the litigious plaintiff hypothesis case selection and resolution the process through which cases are selected for litigation cannot be ignored because it yields a set of lawsuits and plaintiffs that is far from a random selection either of potential claims or of potential claimants we present a theoretical framework for understanding the operation of this suit selection process and its relationship to the underlying distribution of potential claims and claimants the model has implications for the trial rate and the plaintiff win rate at trial our empirical analysis using data on over 200 000 federal civil litigations yields results that are strongly consistent with the theory

pretrial bargaining with self serving bias and asymmetric information abstract we introduce self serving bias into the bebchuk rand journal of economics 15 1984 404 model in which trials result from asymmetric information and characterize the equilibrium an increase in the self serving bias of a defendant who receives an offer can under some circumstances reduce the incidence of trial more typically however we find that an increase in the self serving bias of either player increases the incidence of trial an increase in the self serving bias of a player who receives the offer has ambiguous effects on that player s welfare self serving bias serves as a commitment mechanism not to accept offers which are too unfavorable but players with such a bias typically end up in trial more often for the player making the offer we find that an increase in self serving bias unambiguously lowers welfare

exploring the niche overlaps between organizational ecology and industrial economics the goal of this essay is to bring the work of organizational ecologists on population dynamics to the attention of economists and to try to engineer an exchange of ideas between the two subjects following a relatively brief exposition of the basic arguments made by organizational ecologists we explore a number of areas where cross fertilization between organizational ecology and industrial economics seems promising these include examining the limits of competitive exclusion exploring how models that focus on selection between firms might apply to selection between products linking models of population dynamics to models which explain changes in market structures over time understanding the sources of structural inertia which limit the ability of firms to react to market events we conclude by making a few observations on what each group of scholars might learn from the other copyright 2001 by oxford university press

search unemployment and the production of jobs the authors investigate the performance of the economy when search is required to find employment and when the duration of unemployment varies across sectors they assume that in one sector factor markets are frictionless while in the other se ctor idle factors of production must actively search each other out i n order to produce they focus on how well the economy allocates work ers across sectors and the conditions under which the factor mix with in a sector is correct the authors demonstrate that in equilibrium t he search sector is too small and its factor intensity is too asymmet ric copyright 1987 by royal economic society

market clearing and price formation abstract considered here is decentralized exchange of privately owned commodity bundles voluntary transactions take the form of repeated bilateral barters under broad and reasonable hypotheses the resulting process converges to competitive equilibrium price taking behavior is not assumed prices emerge over time they need neither be anticipated nor known at any interim stage

bargaining games with a random sequence of who makes the offers abstract this note relaxes the rigid assumption in recent bargaining theory of a strictly alternating sequence of offers and instead considers the opposite extreme at each bargaining round a random event determines who gets to make an offer irrespective of who made the previous offer the equilibrium of this game is practically identical to the equilibrium of the alternating offers game if the horizon is infinite with a finite horizon the properties of the equilibrium are more satisfying than the properties of the equilibrium of the alternating offers game

why is there no cannery in cannery row exploring a behavioral simulation model of population extinction available ecological models of organizations do not provide satisfactory explanation for population extinction in this article we search for a minimal set of assumptions needed to expand the range of dynamic behaviors of the ecological model of density dependence to admit extinction while preserving its original insight the revised version of the model builds on two core assumptions the first is that organizational populations are linked to their environments through feedback processes of resource generation and consumption as a consequence the carrying capacity for an organizational population changes systematically with its density the second assumption is that organizational vital rates respond with delay to changes in the level of available resources as a consequence organizational founding and mortality rates are affected by expectations that decision makers form about the future state of their environment using computer simulation we test these assumptions and show that the relative speed at which processes of resource regeneration and consumption happen and the speed at which expectations about future levels of resources are revised jointly determine a wide range of evolutionary trajectories that admit population extinction as one distinct possibility the model is validated using multivariate sensitivity analysis techniques we discuss the implications of our findings in the broader context of the current debate on the implications of selective sampling in the study of organizational populations copyright 2012 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

