does employment protection create its own political support this paper investigates the ability of employment protection to generate its own political support a version of the mortensen pissarides model is used for this purpose if wages are set through nash bargaining workers value employment protection because it strengthens their hand in wage negotiations workers in high productivity matches benefit most from higher wages as they expect to stay employed for longer by reducing turnover employment protection shifts the distribution of match specific productivity toward lower values thus stringent protection in the past actually reduces support for employment protection today introducing involuntary separations reverses this conclusion now workers value employment protection because it delays involuntary dismissals workers in low productivity matches gain most since they face the highest risk of dismissal the downward shift in the productivity distribution is now a shift towards supporters

how should commodities be taxed market structure product heterogeneity and the optimal structure of commodity taxes abstract this paper is concerned with the form in which commodity taxes are best imposed and particularly with the appropriate balance between specific and ad valorem components this neglected issue is of policy importance in relation to the harmonization of tax structures within the eec and of theoretical interest as a point of contact between optimal tax theory and models of non price competition the roles of the two taxes as purely corrective devices under a variety of market forms are established and discussed the analysis suggests that heavily taxed commodities should normally be subject to high specific rather than high ad valorem taxes

undominated coalition proof nash equilibria in quasi supermodular games with monotonic externalities abstract i introduce an undominated coalition proof nash equilibrium that is unique and is able to select undominated nash equilibria in a quasi supermodular game with a strict single crossing property and monotonic externalities

efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

sequential formation of coalitions in games with externalities and fixed payoff division this paper analyzes a sequential game of coalition formation when the division of the coalitional surplus is fixed and the payoffs are defined relative to the whole coalition structure gains from cooperation are represented by a valuation which maps coalition structures into payoff vectors i show that any core stable coalition structure can be attained as a stationary perfect equilibrium of the game if stationary perfect equilibria may fail to exist in general games a simple condition is provided under which they exist in symmetric games furthermore symmetric stationary perfect equilibria of symmetric games generate a coalition structure which is generically unique up to a permutation of the players a general method for the characterization of equilibria in symmetric games is proposed and applied to the formation of cartels in oligopolies and coalitions in symmetric majority games journal of economic literatureclassification numbers c78 c71 1996 academic press inc

regional innovation systems theory empirics and policy asheim b t lawton smith h and oughton c regional innovation systems theory empirics and policy regional studies interest in regional innovation systems has grown significantly over the past three decades driven partly by advances in theoretical analysis partly by the growing interest in innovation as a source of competitive advantage and partly by the need for new policies to address regional inequalities and divergence this article explores the elements and characteristics that exemplify the regional innovation systems approach it provides an appraisal and synthesis of the regional innovation systems paradigm and aims to shed light on a number of areas where theoretical empirical and policy based questions remain unanswered it outlines and assesses the major strands in recent theoretical and empirical debates and discusses how they might be developed to contribute to the further advancement of the regional innovation systems literature three interrelated questions form the key themes arou

communication structure and coalition proofness experimental evidence abstract the paper analyzes the role of the structure of communication i e who is talking with whom in a coordination game we run an experiment in a three player game with pareto ranked equilibria where a pair of players has a profitable joint deviation from the pareto superior equilibrium we show that specific communication structures lead to different coalition proof equilibria in this game results match the theoretical predictions subjects communicate and play the pareto superior equilibrium when communication is public when pairs of players exchange messages privately subjects play the pareto inferior equilibrium even in these latter cases however players beliefs and choices tend to react to messages despite the fact that these are not credible

bargaining around cost benefit standards abstract injurers often purchase the property of potential victims to avoid liability or to comply with regulations this paper shows that injurers subject to cost benefit standards could profit from buying out victims even if they attach no value to the victims property because buyouts allow injurers to take fewer precautions a buyout of one victim produces a negative externality for the remaining victims injurers can consequently exploit victims and thereby reduce social welfare by adopting a divide and conquer strategy or by negotiating with victims sequentially perhaps surprisingly buyouts may reduce social welfare and victims joint profits even if victims make simultaneous or sequential take it or leave it buyout demands to the injurer

