. Under a standard regularity condition, a novel information order – the hazard rate spread (HRS) order – characterizes a robust ranking of signals by the principal. I relate the HRS order to well-known information orders and provide sufficient conditions for other welfare measures than the principal's payoff to increase or decrease in the HRS order.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105993"},"PeriodicalIF":1.4,"publicationDate":"2025-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143579206","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Fragility under joint financing: The (moral) hazards of diversification","authors":"Piero Gottardi , Vincent Maurin , Cyril Monnet","doi":"10.1016/j.jet.2025.105990","DOIUrl":"10.1016/j.jet.2025.105990","url":null,"abstract":"<div><div>We study the effect of investment growth on firms' incentives under moral hazard. Adding value-increasing, but risky projects to a firm's portfolio can weaken incentives for safer ones, even when returns are independent. While the firm diversifies its sources of income, this risk contamination channel can increase its fragility. Such fragility is exacerbated in the presence of news about the value of investments. Firms can mitigate these effects by selecting safer new investments at the expense of value creation. Our model thus predicts that large firms or merged firms may be riskier or less productive than smaller firms.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105990"},"PeriodicalIF":1.4,"publicationDate":"2025-03-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143563834","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Information and policing","authors":"Shota Ichihashi","doi":"10.1016/j.jet.2025.105992","DOIUrl":"10.1016/j.jet.2025.105992","url":null,"abstract":"<div><div>Agents decide whether to commit a crime based on their private types, which capture their heterogeneous returns from a crime. The police have information about these types. The police search agents, without commitment, to detect crime subject to a search capacity constraint. The deterrent effect of policing is lost when the police have full information about agents' types. The crime-minimizing information structure prevents the police from identifying agents who face high returns from a crime, while still allowing them to adjust their search intensities based on the types of agents who face low returns from a crime. The result extends to the case in which the police endogenously choose search capacity at a cost.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105992"},"PeriodicalIF":1.4,"publicationDate":"2025-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143563833","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Andrei Savochkin , Alexander Shklyaev , Alexey Galatenko
{"title":"Dynamic consistency and rectangularity for the smooth ambiguity model","authors":"Andrei Savochkin , Alexander Shklyaev , Alexey Galatenko","doi":"10.1016/j.jet.2025.105991","DOIUrl":"10.1016/j.jet.2025.105991","url":null,"abstract":"<div><div>We study the Smooth Ambiguity decision criterion in the dynamic setting to understand when it can satisfy the Dynamic Consistency and Consequentialism properties. These properties allow one to rewrite the decision criterion recursively and solve for optimal decisions by Dynamic Programming. Our result characterizes the possibility of having these properties through a condition that resembles <span><span>Epstein and Schneider</span></span>'s (<span><span>2003</span></span>) rectangularity condition for the maxmin model. At the same time, we show that Dynamic Consistency and Consequentialism can be achieved for Smooth Ambiguity preferences in a narrower set of scenarios than one would hope for.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105991"},"PeriodicalIF":1.4,"publicationDate":"2025-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143600777","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Feedback design in games with ambiguity-averse players","authors":"Frederic Koessler , Marieke Pahlke","doi":"10.1016/j.jet.2025.105987","DOIUrl":"10.1016/j.jet.2025.105987","url":null,"abstract":"<div><div>We use a notion of maxmin self-confirming equilibrium (MSCE) to study the design of players' information feedback about others' behavior in simultaneous-move games with ambiguity-averse players. Coarse feedback shapes strategic uncertainty and can, therefore, modify players' equilibrium strategies in an advantageous way. We characterize MSCE and study the equilibrium implications of coarse feedback in various classes of games. We show how feedback should be optimally designed to improve contributions in generalized volunteer dilemmas and public good games with strategic substitutes, strategic complements, or more general production functions. We also study games with negative externalities and strategic substitutes, such as Cournot oligopolies. In general, perfect and no feedback are suboptimal. Some results are extended to <em>α</em>-maxmin preferences.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105987"},"PeriodicalIF":1.4,"publicationDate":"2025-02-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143453038","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Optimal monetary policy in production networks with distortions","authors":"Zhihao Xu , Changhua Yu","doi":"10.1016/j.jet.2025.105979","DOIUrl":"10.1016/j.jet.2025.105979","url":null,"abstract":"<div><div>This paper studies optimal monetary policy in a multisector economy with input-output linkages and distortions. Our model incorporates both the supply side and the demand side effects of monetary policy. We derive a tractable sufficient statistic for the supply side effect, which comprises two reallocation channels resulting from substitution between sectoral products for households and firms, and substitution between labor and intermediate inputs in production. The optimal monetary policy induces an inflation bias that stems from both an aggregate wedge and the supply side effect, and targets an inflation index by assigning higher weights to (i) larger sectors, (ii) sectors with stickier prices, and (iii) sectors with less distortions. Our quantitative results indicate that production networks play a crucial role in generating both the supply and demand effects of monetary policy.</div></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":"225 ","pages":"Article 105979"},"PeriodicalIF":1.4,"publicationDate":"2025-02-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143429756","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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