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

analysts weighting of private and public information using both a linear regression method and a probability based method we find that on average analysts place larger than efficient weights on i e they overweight their private information when they forecast corporate earnings we also find that analysts overweight more when issuing forecasts more favorable than the consensus and overweight less and may even underweight private information when issuing forecasts less favorable than the consensus further the deviation from efficient weighting increases when the benefits from doing so are high or when the costs of doing so are low these results suggest that analysts incentives play a larger role in misweighting than their behavioral biases copyright 2006 oxford university press

from physical to human capital accumulation inequality and the process of development this paper develops a growth theory that captures the replacement of physical capital accumulation by human capital accumulation as a prime engine of growth along the process of development it argues that the positive impact of inequality on the growth process was reversed in this process in early stages of the industrial revolution when physical capital accumulation was the prime source of growth inequality stimulated development by channelling resources towards individuals with a higher propensity to save as human capital emerged as a growth engine equality alleviated adverse effects of credit constraints on human capital accumulation stimulating the growth process this research develops a growth theory that captures the endogenous replacement of physical capital accumulation by human capital accumulation as a prime engine of economic growth in the transition from the industrial revolution to modern growth the proposed theory offers a unified account for the effect of income inequality on the growth process during this transition it argues that the replacement of physical capital accumulation by human capital accumulation as a prime engine of economic growth changed the qualitative impact of inequality on the process of development in the early stages of the industrial revolution when physical capital accumulation was the prime source of economic growth inequality enhanced the process of development by channelling resources towards individuals whose marginal propensity to save is higher in the later stages of the transition to modern growth as human capital emerged as a prime engine of economic growth equality alleviated the adverse effect of credit constraints on human capital accumulation and stimulated the growth process the proposed theory unifies two fundamental approaches regarding the effect of income distribution on the process of development the classical approach and the credit market imperfection approach 1 the classical approach was originated by smith 1776 and was further interpreted and developed by keynes 1920 lewis 1954 kaldor 1957 and bourguignon 1981 according to this approach saving rates are an increasing function of wealth and inequality therefore channels resources towards individuals whose marginal propensity to save 1 the socio political economy approach provides an alternative mechanism equality diminishes the tendency for socio political instability or distortionary redistribution and hence it stimulates investment and economic growth see the comprehensive survey of benabou 1996b

uniqueness of stationary equilibrium payoffs in the baron ferejohn model abstract we consider a multilateral sequential bargaining model in which the players may differ in their probability of being selected as the proposer and the rate at which they discount future payoffs for games in which agreement requires less than unanimous consent we characterize the set of stationary subgame perfect equilibrium payoffs with this characterization we establish the uniqueness of the equilibrium payoffs for the case where the players have the same discount factor we show that the payoff to a player is nondecreasing in his probability of being selected as the proposer for the case where the players have the same probability of being selected as the proposer we show that the payoff to a player is nondecreasing in his discount factor journal of economic literature classification numbers c72 c78 d70

buying supermajorities in finite legislatures i analyze the finite voter version of the groseclose and snyder vote buying model i identify how the optimal coalition size varies with the underlying preference parameters derive necessary and sufficient conditions for minimal ma1onty and universal coalitions to form and show that the necessary condition for minimal majorities found in groseclose and snyder is incorrect

vote buying supermajorities and flooded coalitions in a recent paper banks 2000 adopting the framework of our model groseclose and snyder 1996 derives several new and noteworthy results in addition he provides a counterexample to our proposition 4 here we explain the error in our proposition but note that we can correct it easily if we invoke an additional assumption in equilibrium the winning vote buyer constructs a nonflooded coalition that is she does not bribe every member of her coalition we conclude with a brief discussion of the substantive implications of banks s proposition 1 we note that it provides additional support for our general claim that minimal winning coalitions should be rare in a vote buying game