taxation in a two sided search model abstract this paper analyzes the effects of wage and profit taxation in a simple search and bargaining model wage tax effects depend upon the level of unemployment benefits if unemployment benefits are less than search costs or if benefits are taxed as income then a wage tax decreases unemployment it also decreases the wage thereby overshifting the tax burden profit tax effects depend upon job entry in the short run with a fixed number of jobs filled jobs plus vacancies a profit tax decreases unemployment it also raises the wage again overshifting the tax in the long run the converse holds

bargaining search and outside options abstract this paper studies a two sided incomplete information bargaining model between a seller and a buyer the buyer has an outside option which is modeled as a sequential search process during which he can choose to return to bargaining at any time two cases are considered in regime i both agents have symmetric information about the search parameters we find that in contrast to bargaining with complete information the option to return to bargaining is not redundant in equilibrium however the no delay result still holds in regime ii where agents have asymmetric information about the outside option delay is possible the solution characterizes the parameters for renegotiation and those for search with no return to the bargaining table

pretrial bargaining with asymmetric information unilateral versus bilateral payoff relevance author affiliation amy farmer amyf walton uark edupaul pecorino ppecorin cba ua edu acknowledgment we would like to thank akram temimi and two anonymous referees for providing helpful comments on the article 1 introductionasymmetric information is a leading explanation for bargaining failure and the role of asymmetric information has been extensively analyzed in the civil litigation literature 1 most of this literature concerns information that has bilateral payoff relevance in the sense that the information in question affects the expected payoff at trial of both the plaintiff and defendant when there is bilateral payoff relevance trials may be predicted in the equilibrium of the bargaining game regardless of whether the informed or uninformed party makes the offer in this article we analyze information that has unilateral payoff relevance meaning that it affects the expected payoff of one of the two parties to the dispute but not the other as an example suppose the plaintiff has private information on her risk preferences this affects her expected payoff at trial but not the defendant s when there is unilateral payoff relevance there are never inefficient trials in the equilibrium of the game where the informed party makes the offer 2 however there may still be costly disputes in the equilibrium of the game in which the uninformed party makes the offer examples of information with bilateral payoff relevance include information on the probability that the plaintiff will prevail at trial and information on the amount of the judgment to be awarded at trial in the event the plaintiff is victorious in both cases the information clearly affects the expected payoff of both the plaintiff and defendant at trial and these are the types of informational asymmetry considered most often in the literature what type of information has only unilateral payoff relevance one example mentioned above is information on risk preferences farmer and pecorino 1994 swanson and mason 1998 and heyes rickman and tzavara 2004 all examine asymmetric information on risk preferences within the context of the screening model in which the uninformed party makes the offer 3 in each case trials are predicted in the equilibrium of these models as long as trials are not too costly for the participants however other types of information also have only unilateral payoff relevance a large literature on the ultimatum game has provided convincing evidence that under certain circumstances individuals will express a preference for being treated fairly 4 this preference may be expressed specifically by the percentage of her own court costs a player is willing to concede to her opponent via his settlement offer 5 since this preference is not observable and presumably differs across individuals the proposer in a screening game must decide how much of the joint surplus of settlement he will attempt to extract without knowledge of how low he can go before triggering a rejection suppose the judgment is 100 000 and the plaintiff s court costs are 30 000 a plaintiff without a taste for fairness will accept an offer of 70 000 rather than proceed to trial a plaintiff with a taste for fairness might as an example accept no less than 90 000 the defendant then must choose between an offer of 90 000 and 70 000 without knowledge of whether the other party has a taste for fairness or not the defendant will make the low offer if he believes it will be accepted with a sufficiently high probability if the plaintiff does indeed have a taste for fairness she will reject the low offer and a trial will result presumably a mechanism along these lines explains the persistence of disputes in ultimatum game experiments another example of information with unilateral payoff relevance is the degree of litigiousness which can be modeled as differences in perceived court costs on the part of the plaintiff eisenberg and farber 1997

the evolution of comparative or competitive advantage a preliminary report on a study this paper is a preliminary report on a study of the comparative evolution of several major high tech industries in the us japan and western europe in general the paper examines similarities and differences in the ways these industries developed in different countries and the factors explaining those differences the project especially focused on understanding the instances when firms in a particular country gained a strong competitive advantage over firms based in other countries the industries studied are organic chemical products computers semiconductors software numerical controlled machine tools pharmaceuticals in the age of biotechnology and medical devices copyright 1996 by oxford university press