endogenous structures of association in oligopolies the formulation of associations of firms in an oligopoly with linear demand is analyzed as a two stage noncooperative game in the first stage firms form associations in order to decrease their costs and in the second stage they compete on the market examples of associations include r d joint ventures and groups of firms adopting common standards in equilibrium the associations formed exhibit two general features they are asymmetric and inefficient

institutions and equilibrium in the united states supreme court over the last decade the scholarship on judicial politics has increasingly emphasized the strategic aspects of decision making in the united states supreme court this scholarship however has struggled with two significant limitations the restriction to unidimensional policy spaces and the assumption of binary comparisons of alternatives these two assumptions have the advantage of implying stable predictable outcomes but lack a sound theoretical foundation and assume away potentially important aspects of strategic behavior on the court in this article we identify institutional features of the court that under certain conditions allow us to relax these two assumptions without sacrificing stable predictable policy outcomes in particular we formalize the part by part opinion voting used by the justices a feature that together with separable preferences over policy issues implies stable policy outcomes around the issue by issue median of the justices

collusion under asymmetric information when applied to groups the revelation principle postulates a bayesian nash behavior between agents their binding agreements are unenforceable or the principal can prevent them at no cost we analyze instead a mechanism design problem in which the agents can communicate between themselves and collude under asymmetric information we characterize the set of implementable collusion proof contracts both when the principal offers anonymous and nonanonymous contracts after having isolated the nexi and the stakes of collusion we proceed to a normative analysis perform some comparative statics discuss our concept of collusion proofness and provide some insights about transaction costs in side contracting

pure strategy nash equilibrium in a group formation game with positive externalities abstract this paper identifies a domain of payoff functions in no spillover noncooperative games with positive externality which admit a pure strategy nash equilibrium since in general a nash equilibrium may fail to exist in order to guarantee the existence of an equilibrium we impose two additional assumptions anonymity and order preservation the proof of our main result is carried out by constructing for a given game g a potential function over the set of strategy profiles in such a way that the maximum of yields a nash equilibrium in pure strategies of g journal of economics literature classification numbers c72 d62 h73

the efficiency of indirect taxes under imperfect competition abstract this paper considers the relative efficiency of ad valorem and unit taxes in imperfectly competitive markets we provide a simple proof that ad valorem taxes are welfare superior to unit taxes in the short run when production costs are identical across firms the proof covers differentiated products and a wide range of market conduct cost asymmetries strengthen the case for ad valorem taxation under cournot competition but unit taxation may be welfare superior under bertrand competition with product differentiation ad valorem taxation is superior with free entry under cournot competition but not necessarily under price competition when consumers value variety

an experimental study of communication and coordination in noncooperative games this paper reports the results of an experiment designed to test the usefulness of alternative solution concepts to explain players behavior in noncooperative games with preplay communication in the experiment subjects communicate byplain conversationprior to playing a simple game in this setting we find that the presumption ofindividualisticandindependentbehavior underlying the concept of nash equilibrium is inappropriate instead we observe behavior to becoordinatedandcorrelated statistical tests reject nash equilibrium as an explanation of observed play the coalition proof correlated equilibrium of the game however explains the data when the possibility of errors by players is introduced journal of economic literatureclassification numbers c72 c92

the rise and persistence of rigidities in this paper we argue that employment protection legislation is more likely to arise when the rents earned by the employed over their alternative wage is greater the model explains why economies with greater real wage rigidity also have greater employment protection the model also predicts that lower turnover increases the political support for employment protection and that this political support is greater when employment protection is more harmful for employment also rigidities are persistent as they create a constituency of low productivity sectors whose workers would oppose the removal of firing costs even though existing rents would not generate support for introducing them we argue that tight labour markets due to post war reconstruction needs in europe made it easier for insiders to create such rents which in turn led them to support employment protection legislation in the late 1970s rents started to fall but reforms proved difficult because of ratchet effects this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