coalition and party formation in a legislative voting game we examine a legislative voting game where decisions are being made over both ideological and distributive dimensions and legislators preferences are separable over the two dimensions in equilibrium legislators prefer to make proposals for the two dimensions together rather than offering sequential proposals on the two dimensions separately the equilibria exhibit interaction between the ideological and distributive dimensions and in any equilibrium there is a positive probability that a proposal is made and approved which excludes the median legislator as defined over the ideological dimension in contrast with a game where no distributive decision is being made moreover in any stationary equilibrium there is more than one ideological decision that has a positive probability of being proposed and approved we show that legislators can gain from forming political parties and consider examples where predictions can be made about the composition of parties we discuss the impact of political parties on the outcome

dynamic processes of social and economic interactions on the persistence of inefficiencies an economy with a finite number of agents and a finite number of states is considered an exogenous institutional rule prescribes which moves from one state to another are feasible to each coalition at each time an agent is called to act with some exogenous probability and he chooses a coalition a feasible new state to move the economy to and side payments between the agents in the coalition the setup can be applied to various dynamic processes of social and economic interactions such as legislative bargaining coalition formation or exchange economies whenever agents are unable to write long term contracts but are otherwise unconstrained both in their ability to write arbitrary spot contracts and in their ability to collude there can be long run inefficiencies with cycles or inefficient steady states however when agents are sufficiently patient the initial state from which the process starts plays no role in the long run moreover when there exists an efficient state that is free of negat

bicameralism and its consequences for the internal organization of legislatures theories of organization of legislatures have mainly focused on the u s congress explaining why committee systems emerge there but not explaining variance in organization across legislatures of different countries to analyze the effects of different constitutional features on the internal organization of legislatures we adopt a vote buying model and consider the incentives to delegate decision rights in a game among legislative chambers we show how presidential veto power and bicameral separation can encourage a legislative chamber to create internal veto players or supermajority rules while a unicameral structure can encourage legislators to delegate power to a leader

analyst forecasts and herding behavior the use of analyst forecasts as proxies for investors earnings expectations is commonplace in empirical research an implicit assumption behind their use is that they reflect analysts private information in an unbiased manner as demonstrated here this assumption is not necessarily valid there is shown to be a tendency for analysts to release forecasts closer to prior earnings expectations than is appropriate given their information further analysts exhibit herding behavior whereby they release forecasts similar to those previously announced by other analysts even when this is not justified by their information these results are shown to have interesting empirical implications article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

bargaining foundations of shapley value1 a transferable utility economy in which each agent holds a resource which can be used in combination with the resources of other agents to generate value according to the characteristic function v is studied using a dynamic model of bargaining the main theorem establishes that the payoffs associated with efficient equilibria converge to the agents shapley values as the time between periods of the dynamic game goes to zero in addition it is demonstrated that an efficient equilibrium exists and is unique when an additivity condition is satisfied to demonstrate the sensitivity of the solution to the institutional detail we modify the model to allow for partnerships and show that the shapley value is no longer achieved

a theory of endogenous coalition structures consider an environment with widespread externalities and suppose that bind ing agreements can be written we study coalition formation in such a setting our analysis proceeds by defining on a partition function an extensive form bargaining game we establish the existence of a stationary subgame perfect equilibrium for such a game our main results are concerned with the characterization of equilib rium coalition structures we develop an algorithm that generates under certain conditions an equilibrium coalition structure our characterization results are especially sharp for symmetric partition functions in particular we provide a uniqueness theorem and apply our results to a cournot oligopoly journal of economic literature classification numbers c71 c72 c78 d62 q 1999 academic press