why the microbrewery movement organizational dynamics of resource partitioning in the u s brewing industry1 the number of small specialty brewers in the u s beer brewing industry has increased dramatically in recent decades even as the market for beer became increasingly dominated by mass production brewing companies using the resource partitioning model of organizational ecology this article shows that these two apparently contradictory trends are fundamentally interrelated hypotheses developed here refine the way scale competition among generalist organizations is modeled and improve the theoretical development of the sociological bases for the appeal of specialist organizations products especially those related to organizational identity evidence drawn from qualitative and quantitative research provides strong support for the theory the article offers a brief discussion of the theoretical and substantive issues involved in application of the model to other industries and to other cultures

fairness price stickiness and history dependence in decentralized trade this chapter investigates the implications that social preferences have for the stationary strategic equilibrium of such a decentralized market agents are supposed to be averse to unfairly unfavorable as well as unfairly favorable deals in the spirit of fehr and schmidt 1999 but we stay rather close to standard individualistic preferences the negative weights on advantageous and disadvantageous deviations from what is considered as the fair benchmark are such that utility remains strictly increasing in own surplus share and in contrast to the original fehr schmidt model the fair split need not automatically be a 50 50 division any price between sellers cost and buyers willingness to pay may be the one which for whatever reasons is agents reference point in a given market this makes it possible to consider a more flexible notion of fairness than is usually done it is in line with cognitive dissonance theory from psychology and the noteworthy experiments of binmore et al 1991 1993 where subjects who were triggered to play different bargaining equilibria ended up considering very different surplus distributions as fair

bargaining and value we present and analyze a model of noncooperative bargaining among n participants applied to situations describable as games in coalitional form this leads to a unified solution theory for such games that has as special cases the shapley value in the transferable utility tu case the nash bargaining solution in the pure bargaining case and the recently introduced maschler owen consistent value in the general nontransferable utility ntu case moreover we show that any variation in a certain class of our bargaining procedure which generates the shapley value in the tu setup must yield the consistent value in the general ntu setup

auctions actions and the failure of information aggregation we study a market where k identical and indivisible objects are allocated using a uniform price auction where n k bidders each demand one object before the auction each bidder receives an informative but imperfect signal about the state of the world the good that is auctioned is a common value object for the bidders and a bidder s valuation for the object is determined jointly by the state of the world and an action that he chooses after winning the object but before he observes the state we show that there are equilibria where the auction price is completely uninformative about the state of the world and aggregates no information even in an arbitrarily large auction in the equilibrium that we construct because prices do not aggregate information agents have strict incentives to acquire costly information before they participate in the market also market statistics other than price such as the amount of rationing and bid distributions contain extra information about the state our findings sharply contrast with past work which shows that large auctions aggregate information when there is no ex post action

matching markets with adverse selection abstract this paper considers a market with adverse selection in the spirit of rothschild and stiglitz quart j econ 90 1976 629 the major departure from existing approaches is that we model a decentralized market that is open ended and constantly refilled by new participants e g by new workers and firms in the case of a labor market the major novelty of this approach is that the distribution of types in the market becomes an endogenous variable which is jointly determined with equilibrium contracts as frictions become small we show that the least cost separating contracts are always supported as an equilibrium outcome regardless of the distribution of types among entrants moreover we derive conditions under which this outcome is also unique

getting there exploring the role of expectations and preproduction delays in processes of organizational founding because of preproduction delays environmental conditions at founding cannot explain organization building decisions taken earlier as a consequence environmental conditions at founding cannot explain organizational founding future levels of resource availability may be estimated but not directly observed by potential entrepreneurs at the time at which they decide to enter preproduction in this paper we take these considerations as our starting point to build a dynamic feedback model of organization founding according to the model organizational founding is driven by expectations that entrepreneurs form about future levels of resources and only indirectly by current levels of population density we explore the behavior of the model under a variety of experimental conditions we show that the qualitative behavior of the model is consistent with studies that have linked the duration of preproduction stage with fluctuations in density during population maturity our simulation analyses sustains three main conclusions first historical trajectories of organizational populations that are consistent with empirical observations may be produced by mechanisms that are not directly dependent on density second alternative hypotheses about how expectations are formed produce qualitatively different historical trajectories of density third fluctuations in numbers of organizations are linked to specific aspects of individual organization building decisions