endogenous cartel formation with heterogeneous firms in the context of an infinitely repeated capacity constrained price game we endogenize the composition of a cartel when firms are heterogeneous in their capacities when firms are sufficiently patient there exists a stable cartel involving the largest firms a firm with sufficiently small capacity is not a member of any stable cartel when a cartel is not all inclusive colluding firms set a price that serves as an umbrella with non cartel members pricing below it and producing at capacity contrary to previous work our results suggest that the most severe coordinated effects may come from mergers involving moderate sized firms rather than the largest or smallest firms

exclusionary pricing when scale matters we consider an incumbent firm and a more efficient entrant both offering a network good to several asymmetric buyers and both being able to price discriminate the good has positive value to buyers only if the network size exceeds a certain threshold the incumbent s installed base guarantees this critical size to the incumbent while the entrant needs to attract enough new buyers to meet this threshold we show that price discrimination in the various forms it may take reduces the set of achievable socially efficient entry equilibria and discuss the policy implications of this result

tax incidence in differentiated product oligopoly abstract we analyze the incidence of ad valorem and unit excise taxes in an oligopolistic industry with differentiated products and price setting bertrand firms both taxes may be passed on to consumers by more than 100 percent and an increase in the tax rate can increase short run firm profits and hence the long run number of firms we provide summary conditions for these effects to arise the conditions depend on demand curvatures and are written in elasticity form surprisingly the analysis largely corroborates cournot results with homogeneous demand

an evolutionary analysis of insurance markets with adverse selection abstract the equilibrium nonexistence problem in rothschild and stiglitz s insurance market is reexamined in a dynamic setting insurance firms are boundedly rational and offer menus of insurance contracts which are periodically revised profitable competitors contracts are imitated and loss making contracts are withdrawn occasionally a firm experiments by withdrawing or innovating a random set of contracts we show that rothschild and stiglitz s candidate competitive equilibrium contracts constitute the unique long run market outcome if innovation experiments are restricted to contracts which are sufficiently similar to those currently on the market

a pareto comparison of ad valorem and unit taxes in noncompetitive environments abstract a literature that began with wicksell 1896 has shown that an ad valorem tax is welfare superior to an equal yield unit tax in both monopoly and oligopoly markets this paper proves a stronger result for any unit tax imposed on a monopoly there exists an ad valorem tax that pareto dominates it that produces larger profit tax revenue and consumer surplus the paper then considers whether this pareto result generalizes to all cournot nash oligopolies the paper shows that pareto dominance holds in such markets whenever the tax level exceeds a critical value that depends on various market parameters

all stage strong correlated equilibrium abstract a strong correlated equilibrium is a strategy profile that is immune to joint deviations different notions of strong correlated equilibria were defined in the literature one major difference among those definitions is the stage in which coalitions can plan a joint deviation before ex ante or after ex post the deviating players receive their part of the correlated profile in this paper we show that an ex ante strong correlated equilibrium is immune to deviations at all stages thus the set of ex ante strong correlated equilibria of moreno wooders games econ behav 17 1996 80 113 is included in all other sets of strong correlated equilibria

enlargement processes and distributional conflicts the politics of discriminatory membership in the european union this paper examines discriminatory membership in the european union from a game theoretical perspective i argue that discriminatory membership enables the enlargement of international organizations with heterogenous member states eu members impose discriminatory measures on new members to redistribute enlargement gains from new members to particularly negatively affected eu members as to render expansion pareto efficient the empirical findings of a probit analysis on the eu accession negotiations and outcomes of all five eu enlargement rounds support the theoretical claim the eu grants acceding states restricted membership rights if distributional conflicts emerge moreover the candidate s bargaining power and the possibility of alternative compensation schemes influence the enlargement outcomes

renegotiation proof equilibria in a global emission game when players are impatient in a two country model in which countries differ with respect to the perception of environmental damages and abatement costs the stability of international environmental agreements is analyzed in a dynamic framework three types of agreements are considered a socially optimal solution a uniform emission tax a tax equally applied in both countries and a uniform emission reduction quota an equal percentage emission reduction from a base year stability is checked for these agreements according to the concept of renegotiation proofness it is shown that the stability requirements depend crucially on the parameters defining the interests of the two countries and the type of agreement moreover it is demonstrated that if punishment options are restricted for some reason the stability of an agreement may suffer one important result of the paper is that if countries exhibit asymmetric interests stability in the quota regime is higher than in the tax regime and in the social optimum this might explain why emission reduction quotas have been so popular in international politics despite recommendations of economists to use market based instruments