a social coalitional equilibrium existence lemma the purpose of this paper is to construct an abstract model of a society in which each member can cooperate with others by forming a coalition but at the same time can be influenced by the members outside the coalition a new concept of equilibrium called here a social coalitional equilibrium is proposed and a sufficient condition for its existence provided the social coalitional equilibrium may be considered a synthesis of the nash equilibrium a noncooperative solution concept and the core a cooperative solution concept the paper provides a broadly applicable mathematical tool for proving existence of equilibrium for models of labor managed market economies the purpose of the present paper is to construct an abstract model of a society in which each member can cooperate with others by forming a coalition but at the same time can be influenced by the members outside the coalition a new concept of equilibrium called here a social coalitional equilibrium is proposed and a sufficient condition for its existence provided a coalition structure is endogenously determined in equilibrium when the model is suitably specified it describes noncooperative behavior of the members and the social coalitional equilibrium is reduced to the nash equilibrium given another extreme specification the model is reduced to a cooperative game without sidepayments in characteristic function form and the set of social coalitional equilibria corresponds precisely to the core the need for study of the present model arose originally out of the author s recent investigation of labor managed market economies both the socialistic version and the capitalistic version in 10 11 12 indeed the model and the concept of social coalitional equilibrium were obtained by abstracting and generalizing the formal aspect of those studies the socialistic labor managed market economy has long been the object of study of various authors see e g vanek 19 the capitalistic labor managed market economy seems to reflect the institutional aspect of the modern capitalistic society better than the economies formulated by other available general equilibrium models it differs for example from the standard private ownership economy of arrow and debreu 1 see also debreu 6 sec 5 5 in that i the ownership and control of a firm are separated ii no particular firm is given a priori but instead the list of potential firms is given as a primitive datum and iii the behavioral principle of the economic agents involves both noncooperative behavior and cooperative behavior because of the above feature ii any general equilibrium model of this economy has to formulate the economic mechanism that underlies the formation of firms in equilibrium as

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

analyzing the analysts career concerns and biased earnings forecasts this paper examines the career concerns of security analysts we relate long histories of their earnings forecasts to job separations we find that relatively accurate past forecasts lead to favorable career outcomes such as remaining at or moving up to a high status large prestigious brokerage house controlling for accuracy optimistic forecasts relative to the consensus increase the chances of favorable job separations job separations depend much less on accuracy for analysts who cover stocks that are underwritten by their brokerage houses such analysts are also much more likely to be rewarded for optimistic forecasts than other analysts furthermore job separations were much less sensitive to accuracy and somewhat more sensitive to optimism during the stock market mania of the late 1990s these findings suggest that the well documented analyst forecast optimism bias is likely due to incentives to promote stocks

elections governments and parliaments in proportional representation systems this paper presents a theory of parliamentary systems with a proportional representation electoral system a formateur selected based on party representation in parliament and parties that cannot commit to the policies they will implement once in government government formation involves efficient proto coalition bargaining and elections yield unique strong nash equilibrium outcomes depending on the status quo minimal majority surplus or consensus governments can form if parties and voters are myopic and the status quo is subject to shocks consensus governments and centrist policies occur only in a crisis otherwise governments are minimal winning and policies reflect only the preferences of the government parties

power brokers middlemen in legislative bargaining abstract we study a model of decentralized legislative bargaining over public decisions with transfers we establish the emergence of middlemen in legislative bargaining as a robust equilibrium phenomenon we show that legislative intermediation can impact policy outcomes and can be inefficient to fulfill this role the middleman s policy preferences and bargaining position must be such that its role of intermediary is credible but the political middleman must also directly benefit from policy change the results highlight fundamental differences between the role of intermediaries in politics and exchange economies

the provision of public goods under alternative electoral incentives politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork barrel spending we compare a winner take all system where all the spoils go to the winner to a proportional system where the spoils of office are split among candidates proportionally to their share of the vote in a winner take all system the public good is provided less often than in a proportional system when the public good is particularly desirable we then consider the electoral college system and show that it is particularly subject to this inefficiency

incentives to cultivate favored minorities under alternative electoral systems a simple model is used to compare under different electoral systems the incentives for candidates to create inequalities among otherwise homogeneous voters by making campaign promises that favor small groups rather than appealing equally to all voters in this game model each candidate generates offers for voters independently out of a distribution that is chosen by the candidate subject only to the constraints that offers must be nonnegative and have mean 1 symmetric equilibria with sincere voting are analyzed for two candidate elections and for multicandidate elections under rank scoring rules approval voting and single transferable vote voting rules that can guarantee representation for minorities in multiseat elections generate in this model the most severely unequal campaign promises