endogenous timing in duopoly games stackelberg or cournot equilibria abstract simultaneous versus sequential play is studied in an extended game in a preplay stage players decide whether to select actions in the basic game at the first opportunity or to wait until observing their rivals first period actions in one extended game players first decide when to select actions without committing to actions in the basic game the equilibrium has a simultaneous play subgame unless payoffs in a sequential play subgame pareto dominate those payoffs in another extended game deciding to select at the first turn requires committing to an action both sequential play outcomes are the equilibria only in undominated strategies

optimal capital structure and bankruptcy choice dynamic bargaining versus liquidation abstract we model a firm s optimal capital structure decision in a framework in which it may later choose to enter either chapter 11 reorganization or chapter 7 liquidation creditors anticipate equityholders ex post reorganization incentives and price them into the ex ante credit spreads using a realistic dynamic bargaining model of reorganization we show that the off equilibrium threat of costly renegotiation can lead to lower leverage even with liquidation in equilibrium if reorganization is less efficient than liquidation the added option of reorganization can actually make equityholders worse off ex ante even when they liquidate on the equilibrium path

the ecology of organizational mortality american labor unions 1836 1985 this research analyzes the disbanding rates of the full population of american national labor unions for the period 1836 1985 it tests the hypothesis drawn from population ecology theory that di

dynamic matching two sided incomplete information and participation costs existence and convergence to perfect competition consider a decentralized dynamic market with an infinite horizon and participation costs in which both buyers and sellers have private information concerning their values for the indivisible traded good time is discrete each period has length and each unit of time continuums of new buyers and sellers consider entry traders whose expected utility is negative choose not to enter within a period each buyer is matched anonymously with a seller and each seller is matched with zero one or more buyers every seller runs a first price auction with a reservation price and if trade occurs both the seller and the winning buyer exit the market with their realized utility traders who fail to trade continue in the market to be rematched we characterize the steady state equilibria that are perfect bayesian we show that as converges to zero equilibrium prices at which trades occur converge to the walrasian price and the realized allocations converge to the competitive allocation we also show the existence of equilibria for sufficiently small provided the discount rate is small relative to the participation

equilibrium in a market with sequential bargaining this paper considers a market where pairs of agents who are interested in carrying out a transaction are brought together by a stochastic process and upon meeting initiate a bargaining process over the terms of the transaction the basic bargaining problem is treated with the strategic approach the paper derives the steady state equilibrium agreements analyzes their dependence on market conditions such as the relative numbers of agents of different types and discusses their relations with the competitive equilibrium outcome and other results in the search equilibrium literature this paper considers a market that operates in the following way pairs of agents who have mutual interest in carrying out a transaction are brought together by a stochastic process when two agents meet they initiate a bargaining process over the terms of the transaction if two agents reach an agreement a transaction takes place and they leave the market of course the bargaining positions and hence the agreement reached in any particular meeting will be affected by the conditions prevailing in the market these will include the chances that each of the negotiating parties have of meeting other partners in the event that the agreement in the current negotiations is delayed also the expected length of time required to achieve an alternative transaction and the expected behavior of alternative partners the study of such a market mechanism is of interest for two reasons firstly it captures some realistic aspects of the trade in certain specific markets e g asset markets such as housing and some labor markets secondly it contributes to an understanding of the micro mechanisms of price formation and their role in shaping market outcomes in both cases the features studied are largely neglected in the traditional market equilibrium analyses the related literature includes the articles by diamond 4 5 diamond and maskin 6 mortensen 8 9 and zusman and bell 13 these articles consider markets of the type described above in which transactions are concluded at pairwise meetings of agents the major difference between our work and these articles is in the approach to the basic bargaining problem in the cited articles it is assumed that a meeting is concluded with an instantaneous agreement which divides the associated surplus in an arbitrary predetermined way when the surplus is assumed to be divided equally the division rule is in fact nash s axiomatic bargaining solution in contrast the present paper treats the basic bargaining problem with the strategic approach see rubinstein 19 which constitutes an attempt to look into the bargaining black box this approach explicitly models the time dimension of the bargaining process describes in detail the bargaining procedure and justifies the agreement as a perfect equilibrium in

