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

an approach to poverty alleviation for large international development agencies abstract this essay explores the nature of the poverty alleviation problem from the perspective of international development funding agencies these agencies have been poorly structured to promote the interests of the poor agencies such as the world bank and the us agency for international development usaid can achieve better results by creating independent units devoted exclusively to poverty alleviation these units should immerse their staff more completely in local societies with lower pay scales and longer tours of duty a revised form of cost benefit analysis around which these units should orient their work is presented previous analyses of poverty alleviation opportunities and failures have neglected funding agency influences

economics in the backyard how much convergence is there between china and her special regions this paper tests the hypothesis that the links and dependency relationships between china and her special regions have changed over the past 20 years with the industrialisation of china and the emergence of taiwan as a source of investment and sophisticated manufactures and hong kong as financial centre and supplier of services has this changed the size and direction of spillovers in the region and has it curtailed or eliminated american economic leadership we use time varying spectral methods to decompose the links between six advanced asian economies and the us we find a the links with the us have been weakening while those within a bloc based on china have strengthened b that this is not new it has been happening since the 1980s but has now been reversed by the surge in trade c that taiwan is more integrated with and dependent on the chinese economy while hong kong continues her separate development based on specialisation and comparative advantage d that the links with the us are rather complex with the us able to shape the cycles elsewhere through her control of monetary conditions but the china zone able to control the size of their cycles and e there appears to be no real evidence that pegged exchange rates encourage convergence in fact the reverse may be true

price formation in a matching market with targeted offers abstract we model a market where the surpluses from seller buyer matches are heterogeneous but common knowledge price setting is synchronous with search buyers simultaneously make one personalized offer each to the seller of their choice with impatient players efficient coordination is not possible and both temporary and permanent mismatches occur nonetheless for patient players efficient matching with monopsony wages is an equilibrium the setting is inspired by a labor market for highly skilled workers such as the academic job market but it can be easily adapted to for example the housing market or internet advertising auctions

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

monetary policy synchronization in the asean 5 region an exchange rate perspective in light of the long standing vision of economic and monetary integration in the asean association of southeast asian nations region and the importance of coordinating monetary policies to achieve it the objective of this article is to assess the monetary policy synchronization among the founding members of the asean that is indonesia malaysia the philippines singapore and thailand due to the importance of exchange rate movements to monetary policies we approach this issue from a currency exchange rate perspective specifically multivariate trend cycle decomposition is employed to investigate common trends and common cycles among the exchange rates of these countries during the period 1976 2012 our analysis reveals that the real exchange rates of malaysia the philippines singapore and thailand share common cycles in the short term and have common trends in the long term but the indonesian currency does not share these relationships thus our results augur well for the synchronization of mo

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

search theoretic models of the labor market a survey we survey the literature on search theoretic models of the labor market we show how this approach addresses many issues including the following why do workers sometimes choose to remain unemployed what determines the lengths of employment and unemployment spells how can there simultaneously exist unemployed workers and unfilled vacancies what determines aggregate unemployment and vacancies how can homogeneous workers earn different wages what are the tradeoffs firms face from different wages how do wages and turnover interact what determines efficient turnover we discuss various modeling choices concerning wage determination and the meeting process including recent models of directed search

common trends and common cycles the existence of a serial correlation common feature among the first differences of a set of i 1 variables implies the existence of a common cycle in the beveridge nelson stock watson decomposition of those variables a test for the existence of common cycles among cointegrated variables is developed the test is used to examine the validity of the common trend common cycle structure implied by flavin s excess sensitivity hypothesis and campbell and mankiw s mixture of rational expectations and rule of thumb hypothesis for consumption and income linear independence between the cointegration and the cofeature vectors is exploited to decompose consumption and income into their trend and cycle components copyright 1993 by john wiley sons ltd