analysts herding when does sentiment matter abstractherding among analysts emerges when analysts give priority to their peers opinions instead of their own beliefs or information some circumstances may enhance or restrain this type of behaviour we postulate that market sentiment is one of them this article analyses the effect that investor sentiment may have on analysts herding behaviour in the u k our results suggest that easy situations such as analysing easy to value securities and releasing optimistic information at times of high market sentiment clearly reduce herding practices whereas herding clearly increases in difficult situations when analysts have to release negative information at moments of high investor sentiment

the impact of inequality on the transmission of monetary policy abstract we consider a model to detect the relation between household debt and the transmission of monetary policy in an eu member state with independent monetary policy and high income inequality romania we find that households response to changes in monetary conditions depends on their income and indebtedness profile the transmission of monetary policy is more effective for middle income households which are more indebted and have adjustable rates as lower policy rates ease the consumption constraints on these households low income households respond mainly to budgetary policies as the increase in disposable income matters most for the bottom quintile top income quintile reacts more to monetary policy than bottom quintile but less than middle income quintiles lower inequality is associated with stronger effectiveness and higher homogeneity of monetary policy transmission in turn higher inequality is associated with less effectiveness and higher heterogeneity of the impact of the monetary policy

a bargaining model of collective choice we present a general model of legislative bargaining in which the status quo is an arbitrary point in a multidimensional policy space in contrast to other bargaining models the status quo is not assumed to be bad and delay may be pareto efficient we prove existence of stationary equilibria the possibility of equilibrium delay depends on four factors risk aversion of the legislators the dimensionality of the policy space the voting rule and the possibility of transfers across districts if legislators are risk averse if there is more than one policy dimension and if voting is by majority rule for example then delay will almost never occur in one dimension delay is possible if and only if the status quo lies in the core of the voting rule and then it is the only possible outcome this core selection result yields a game theoretic foundation for the well known median voter theorem our comparative statics analysis yield two noteworthy insights i if the status quo is close to the core t hen equilibrium policy outcomes will also be close to the core a moderate status quo produces moderate policy outcomes and ii if legislators are patient then equilibrium proposals will be close to the core legislative patience leads to policy moderation

a consistent bargaining set abstract both the core and the bargaining set fail to satisfy a natural requirement of consistency in excluding imputations to which there exist objections the core does not assess the credibility of such objections the bargaining set goes a step further only objections which have no counterobjections are considered justified however the credibility of counterobjections is not similarly assessed we formulate a notion of a consistent bargaining set in which each objection in a chain of objections is tested in precisely the same way as its predecessor various properties of the consistent bargaining set are also analyzed

financial analyst characteristics and herding behavior in forecasting this study classifies analysts earnings forecasts as herding or bold and finds that 1 boldness likelihood increases with the analyst s prior accuracy brokerage size and experience and declines with the number of industries the analyst follows consistent with theory linking boldness with career concerns and ability 2 bold forecasts are more accurate than herding forecasts and 3 herding forecast revisions are more strongly associated with analysts earnings forecast errors actual earnings forecast than are bold forecast revisions thus bold forecasts incorporate analysts private information more completely and provide more relevant information to investors than herding forecasts

do analysts herd an analysis of recommendations and market reactions this article develops and implements a new test to investigate whether sell side analysts herd around the consensus when they make stock recommendations our empirical results support the herding hypothesis stock price reactions following recommendation revisions are stronger when the new recommendation is away from the consensus than when it is closer to it indicating that the market recognizes analysts tendency to herd we find that analysts from larger brokerages analysts following stocks with smaller dispersion across recommendations and analysts who make less frequent revisions are more likely to herd the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