competition policy collusion and tacit collusion in this paper i pursue three goals the first is to model collusion in a way that is distinct from noncooperative collusion the second and third are to develop a particular specification of a standard model of noncooperative collusion that permits explicit solution for equilibrium outputs and reversion thresholds and to extend this analysis to allow for a deterrence based competition policy that investigates conduct based on observed high prices investigation thresholds

bilateral bargaining in networks abstract each connected pair of nodes in a network can jointly produce one unit of surplus a maximum number of linked nodes is selected in every period to bargain bilaterally over the division of the surplus according to the protocol proposed by rubinstein and wollinsky equilibrium in a market with sequential bargaining econometrica 53 1985 1133 1150 all pairs which reach an agreement obtain the discounted payoffs and are removed from the network this bargaining game has a unique subgame perfect equilibrium that induces the dulmage mendelsohn decomposition partition of the bipartite network of the set of nodes in this network

what s wrong with the fundamental existence and welfare theorems abstract the definition of walrasian competitive equilibrium on which the fundamental existence and welfare theorems rest assumes that all trading in decentralized exchange economies takes place at the final equilibrium prices which further implies that at equilibrium prices the value of each agent s equilibrium commodity bundle is equal to the value of her endowment and equal treatment of agents with the same preferences technology and endowment the logic of the theorems supports the conclusion that in competitive economies prices the allocation of commodities and the distribution of income and material welfare are determined by the preferences technology and endowments of the agents in real world markets however agents can discover equilibrium prices only by making mutually advantageous transactions at disequilibrium prices any sequence of such transactions leads stably to an exchange equilibrium at which the offer prices of all agents are close to each other and which exhausts all private opportunities to realize economic surpluses the exchange equilibrium set however is in general a continuum and the exact equilibrium reached depends on the path of transactions in general exchange equilibria do not treat agents with the same preferences and endowments equally and the exchange equilibrium allocation of commodities does not conserve the values of individual agent endowments existence and stability of exchange equilibrium are transparent consequences of the logic of voluntary exchange but because of transaction path dependence equilibrium prices allocations of commodities and the distribution of wealth and economic welfare are not determined by agents preferences and endowments

perfect equilibria in sequential bargaining games with nonlinear utility functions bargaining over a price between a seller and a buyer is analyzed as a noncooperative sequential game the perfect equilibrium of the game depends on the shape of the players utility functions which may be nonlinear it also depends on the discount rates of the two players if discount rates approach zero and the ratio between them equals one the equilibrium price will correspond to the nash bargaining solution a bargaining game with a finite number of potential bargaining periods is also studied the equilibrium price approaches the nash bargaining price when the number of potential periods becomes large

a time to grow and a time to die growth and mortality of credit unions in new york city 1914 1990 one vision of organizational evolution suggests that old and large organizations become increasingly dominant over their environment a second suggests that as organizations age they become less able to respond to new challenges in this article the authors investigate which of these visions best characterizes the evolution of state chartered credit unions in new york city from 1914 through 1990 by analyzing the effects of organizational age size and population density on rates of organizational failure and growth the authors find evidence that old and small institutions are more likely to fail while young and small organizations have the highest growth rates

quick responses in duopoly ensure monopoly pricing if firms in a homogeneous duopoly game can respond with negligible delay to their rival s price changes equilibrium is unique at the monopoly price

the political economy of scandinavian neutrality the article examines whether three of the neutral nations of eu rope sweden switzerland and finland have adhered to their choice of armed neu trality by being self reliant on their own defenses using a joint product model the authors specify a reduced form equation for a nation s demand for military expenditures empirical estimates of these demands suggest that sweden free rod e on nato after institution of the doctrine of flexible response however the o thertwo netural nations have been self reliant throughout the period 1957 82 w ith pooled data cross equation restrictions highlight theessential differences between nato and nonaligned scandinavian countries copyright 1986 by the editors of the scandinavian journal of economics