the comparison between ad valorem and specific taxation under imperfect competition abstract this paper compares ad valorem and specific taxation in two models of oligopoly with and without free entry predominantly ad valorem taxation implies a relatively low consumer price high tax revenue and when entry is precluded low profits ad valorem taxation dominates specific taxation from the welfare perspective the set of circumstances under which with free entry specific taxation raises welfare is a strict subset of that in which ad valorem taxation is welfare improving and in both models the maximisation of consumer welfare subject to a binding revenue constraint requires maximum reliance on ad valorem taxation

stable coalition structures with open membership and asymmetric firms i study games of coalition formation with open membership where firms form associations in order to decrease their costs before competing on the market according to previous analyses only the grand coalition forms at the nash equilibrium of such games i show that this result hinges on the assumption of symmetric firms i therefore introduce asymmetric firms in a game where only two associations can form i demonstrate that there exists a coalition proof nash equilibrium coalition structure in this game and that when the equilibrium involves two associations all the members of an association have a higher taste for this association than all nonmembers do journal of economic literature classification numbers c70 c72 l13

coalition proof implementation abstract a new condition is shown to be necessary and sufficient for coalition proof nash equilibrium cpne implementation in environments with complete information this result implies that all choice functions are cpne implementable when individuals utility functions are bounded with respect to all variables except for money and are either analytic or quasi linear journal economic literature classification numbers c72 d72 d78

united we stand or divided we stand strategic supplier alliances under order default risk we study the alliance formation strategy among suppliers in a framework with one downstream firm and n upstream suppliers each supplier faces an exogenous random shock that may result in an order default each of them also has access to a recourse fund that can mitigate this risk the suppliers can share the fund resources within an alliance but they need to equitably allocate the profits of the alliance among the partners in this context suppliers need to decide whether to join larger alliances that have better chances of order fulfillment or smaller ones that may grant them higher profit allocations we first analytically characterize the exact coalition proof nash stable coalition structures that would arise for symmetric complementary or substitutable suppliers our analysis reveals that it is the appeal of default risk mitigation rather than competition reduction that motivates cooperation in general a riskier and or less fragmented supply base favors larger alliances whereas substitutable s

large scale service marketplaces the role of the moderating firm recently large scale web based service marketplaces where many small service providers compete among themselves in catering to customers with diverse needs have emerged customers who frequent these marketplaces seek quick resolutions and thus are usually willing to trade prices with waiting times the main goal of this paper is to discuss the role of the moderating firm in facilitating information gathering operational efficiency and communication among agents in service marketplaces surprisingly we show that operational efficiency may be detrimental to the overall efficiency of the marketplace furthermore we establish that to reap the expected gains of operational efficiency the moderating firm may need to complement the operational efficiency by enabling communication among its agents the study emphasizes the scale of such marketplaces and the impact it has on the outcomes this paper was accepted by yossi aviv operations management

almost all equilibria in dominant strategies are coalition proof abstract we prove that almost all equilibria in dominant strategies of finite strategic games are coalition proof also we investigate existence of coalition proof equilibria of separable games and strategyproof mechanisms in particular we give an example of a strategyproof mechanism which is defined for strict orderings and which is coalition proof but not coalitionally strategyproof

on the coalition proofness of the pareto frontier of the set of nash equilibria abstract this article shows that the pareto efficient frontier of the nash equilibrium set of games with strategic substitutes is coalition proof under the following conditions 1 the game has three players or alternatively a player s payoff depends on her own strategy and on the sum but not on the composition of other players strategies 2 an increase in a player s strategy either raises all other players payoffs monotonically or reduces them monotonically and 3 each player s payoff is strictly concave in her own strategy under these conditions the pareto dominance refinement is equivalent to the coalition proof nash equilibrium refinement journal of economic literature classification number c72