the strategic analysis of intermediation the importance and the special character of intermediation were recognized as early as in the eighteenth century and have been stressed by many authors afterwards in spite of this long tradition comparatively little work has been done on the details of the economic theory of intermediation instead it was assumed that intermediation can simply be treated like any other economic activity in contrast i will argue that the theory of intermediation requires a specific game theoretic analysis and moreover that many preconceptions that one might have on the basis of standard microeconomic theory are wrong

competing for loyalty the dynamics of rallying support abstract we consider a class of dynamic collective action problems in which either a single principal or two competing principals vie for the support of members of a group we focus on the dynamic problem that emerges when agents negotiate and commit their support to principals sequentially we show that competition reduces agents welfare with public goods or if and only if there are positive externalities on uncommitted agents and increases agents welfare with public bads we apply the model to the study of corporate takeovers vote buying and exclusive deals jel d42 d62 d72 d82 g34 h41

implications of herding behavior for earnings estimation risk assessment and stock returns experts earnings predictions exhibit positive bias and disappointing accuracy these shortcomings are usually attributed to some combination of incomplete knowledge incompetence and or misrepresentation this article suggests that the human desire for consensus leads to herding behavior among earnings forecasters herding results in a reduction in the dispersion and an increase in the mean of the distribution of expert forecasts creating positive bias and inaccuracy in published earnings estimates investors mistake reduced dispersion for reduced risk and positive bias for high future returns these misperceptions lead to abnormally low returns from stocks with unpredictable earning streams

vote buying general elections we examine the consequences of vote buying assuming this practice were allowed and free of stigma two parties compete in a binary election and may purchase votes in a sequential bidding game via up front binding payments and or campaign promises platforms that are contingent on the outcome of the election we analyze the role of the parties and voters preferences in determining the winner and the payments to voters

equilibrium and efficiency in an organized vote market we study an organized market for votes in which trade is directed by a market specialist this market mechanism always produces an equilibrium outcome and whenever vote buying occurs the alternative chosen is pareto superior to the alternative that would be chosen without trade we then characterize the equilibrium outcomes in a one dimensional policy space and show that if the distribution of ideal points is skewed enough then the equilibrium with vote buying differs from the equilibrium without vote buying the median ideal point this difference reflects the ability of an intense minority to obtain a policy it prefers in exchange for side payments

endogenous formation of coalitions the formation of coalitions is a fundamental problem in game theory by a coalition is meant a group of players e g economic or political agents which decide to act together as one unit relative to the rest of the players this includes the instances of syndicates unions cartels blocks political parties parliamentary coalitions etc we would like to emphasize that forming a coalition does not eliminate the individual players as decision makers in all interactions with the other players coalition members act as one unit it may be useful to think of a representative agent taking their place 2 however this arrangement will continue only as long as each player finds it desirable to act this way further bargaining occurs among the members of each coalition on how to divide what they obtained together thus the existence of coalitions implies that the interactions among the players will be conducted on two levels first among the coalitions and second within each coalition most of the existing models in economics and game theory assume that the coalition structure is given exogenously instead we try here to obtain it as an endogenous outcome of our model namely we want to be able to predict which coalitions will in fact form in each given situation 3 our theory combines two kinds of game theoretic concepts value and stability the basic idea is first to evaluate the players prospects in the various coalition structures and then based on these values to find which ones are stable we will call this value coalition structure value or cs value for short the reason we are considering coalition structures i e partitions of the set of players into disjoint coalitions rather than just coalitions is that in general players may find it to their advantage to join forces in some situations and to act separately in others all depending on the way the other participants are organized this implies that both the value and the stability concepts should depend on the entire coalition structure the cs value we analyze in this paper was first developed by owen 7

