Working Papers:
Abstract: This paper studies incentives for the interim voluntary disclosure of verifiable information in probabilistic all-pay contests. Considered are unfair contests,i.e., contests in which, subject to activity conditions, one player (the favorite) is interim always more likely to win than the other player (the underdog). A condition is identified that ensures that a given contest is unfair regardless of disclosure decisions. Under this condition, full revelation is the unique perfect Bayesian equilibrium outcome of the contest with pre-play communication. This is so because the weakest type of the underdog will try to moderate the favorite, while the strongest type of the favorite will try to discourage the underdog, so that the contest unravels. We also show that self-disclosure may, with positive probability, provoke unintended re-actions, i.e., "dominant" or "defiant" behavior. Moreover, while individually rational for the marginal type, the unraveling may be strictly Pareto inferior from an ex-ante perspective. Our main conclusion is just the opposite of the corresponding finding for the deterministic all-pay auction. The proofs employ lattice-theoretic methods and an improved version of Jensen's inequality.
Abstract: Satisficing is one of the major behavioral concepts to study search behavior over lists, yet it cannot be easily tested using choice data and has generally little empirical content. We develop a new model called size N satisficing, where a decision maker terminates the search procedure after having observed N satisficing alternatives and then picks the best among the examined ones. Given complete binary stochastic choice data, where the stochasticity comes from the randomness of the unobserved search order, the complete preference ranking, even over the satisficing alternatives, can be retrieved, unlike in the classical satisficing model. This framework perfectly nests both rational choice behavior and the classical satisficing model. The extensions cover identification of preferences with incomplete data sets as well as menu-dependent N’s. Finally, the model can accommodate behavioral choice anomalies frequently observed in choice data such as the attraction and the similarity effect.
Abstract: This paper studies how the allocation of limited consumer attention may affect competition and the resulting market structure. Using insights from both neuroeconomics and psychology, we provide a microfoundation for the attention of consumers towards advertising or messages and analyze how an increase in stimuli changes attentiveness, where we find a negative correlation. Given this set-up we show, if firms are only aware of the average attention in the market, a symmetric price equilibrium results and profits are ordered according to the aggregate attention allocation. Furthermore, as the average attentiveness declines, a Matthew effect occurs, hence we find a rich-gets-richer effect, where the wealthy firms get even wealthier in absolute terms. Additionally, with endogenously determined attention, we characterize conditions for both the Superstar- and the Long Tail phenomenon to arise simultaneously.