corporate board composition protocols and voting behavior experimental evidence we examine voting by a board designed to mitigate conflicts of interest between privately informed insiders and owners our model demonstrates that as argued by researchers and the business press boards with a majority of trustworthy but uninformed watchdog agents can implement institutionally preferred policies our laboratory experiments strongly support this conclusion our model also highlights the necessity of penalties on insiders when there is dissension among board members however penalties for dissent appeared to have little impact on the experimental outcomes

equilibria in a model with partial rivalry abstract in this paper we show that a non cooperative game with a finite set of players and common finite strategy sets possesses a strong nash equilibrium in pure strategies whenever individuals preferences satisfy independence of irrelevant choices anonymity and partial rivalry moreover if any of these assumptions is violated then even a pure strategy nash equilibrium may fail to exist further more we demonstrate that even with a continuum of players the same three assumptions yield the existence of a pure strategy strong nash equilibrium and in addition the equivalence of the sets of nash and strong nash equilibria in pure strategies journal of economic literature classification numbers c72 d62

cooperative equilibria in finite horizon noncooperative supergames abstract it is well known that cooperative outcomes can be supported by noncooperative equilibrium strategy combinations in games that are infinitely repeated however the example of the repeated prisoner s dilemma has led people to conclude that such cooperative outcomes cannot be sustained if the game is repeated finitely often in this paper it is proved that the belief about finitely repeated games is false conditions are given that allow the existence of cooperative outcomes in finitely repeated games that are supported by subgame perfect noncooperative equilibrium strategies

community enforcement of fisheries effort restrictions abstract this paper models the use of community sanctions to restrict effort in a simple gordon schaefer style model of the fishery with heterogeneous fishing costs the withdrawal of cooperation in other areas of life is used to both restrict effort and to sanction those who continue to cooperate with those who have not restricted effort coalition proof nash equilibria are generated by a combination of sanctions discouraging the defection of small groups and stock reductions discouraging noncooperation by large groups both entry restrictions and individual quotas can be supported by community sanctions under some parameter combinations however there are cases where each can generate lower total rents than would be available under open access relatively low cost fishers are more likely to support entry restrictions and ignore community attempts to restrict individual effort while high cost fishers are more likely to support quotas

coordination and bargaining power in contracting with externalities abstract building on genicot and ray g genicot d ray contracts and externalities how things fall apart j econ theory 131 2006 71 100 we develop a model of non cooperative bargaining that combines the two main approaches in the literature of contracting with externalities the offer game in which the principal makes simultaneous offers to the agents and the bidding game in which the agents make simultaneous offers to the principal allowing for agent coordination we show that the outcome of our bargaining procedure may differ remarkably from those of the offer and the bidding games in particular we find that bargaining can break agents coordination and that the principal s payoff can be decreasing in his own bargaining power

from each according to his surplus equi proportionate sharing of commodity tax burdens abstract this paper examines the incidence of commodity taxes finding that when demand and marginal cost schedules are linear the burden of commodity taxation is distributed between buyers and sellers so that each suffers the same percentage reduction in pre tax surplus this equi proportionate reduction in surplus is the outcome of commodity taxes set at any rate and is unaffected by relative demand and supply elasticities hence when demand and marginal cost schedules are linear commodity taxes resemble flat rate taxes imposed on market surplus similar results apply to nonlinear schedules within certain ranges

coordination and discrimination in contracting with externalities divide and conquer abstract the paper studies bilateral contracting between n agents and one principal whose trade with each agent generates externalities on other agents it examines the effects of prohibiting the principal from i coordinating agents on her preferred equilibrium and ii making different contracts available to different agents these effects depend on whether an agent is more or less eager to trade when others trade more the prohibitions reduce the aggregate trade in the former case and have little or no effect in the latter case the inefficiencies under different contracting regimes are linked to the sign of the relevant externalities and are shown to be typically reduced by both prohibitions

