# CES Economic Theory Seminar

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The Economic Theory workshop is a weekly seminar taking place on fridays 12-13h at the Maison des Sciences Economiques (106-110 Boulverd de l'Hopital). This seminar is a venue for theoretical work in Economics and for work drawing on quantitative methods in Economics. Defined by an approach rather than by a specific theme, the topics of the seminar can concern a variety of areas in Economics, such as (non exhaustively), micro economics, game theory, mathematical economics, decisions theory, finance or macro economics. The seminar functions as an internal workshop but also regularly greets speakers from other institutions.

If you want to be added to the seminar mailing list, or for any other query about the Economic Theory seminar, please feel free to contact Emily Tanimura (emily(dot)tanimura(at)univ-paris1(dot)fr) or Xavier Venel (xavier(dot)venel(at)univ-paris1(dot)fr).

It is supported by the Centre d'économie de la Sorbonne, CNRS and Université Paris 1 Panthéon-Sorbonne.

## Forthcoming:

- Friday 9 November 12h-13h

No seminar

- Friday 16 November 12h-13h

Centre d'Economie de la Sorbonne, Salle 114

Ana Carolina Tereza (Insper Institute of Research and Teaching )

**Title: **Updating Variational (Bewley) Preferences

Abstract: In this paper first we study the problem of characterizing an update rule for the class of variational Bewley preferences. We show that under the standard dynamic consistency the updated preference still in the same class of preferences and the corresponding ambiguity index follows a generalization of the full Bayesian update. Then we study the problem of updating preferences when the decision maker is characterized by two binary relations. Given the empirical evidence for incomplete preference in the sense of variational Bewley preferences, the first unconditional relation satisfies a set of behavioral conditions consis- tent with this class of preferences. Motivated by the fact that on many occasions, the decision maker must be able to compare any pair of acts (forced choices), we investigate the problem of finding an ex post complete, transitive, continuous and monotone prefer- ence that preserves the ambiguity attitude of the original unconditional one. We find that the ex post relation must be given by a variational preference represented by the same affine utility function and the ambiguity index follows the same updating rule of variational Bewley preference. This extension is unique and characterizes a weak completion of the unconditional ex ante preference. Also, our result can be viewed as a novel foundation for the full Bayesian updating of variational preferences.

- Friday 23 November 12h-13h

Centre d'Economie de la Sorbonne, Salle 114

Ugo Bolletta (Université Aix-Marseille)

**Title: **A model of peer effects in school

Abstract: When designing interventions aiming to foster peer effects in schools, knowledge on the endogenous sorting of individuals into groups is key. We propose a theoretical model where agents form groups endogenously, and their outcomes are affected accordingly. Using a popular payoff structure, we show that equilibrium outcomes have a direct correspondence with the linear-in-means model, used to study empirically peer effects and we characterize the set of stable networks. The model can be fitted with real data, providing the tools to i) infer the network in case we do not have this information, ii) match theoretical outcomes with real ones, to infer the motives behind network formation and iii) simulate effects of interventions that manipulate the composition of classrooms. Simulating data we show that the model can consistently reproduce the results of Carrell et al. (2013)

- Friday 30 November 12h-13h

Centre d'Economie de la Sorbonne, Salle 114

Rim Lahmandi-Ayed (ESSAI and UR MASE-ESSAI, Université de Carthage. )

**Title: **When Do Imperfectly Competitive Firms Maximize Profits ? The Lessons from A Simple General Equilibrium Model with Shareholders' Voting. (joint work with Didier Laussel)

Abstract:

We consider a general equilibrium model with vertical preferences, where workers and consumers are differentiated respectively by their sensitivity to effort and their intensity of preference for quality. We consider a monopoly the shares of which are owned by a fraction of the general population. The price is determined through a vote among all the shareholders. We identify necessary and sufficient conditions for (i) an absolute (relative) majority to vote for the profit maximizing price; (ii) an absolute (relative) majority to vote for a different price. We argue that the more concentrated the ownership the more likely it is that the firm charges the profit-maximizing price.