bilateral trading in networks in many markets goods flow from initial producers to final customers travelling through many layers of intermediaries and information is asymmetric we study a dynamic model of bargaining in networks that captures these features we show that the equilibrium price demanded over time is non monotonic but the sequence of transaction prices declines over time with the possible exception of the last period the price dynamic is therefore reminiscent of fire sales and hot potato trading traders who intermediate the object arise endogenously and make a positive profit the profit earning intermediaries are not necessarily traders with many connections for the case of multilayer networks they belong to the path that reaches the maximum number of potential buyers using the minimal number of intermediaries this is not necessarily the path of the network that maximizes the probability of consumption by traders who value the most the object i e welfare

central bank policies and income and wealth inequality a survey this paper reviews recent research on the relationship between central bank policies and inequality a new paradigm which integrates sticky prices incomplete markets and heterogeneity among households is emerging which allows for the joint study of how inequality shapes macroeconomic aggregates and how macroeconomic shocks and policies affect inequality the new paradigm features multiple distributional channels of monetary policy most empirical studies however analyze each potential channel of redistribution in isolation our review suggests that empirical research on the effects of conventional monetary policy on income and wealth inequality yields mixed findings although there seems to be a consensus that higher inflation at least above some threshold increases inequality in contrast to common wisdom conclusions concerning the impact of unconventional monetary policies on inequality are also not clear cut to better understand policy effects on inequality future research should focus on the estimation of general equilibrium models with heterogeneous agents

household financial planning and savings behavior greater personal responsibility toward financial decision making is being advocated on a global basis individuals and households are encouraged to take a more active approach to personal finance in this paper we examine behavioral factors which lead households toward savings and financial planning across a panel of 1253 dutch households in line with the available literature we find that an individual s propensity to save decreases with age and is higher among the financial literate moreover we find that saving behavior varies across generations and is significantly dominant among baby boomers this generation effect however weakens once we account for more individual specifics our results offer evidence for parental influence and for the effects of the psychological and behavioral metrics of numeracy self efficacy locus of control and future orientation a good understanding of these personality variables helps to explain why some take financial responsibility while others do not

mediation and peace this article applies mechanism design to the study of international conflict resolution standard mechanisms in which an arbitrator can enforce her decisions are usually not feasible because disputants are sovereign entities nevertheless we find that this limitation is inconsequential despite only being capable of making unenforceable recommendations mediators can be equally effective as arbitrators by using recommendation strategies that do not reveal that one player is weak to a strong opponent a mediator can effectively circumvent the unenforceability constraint this is because these strategies make the strong player agree to recommendations that yield the same payoff as arbitration in expectation this result relies on the capability of mediators to collect confidential information from the disputants before making their recommendations simple protocols of unmediated communication cannot achieve the same level of ex ante welfare as they preclude confidentiality

conflict of interest and the credibility of underwriter analyst recommendations brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public we show that stocks that underwriter analysts recommend perform more poorly than buy recommendations by unaffiliated brokers prior to at the time of and subsequent to the recommendation date we conclude that the recommendations by underwriter analysts show significant evidence of bias we show also that the market does not recognize the full extent of this bias the results suggest a potential conflict of interest inherent in the different functions that investment bankers perform

does unconventional monetary policy affect inequality evidence from japan inequality has been largely ignored in the literature and practice of monetary policy but is gaining more attention recently here we exclusively focus on the impact of unconventional monetary policy ump on inequality we look at how the recent ump in japan affected inequality using household survey data our vector auto regression var results show that ump widened income inequality after 2008q3 as the bank of japan boj resumed its zero interest rate policy and reinstated ump this is largely due to the portfolio channel to the best of our knowledge this is the first study to empirically analyse the distributional impact of ump japan s extensive experience with ump may hold important policy implications for other countries