the right type of legislator a theory of taxation and representation abstract we develop a theory of taxation and the distribution of government spending in a citizen candidate model of legislatures individuals are heterogeneous in two dimensions productive ability in the private sector and negotiating ability in politics when these are positively correlated rich voters always prefer a rich legislator but poor voters face a trade off a rich legislator will secure more pork for the district but will also prefer lower taxation than the poor voter our theory organizes a number of stylized facts across countries about taxation and redistribution parties and class representation in legislatures we demonstrate that spending does not necessarily increase when the number of legislators increases as the standard common pool intuition suggests and that many policies aimed at increasing descriptive representation may have the opposite effect

formation of a coalition proof stable cartel formation of coalitions in oligopolies is modeled as a noncooperative game in which firms strategies have a binary form to cooperate or not the author demonstrates a one to one correspondence between stable cartels defined by c d aspremont et al 1983 and the nash equilibria of this game using a coalition proof nash equilibrium they define the concept of a coalition proof stable cartel and prove that there is a unique equilibrium

cheap talk coordination and entry we show how costless nonbinding nonverifiable communication cheap talk can achieve partial coordination among potential entrants into a natural monopoly industry where the payoffs are qualitatively like the battle of the sexes the analysis would apply equally in other economic situations with such payoffs for example bargaining under complete information or choosing compatibility standards while cheap talk helps achieve asymmetric coordination in a symmetric mixed strategy equilibrium it cannot achieve complete coordination if the game involves even a small amount of conflict

coalition proof correlated equilibrium a definition a coalition proof correlated equilibrium of a game is a pair consisting of a correlation device and a coalition proof nash equilibrium of the game extended by the device a direct coalition proof correlated equilibrium is a canonical device such that the obedient strategy is a coalition proof nash equilibrium of the canonical extended game the revelation principle may not hold even for two person games direct coalition proof correlated equilibrium may fail to exist for games with more than two players for any game a pure coalition proof nash equilibrium is a direct coalition proof correlated equilibrium c 1996 academic press inc

coalition proof equilibrium we characterize the agreements that the players of a noncooperative game may reach when they can communicate prior to play but they cannot reach binding agreements a coalition proof equilibrium is a correlated strategy from which no coalition has an improving and self enforcing deviation we show that any correlated strategy whose support is contained in the set of actions that survive the iterated elimination of strictly dominated strategies and weakly pareto dominates every other correlated strategy whose support is contained in that set is a coalition proof equilibrium consequently the unique equilibrium of a dominance solvable game is coalition proof journal of economic literature classification

coalition proofness and correlation with arbitrary communication possibilities abstract the ability of the members of a coalition to communicate secretly determines whether the coalition can coordinate to deviate from a proposed strategy and thus affects which strategies are coalition proof we show that the existence of a pareto best element in the set of strategies that survive iterated elimination of dominated strategies implies the existence of a coalition proof correlated equilibrium for any specification of coalitional communication possibilities that always permits individual deviations such an element exists in games with strategic complementarities if either 1 there is a unique nash equilibrium or 2 each player s payoff is nondecreasing in the others strategies journal of economic literature classification number c72

unemployment and labor market reform a contract theoretic approach why do many democracies fail to reform their labor market institutions to answer this question we study the feasibility of reforms that include compensation to insiders for the removal of labor market regulations under asymmetric information a reformer who wants to buy the approval of voters has to pay them an informational rent in addition to the pure costs of compensation that would arise under symmetric information in this setting unemployment may be constrained pareto efficient labor market reforms may fail politically because none of the reform packages proposed wins the approval of a majority of voters we also discuss the role of capital taxation in a reform program jel classification d70 e61 j68

coalitional stochastic stability abstract this paper takes the idea of coalitional behavior groups of people occasionally acting together to their mutual benefit and incorporates it into the framework of evolutionary game theory that underpins the social learning literature an equilibrium selection criterion is defined which we call coalitional stochastic stability css this differs from existing work on stochastic stability in that profitable coalitional deviations are given greater importance than unprofitable single player deviations a general characterization of css is given together with more detailed characterizations for specific classes of games applications include contracting asymmetric social norms and collusive price setting the latter of which is shown in some circumstances to facilitate competitive outcomes