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

decentralized matching markets with endogenous salaries abstract in a shapley shubik assignment problem with a supermodular output matrix we consider games in which each firm makes a take it or leave it salary offer to one applicant and a match is made only when the offer is accepted by her we consider both one shot and multistage games in either game we show that there can be many equilibrium salary vectors which are higher or lower than the minimum competitive salary vector if we exclude artificial equilibria applicants equilibrium salary vectors are bounded above by the minimal competitive salary vector while firms equilibrium payoff vectors are bounded below by the payoff vector under the minimum competitive salary vector this suggests that adopting the minimum competitive salary vector as the equilibrium outcome in decentralized markets does not have a strong justification

the new theory of optimum currency areas highbrow opinion is like a hunted hare if you stand long enough it will come back to the place it started from dennis robertson

exchange rate volatility and exports new empirical evidence from the emerging east asian economies this paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging east asian countries among themselves as well as to 13 industrialised countries we recognise the specificity of the exports between the emerging east asian and industrialised countries and employ a generalised gravity model in the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit root and cointegration tests to verify the long run relationship among the variables the results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging east asian countries in addition the results suggest that the pattern of bilateral exports is influenced by third country variables an increase in the price competitiveness of other emerging east asian countries has a negative impact on a country s exports to a destination market but the magnitude of the impact is relatively small these results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty the results of the gmm iv estimation also confirm the negative impact of exchange rate volatility on exports and suggest that this negative relationship is not driven by simultaneous causality bias

lessons from the eurocrisis for east asian monetary relations i analyse the sources of the eurozone crisis the major conclusion is that the eurozone is insufficiently embedded in a monetary union thereby making it fragile and prone to crises the lesson i draw for east asia is that despite the fact that this region appears to satisfy the traditional optimal currency area oca criteria to form a monetary union the complete absence of political unification makes the prospect of a monetary union in that region of the world both unrealistic and undesirable

equilibrium binding agreements abstract we study equilibrium binding agreements the coalition structures that form under such agreements and the efficiency of the outcomes that result we analyze such agreements in a context where the payoff to each player depends on the actions of all other players thus a game in strategic form is a natural starting point unlike the device of a characteristic function explicit attention is paid to the behavior of the complementary set of players when a coalition blocks a proposed agreement a solution concept and its applications are discussed journal of economic literature classification numbers c70 c71

the dynamic effects of aggregate demand and supply disturbances we interpret fluctuations in gnp and unemployment as due to two types of disturbances disturbances that have a permanent effect on output and disturbances that do not we interpret the first as supply disturbances the second as demand disturbances demand disturbances have a hump shaped mirror image effect on output and unemployment the effect of supply disturbances on output increases steadily over time peaking after two years and reaching a plateau after five years

sustainable plans and mutual default this paper presents a simple general equilibrium model of optimal taxation in which both private agents and the government can default on their debt as a benchmark we consider ramsey equilibria in which the government can precommit to its policies at the beginning of time but in which private agents can default we then consider sustainable equilibria in which both government and private agent decision rules are required to be sequentially rational we adapt abreu s 1988 optimal trigger strategies to completely characterize the entire set of sustainable equilibria in particular we show that when there is sufficiently little discounting and government consumption fluctuates enough the ramsey allocations and policies in which the government never defaults can be supported by a sustainable equilibrium by way of an example we show that the larger the variance of government consumption the easier it is to support good outcomes we also show for moderate discount factors that in the best sustainable equilibrium tax rates are more volatile and debt is smaller than in the ramsey equilibrium

hiring procedures to implement stable allocations abstract we implement the stable correspondence of a job matching market in subgame perfect equilibrium we use a simple sequential mechanism in which firms propose a salary to each worker first stage and then each worker accepts at most one proposal second stage moreover if agents preferences are additive this mechanism implements in subgame perfect equilibrium the firms optimal corre spondence when firms use undominated strategies finally we construct another simple sequential mechanism where the order of decisions is permuted and which implements the workers optimal correspondence when agents preferences are additive journal of economic literature classification numbers c78 d78

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

is a monetary union feasible for east asia the empirical suitability of the east asian economies for potential monetary integration is assessed the structural vector autoregression var method is employed to identify the underlying shocks using a three variable var model across the east asian economies the estimates of the eec are used as a benchmark to compare the size of the underlying shocks and the speed of adjustment to shocks in both regions to determine the feasibility of forming an optimum currency area oca in east asia the empirical results do not display strong support for forming an oca in the east asian region the results do imply however that some small subregions are potential candidates for ocas since their disturbances are correlated and small and these economies adjust rapidly to shocks

real output co movements in east asia any evidence for a monetary union of integration in the region would greatly shape the economic structure of each individual economy an d has direct implications for the effectiveness of domestic stabilisation policy and policy coordination this paper empiricall y examines the feasibility of forming a monetary union in east asia by assessing the real output co movements among these economies as suggested by the optimum curr ency area oca theory that losing monetary independence would be the major cost for adopting