a theory of gradual coalition formation we study noncooperative multilateral bargaining games based on underlying tu games in which coalitions can renegotiate their agreements we distinguish between models in which players continue to bargain after implementing agreements reversible actions and models in which players who implement agreements must leave the game irreversible actions we show that renegotiation always results in formation of the grand coalition if actions are reversible but that the process may otherwise end with smaller coalitions on the other hand we show that the grand coalition cannot form in one step if the core of the game is empty irrespective of the reversibility of actions agreements between players form the basis of much that game theory seeks to explain there are obviously many useful ways to categorize such agreements in multilateral negotiations that is with more than two participants it seems natural to distinguish between cases in which the coalition forms in one step and those in which the coalition grows to its eventual size by attracting new members thus recipients of marshall aid collectively agreed to american terms at the ceec in 1947 whereas a strict subset of these countries agreed to the schuman plan in 1950 with the other current members joining the eu over time similarly negotiations on climate change culminated in universal agreement at rio in 1992 whereas india and china only agreed to reduce cfc emissions in london in 1990 after other countries had signed up to the montreal protocol finally un security council resolution 242 urged that a multilateral conference be set up to establish a comprehensive settlement in the middle east whereas the process initiated by the oslo agreements and arguably camp david has consisted of a sequence of agreements between israel and its neighbours we will refer to cases in which the grand coalition forms in one step as involving immediate coalition formation or icf for short and cases in which a coalition grows as involving gradual coalition formation

appearing and disappearing dividends the link to catering incentives we document a close link between fluctuations in the propensity to pay dividends and catering incentives first we use the methodology of fama and french 2001 to identify a total of four distinct trends in the propensity to pay dividends between 1963 and 2000 second we show that each of these trends lines up with a corresponding fluctuation in catering incentives the propensity to pay increases when a proxy for the stock market dividend premium is positive and decreases when it is negative the lone disconnect is attributable to nixon era controls

inefficiency in analysts earnings forecasts systematic misreaction or systematic optimism a rational analysis of analyst behavior predicts that analysts immediately and without bias incorporate information into their forecasts several studies document analysts tendency to systematically underreact to information underreaction is inconsistent with rationality other studies indicate that analysts systematically overreact to new information or that they are systematically optimistic this study discriminates between these three hypotheses by examining the interaction between the nature of information and the type of reaction by analysts the evidence indicates that analysts underreact to negative information but overreact to positive information these results are consistent with systematic optimism in response to information the literature on financial analysts defines the phrase forecast inefficiency to mean forecasts that fail to accurately incorporate new information on a timely basis and or that are biased these forecasts have also been described as irrational or suboptimal prior studies report inefficiency in analysts forecasts finding that they are upwardly biased and inaccurately reflect available information some studies conclude from this that analysts underreact to information other studies conclude that analysts overreact if markets treat analysts forecasts as both rational and statistically optimal then inefficient forecasts could have important implications for the efficiency of pricing in securities markets in this paper we reexamine the apparent tendency of analysts to misinterpret earnings information the intent of this study is to discriminate between three hypotheses 1 that analysts systematically underreact to new earnings information 2 that analysts systematically overreact to new earnings information and 3 that analysts are systematically optimistic in their reactions for hypotheses 1 and 2 the direction of the misinterpretation i e underor overreaction is independent of the nature of the information received in contrast hypothesis 3 predicts that analysts are optimistic in interpreting

the three p s of total risk management current risk management practices are based on probabilities of extreme dollar losses e g measures like value at risk but these measures capture only part of the story any complete risk management system must address two other important factors prices and preferences together with probabilities these compose the three p s of total risk management this article describes how the three p s interact to determine sensible risk profiles for corporations and for individuals guidelines for how much risk to bear and how much to hedge by synthesizing existing research in economics psychology and decision sciences and through an ambitious research agenda to extend this synthesis into other disciplines a complete and systematic approach to rational decision making in an uncertain world is within reach

why bank credit policies fluctuate a theory and some evidence in a rational profit maximizing world banks should msdntain a credit policy of lending if and only if borrowers have positive net present value projects why then are changes in credit policy seemingly correlated with changes in the condition of those demanding credit this paper argues that rational bank managers with short horizons will set credit policies that influence and are influenced by other banks and demand side conditions this leads to a theory of low frequency business cycles driven by bank credit policies evidence from the banking crisis in new england in the early 1990s is consistent with the assumptions and predictions of the theory