dynamic public goods provision with coalitional manipulation abstract we study dynamic procedures for the provision of an efficient level of a public good with time dependent surplus distribution in general such procedures are prone to manipulation via pre play communication among coalitions of agents we begin with a generalization of truchon s econometrica 1984 52 1179 1190 elegant non myopic mdp procedure and provide a new procedure that exhibits finite monotone convergence to pareto efficiency in subgame perfect coalitionproof equilibrium this procedure also implements any regular surplus distribution rule that is dependent on the public good level the solution concept of subgame perfect coalition proof equilibrium is also new it is an extension of the semistability characterizations of coalition proof equilibrium for infinite strategy games due to kahn and mookherjee games and economic behavior 1992 4 101 121 the coalition proofing device given is more generally applicable

fault tolerance in large games abstract a nash equilibrium is an optimal strategy for each player under the assumption that others play according to their respective nash strategies but it provides no guarantees in the presence of irrational players or coalitions of colluding players in fact no such guarantees exist in general however in this paper we show that large games are innately fault tolerant we quantify the ways in which two subclasses of large games continuous games and anonymous games are resilient against byzantine faults i e irrational behavior coalitions and asynchronous play we also show that general large games have some non trivial resilience against faults

correlated equilibria incomplete information and coalitional deviations this paper proposes new concepts of strong and coalition proof correlated equilibria where agents form coalitions at the interim stage and share information about their recommendations in a credible way when players deviate at the interim stage coalition proof correlated equilibria may fail to exist for two player games however coalition proof correlated equilibria always exist in dominance solvable games and in games with positive externalities and binary actions c 2008 elsevier inc all rights reserved

equilibrium coordination with discretionary policy making discretionary policymakers cannot manage private sector expectations and cannot coor dinate the actions of future policymakers as a consequence coordination failures can occur and multiple equilibria can arise in this paper we employ notions of self enforceability and learnability to motivate and identify equilibria of particular interest in discretionary policy problems exhibiting multiple equilibria central among these criteria are whether an equilib rium is robust to the formation of coalitions and whether it is learnable by private agents and jointly learnable by private agents and the policymaker unless the pareto preferred equilibrium is learnable by private agents we find little reason to expect coordination on that equilibrium

screening contracts in the presence of positive network effects abstract based on the critical assumption of complementarity this paper builds a general model to describe and solve the screening problem faced by a monopolist seller of a network good by applying strict monotone comparative statics we demonstrate that the joint presence of asymmetric information and positive network effects leads to a strict downward distortion from the welfare maximizing allocation for all consumers we also show that the equilibrium allocation is an increasing function of network effect intensity

strategic behavior institutional change and the future of agriculture policy reforms that increase the roles of markets in agriculture and related institutional changes are occurring worldwide and are accompanied by rapid technical change with the evolving role of government new institutions are emerging for shaping the strategic behavior of public and private sector agents this paper suggests that the use of game theoretic formulations combined with modern concepts of mechanism design offers an approach to policy analysis and the study of institutional change that is valuable to professionals involved in the economics of agriculture