markov equilibria in dynamic matching and bargaining games abstract rubinstein and wolinsky rev econ stud 57 1990 63 show that a simple homogeneous market with exogenous matching has a continuum of non competitive perfect equilibria however the unique markov perfect equilibrium of this model is competitive by contrast in the more general case of heterogeneous markets even the markov property is not enough to guarantee the perfectly competitive outcome we define a market game that allows for heterogeneous values on both sides of the market and exhibit a number of examples of non competitive markov perfect equilibria with and without discounting unlike the homogeneous case these equilibria allow for inefficient trades and for trade at non uniform prices the non competitive equilibrium may be unique

a poverty oriented cost benefit approach to the analysis of development projects abstract this essay presents a form of cost benefit analysis where benefits are defined in terms of contributions to basic human capabilities this capabilities approach to project analysis is contrasted with the us agency for international development s logical framework approach the world bank s economic cost benefit approach and distributionally sensitive economic cost benefit analysis i argue that international development agencies concessional resource transfers could contribute more to the well being of the world s poor if guided by this cost benefit approach than they do under current arrangements the notion of capabilities as fundamental requirements for well being has been developed by amartya sen

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

foreign aid and conditions precedent political and bureaucratic dimensions abstract international donor agencies increasingly use their influence to press for major reforms in development policies and administrative practices in third world countries reform recommendations are often conceptualized with little regard for the political and bureaucratic contexts in which they are to be adopted and pursued without greater concern for issues of political and bureaucratic feasibility however reform recommendations are likely to have only minimal impact policy space research and administrative systems research are promising approaches for acquiring and analyzing information about the political and bureaucratic aspects of government decision making such analyses can improve the potential for reform recommendations to be adopted and pursued

comparative advantage and bilateral foreign aid policy this paper formulates the problem of bilateral aid allocation in terms of the comparative advantage framework it is argued that the adaptability of this framework to foreign aid critically depends on the assumption that each donor s aid budget is spent to a large extent on its home market this assumption is not contradicted by empirical evidence an analysis of swiss foreign aid data then suggests that there is scope for considerable gains from specialization we conclude that donors should coordinate their behavior according to their comparative advantage to achieve an optimal allocation of global aid resources

on the optimality of a gcc monetary union structural var common trends and common cycles evidence this paper examines the suitability of the proposed monetary union among the members of the gulf cooperation council gcc to do so we identify the underlying structural shocks that these economies are subject to and assess the extent to which the shocks are symmetric additionally we test for common trends and common business cycles among the gcc economies we find that while the transitory demand shocks are typically symmetric the permanent supply shocks are asymmetric furthermore we do not find synchronous long run and short run movements in output despite the progress that has been made in terms of integration our findings indicate that the conditions for forming a gcc monetary union have not as yet been met

matching and price competition we develop a model in which firms set impersonal salary levels before matching with workers wages fall relative to any competitive equilibrium while profits rise almost as much implying little inefficiency furthermore the best firms gain the most from the system while wages become compressed in light of our results we discuss the performance of alternative institutions and the recent antitrust case against the national resident matching program

the assignment of workers to jobs in an economy with coordination frictions this paper studies the assignment of heterogeneous workers to heterogeneous jobs owing to the anonymity of a large labor market workers use mixed strategies when applying for jobs this randomness generates coordination frictions two workers may apply for a particular job whereas an identical job gets no applications the model generates assortative matching with a positive but imperfect correlation between matched workers and firms types it predicts that a worker s wage is increasing in her job s productivity and a firm s profit is increasing in its employees productivity the model also yields a version of the welfare theorems

a noncooperative theory of coalitional bargaining the authors explore a sequential offers model of n person coalitional bargaining with transferable utility and with time discounting their focus is on the efficiency properties of stationary equilibria of strictly superadditive games when the discount factor delta is sufficiently large it is shown that delay and the formation of inefficient subcoalitions can occur in equilibrium the latter for some or all orders of proposer however efficient stationary equilibrium payoffs converge to a point in the core as delta approaches one strict convexity is a sufficient condition for there to exist an efficient stationary equilibrium payoff vector for sufficiently high delta