market substitution and the pareto dominance of ad valorem taxation 1 introductionexcise taxes take two basic forms unit taxes based on quantity sold and ad valorem taxes based on sales value while these two versions of excise taxes are equivalent in perfectly competitive markets 1 in noncompetitive markets ad valorem taxation has been shown to welfare dominate unit taxation 2ad valorem taxation also pareto dominates unit taxation in monopoly and in some cases oligopoly markets in the sense that under an isorevenue constraint replacing unit taxation with ad valorem taxation increases both consumer welfare and producer profits skeath and trandel 1994 3in this paper we depart from the homogeneous product oligopoly markets assumed in previous literature by adopting a model of heterogeneous products developed by dixit and stiglitz 1977 first we study the pareto dominance of ad valorem taxation in short run equilibrium where a fixed number of firms produce imperfectly substitutable goods and engage in bertrand competition we define market demand as a weighted sum of firm quantities demanded and market price as a similarly weighted average of firm prices by assuming that market demand is isoelastic with respect to market price our framework allows the elasticity of substitution among the goods in the taxed market and the price elasticity of market demand to bear on the comparison of the two forms of excise taxes we find that in the short run ad valorem taxation always dominates unit taxation both in terms of consumer welfare and overall welfare the precise meaning of overall welfare is made clear later however pareto dominance of ad valorem taxation never exists if market demand is inelastic because in this case firms always earn lower profits under ad valorem taxation restricting our analysis to the case where market demand is elastic we find that ad valorem taxation pareto dominance is more likely the smaller the within market elasticity of substitution or the larger the market demand elasticity we also generalize a prior result for homogenous products increasing the number of firms in a market decreases the likelihood of ad valorem taxation pareto dominance finally we find that for a sufficiently large within market elasticity of substitution ad valorem taxation pareto dominance is more likely the smaller the tax level contrary to an existing result for the homogenous product case given the results of previous literature that unit taxation tends to be welfare dominated by equal revenue ad valorem taxation in noncompetitive environments the existence of both types of taxes must be explained by nonoptimal behavior on the part of government 4 one possible explanation for the coexistence of unit and ad valorem taxes despite the welfare dominance of ad valorem taxation is that a government only cares about the amount of revenue collected from each market and the choice between these two taxes in a specific market is dictated by producers interests which are more concentrated than consumers interests in general given this hypothesis concerning the political economy of choice between the two major forms of excise taxes the results of this paper make testable predictions with respect to how the relative desirability of ad valorem taxation from the perspective of producers changes with several important characteristics of a market the elasticity of substitution among goods in the market the market demand elasticity the number of firms in the market and the level of taxation in the market extending our analysis to long run equilibrium where entry and exit provides an additional market equilibrating mechanism and where firms always earn zero profits we show that an equal revenue switch from unit to ad valorem taxation has welfare effects on consumers through two channels

co ordination spillovers and cheap talk abstract we analyze the role of cheap talk in two player games with one sided incomplete information we identify conditions under which 1 players can fully communicate and coordinate on efficient nash equilibria of the underlying complete information game and 2 players cannot communicate so cheap talk does not alter the equilibrium set of the bayesian game we present examples that illustrate several issues that arise when there is two sided incomplete information journal of economic literature classification numbers c72 d82

coalition proof nash equilibria ii applications abstract in bernheim peleg and whinston coalition proof equilibria i concepts j econ theory 42 1987 1 12 we proposed the notion of coalition proof nash equilibrium and perfectly coalition proof nash equilibrium as solution concepts for strategic environments in which players can freely discuss their strategies but cannot make binding commitments this paper undertakes applications to several economic problems including the behavior of cournot oligopolists oligopolistic entry deterrence cooperation in finite horizon games and social choice rule implementation

market organization and product quality the modern discussion of the impact of market organization on product quality had its beginnings in the work of levhari and srinivasan 7 and schmalensee 8 both of these works argued that a monopolistic market resulted in equilibrium in a product with lower quality in their case lower durability than a similar industry competitively organized it was later pointed out by swan 10 that both levhari and srinivasan and schmalensee had neglected to appropriately account for the opportunity cost of holding the stock of the durable good required to produce the long run equilibrium level of service flow once this cost was accounted for both forms of market organization produced goods of equal quality once again equal durability that is not to say that monopoly is efficient in the economic sense but only that the inefficiency of monopoly lies not in the quality of product it produces but in the quantity of output

bond calls credible commitment and equity dilution a theoretical and clinical analysis of simultaneous tender and call stac offers this paper is an exploration of the ability of game theory to explain real world corporate maneuvering we explore this issue by investigating bond tender offers accompanied by a threat to call nontendered bonds so called simultaneous tender and call stac offers we argue that stacs engender a transparent game played by bondholders and shareholders we model this game and use this model to predict the outcome of stacs finally we investigate the issue of whether this theoretical model explains the outcomes of four actual stac issues made by james river may department stores and houston lighting power company our clinical analysis provides support for the explanatory power of our model calibrating the predictions of the model with data from these stacs we demonstrate a correspondence between theory and actual corporate behavior as predicted by our model subgame perfection or threat credibility and preplay coordination are central to explaining the outcomes of the stacs