matching and price competition comment the theory of two sided matching markets has interested researchers for its theoretical appeal and relevance to real life applications the matching of medical residents and hospitals in the united states has been studied extensively by alvin e roth 1984 and others the national resident matching program nrmp the matching authority in the us hospital resident matching market runs a centralized matching mechanism that is a variant of the deferred acceptance algorithm of david gale and lloyd s shapley 1962 redesigned by roth and elliott peranson 1999 a recent antitrust case against the nrmp charged that the centralized matching mechanism suppressed wages of residents although the lawsuit itself was dismissed it sparked discussion about the effect of centralized matching on wages and efficiency jeremy bulow and jonathan levin 2006 bl henceforth investigate a matching market with price competition where each firm can hire only one worker and show that a the average wage is lower b profit of each firm is higher c wages are more compressed and d the resulting matching is slightly less efficient in the presence of the matching mechanism than in any competitive equilibrium although bl declare we have chosen our assumptions for analytical simplicity and transparency not as the most realistic possible model of the residency match 654 these results were often interpreted as an argument against the nrmp and led to discussion about potential changes of the matching mechanism vincent p crawford forthcoming for instance proposes the flexible salary match in which hospitals are allowed to indicate several levels of possible wages and medical students are allowed to express preferences over pairs of hospitals and wages we show that conclusions a and b above do not necessarily hold when firms may hire more than one worker and the number of workers in different firms are different more specifically we present an example with multiple positions in which the average worker wage is higher in the equilibrium with the matching mechanism than in a competitive equilibrium and profit of each firm is lower in the equilibrium with the matching mechanism than in a competitive equilibrium our findings may explain why some of the results of bl disagree with empirical findings of muriel niederle and roth 2003 2004 who find little or no effect of the centralized matching on wages in some medical matching markets in the united states note that different firms hire different numbers of workers in many labor markets like the nrmp there are other reasons why the conclusions and policy implications of bl may not be applicable to markets like the nrmp for example a competitive equilibrium may not be a

multi item auctions a collection of items is to be distributed among several bidders and each bidder is to receive at most one item assuming that the bidders place some monetary value on each of the items it has been shown that there is a unique vector of equilibrium prices that is optimal in a suitable sense for the bidders in this paper we describe two dynamic auction mechanisms one achieves this equilibrium and the other approximates it to any desired degree of accuracy

a noncooperative view of coalition formation and the core a noncooperative implementation of the core is provided for games with transferable utility the implementation obtained here is meant to reflect the standard motivation for the core as closely as possible in the model proposed time is continuous this idealized treatment of time is most amenable for capturing an essential feature of the core there is always time to reject a noncore proposal before it is consumated

the dampening effect of bank foreign liabilities on monetary policy revisiting monetary cooperation in east asia abstract this paper addresses the cost of formal monetary cooperation from the perspective of monetary policy effectiveness as banks tend to borrow from abroad in foreign currencies to fund domestic lending monetary policy may have a reduced effect on the credit market and the economy results derived from bank level data in east asia indicate that bank foreign liabilities significantly reduce the effectiveness of the credit channel of monetary policy implying a relatively low cost of giving up monetary autonomy

a noncooperative coalitional bargaining game with random proposers abstract we extend the stahl rubinstein s alternating offer model ton person coalitional bargaining the key feature of the model is the random selection of proposers at every round no delay of agreement occurs in equilibrium for a super additive game in contrast to the fixed order model of chatterjeeet al rev econ stud 60 1993 463 477 when the discount factor of future payoffs is sufficiently high the agreement on the grand coalition is reached if and only if it has the largest value per capita among all coalitions moreover in the limit as the discount factor goes to one all players divide equally the value of the grand coalition regardless of who makes a proposal journal of economic literatureclassification numbers c72 c73 c78

what ever happened to poverty alleviation abstract the failure of many programs directed toward alleviating poverty is better understood than the successes this paper identifies the traits that characterize several better performing programs funded by the ford foundation traits that are not commonly found in such programs all focused narrowly on a particular trade or activity in the beginning used credit as an entry point started by brokering loans rather than lending directly and had leadership linked to powerful institutions participants were already engaged in the economic activities supported by the programs marketing channels existed and powerful consumer groups were often in favor of production by beneficiary groups though these findings seem obvious few programs funded by donors display these characteristics suggesting that donors choose programs and organizations more carefully and not limit their funding to the nongovernmental sector