things change dynamic resource constraints and system dependent selection in the evolution of organizational populations an extensive empirical literature has demonstrated the existence of density dependent selection in organizational vital rates this research has also shown that historical trajectories followed by organizational populations only partly conform to the predictions of the original model inconsistencies with the model s predictions prompt a series of questions why do organizational populations suddenly collapse after reaching a peak why do organizational populations oscillate after collapsing what causes extinction of organizational forms to address these questions scholars have proposed a variety of modifications to the original model of density dependence all have merit but none is completely satisfying the main objective of this study is to narrow the gap between theories models and observed historical trajectories by identifying a unitary analytical framework that can account for the variety of empirical trajectories typically followed by mature organizational populations the model that we present is based on the hypothesis of system dependent selection according to which patterns of resource availability are produced by processes that are partly endogenous to organizational populations the main analytical insight of the study is that under conditions of dynamic resource constraints introduced by system dependent selection the presence of population level inertia leads to a rich variety of historical trajectories during population maturity we show that this result holds in the absence of any particular assumption about the microstructure of organizational populations possible trajectories include sustained oscillations resurgence and extinction

long term evolutionary change in organizational populations theory models and empirical findings in industrial demography organizational ecology is a theoretical perspective on organizations that attempts to explain long term social evolution especially the rise and fall of organizational populations this artist review the most sustained demographic research program of the perspective one based on the density dependent model of legitimation and competition it discusses the theoretical model and evidence from industrial demography that has been offered in its support as well as criticisms that have been registered unresolved research problems of the program are identified and three major models in progress attempting to address these open questions are discussed and compared copyright 1997 by oxford university press

on noncooperative oligopoly equilibrium in the multiple leader follower game abstract in this paper we provide new proofs of existence and uniqueness of a stackelberg market equilibrium for a multiple leader follower noncooperative oligopoly model in which heterogeneous firms compete on quantities to this end we consider a two stage game of complete and perfect information in which many leaders interact strategically with many followers the stackelberg market equilibrium constitutes a pure strategy subgame perfect nash equilibrium of this game existence and uniqueness are more difficult to handle in this framework insofar as the presence of several leaders and followers displays a richer set of strategic interactions then to prove existence we notably provide a new procedure to determine the conditions under which the optimal behavior of the followers may be written as functions of the sole strategy profile of the leaders some examples outline our procedure and discuss our assumptions

for whom the bell tolls ecological perspectives on industrial decline and resurgence over the last twenty five years research in organizational ecology has given rise to a proliferation of mechanisms that seek to explain processes of decline and resurgence in mature industries in this article i consider four of these mechanisms including arguments concerning competitive intensity temporal heterogeneity population inertia and community ecology and apply them to explain the evolution of us medical schools between 1765 and 1999 for this population mechanisms relying on organizational variation in competitive intensity especially mass dependence accounts perform poorly in terms of theoretical and empirical adequacy models that incorporate temporal heterogeneity in industrial competition and legitimation explain more variation in patterns of growth and decline but are sensitive to right censoring and model specification ecological mechanisms that explicitly analyze population inertia or community ecology seem to be the most promising in terms of theoretical and empirical consistency ironically this finding seems to vindicate the model of population growth advanced in hannan and freeman s seminal article which has sometimes been discounted as failing to represent the evolution of mature industries in a realistic manner copyright 2004 oxford university press

optimal unemployment insurance in search equilibrium should unemployment benefits be paid indefinitely at a fixed rate or should the rate decline or increase over a worker s unemployment spell we examine these issues using an equilibrium model of search unemployment the model features worker firm bargaining over wages free entry of new jobs and endogenous search effort among the unemployed the main result is that an optimal insurance program implies a declining benefit sequence over the spell of unemployment numerical calibrations of the model suggest that there may be nontrivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system

on the status of the nash type of noncooperative equilibrium in economic theory in economic theory the nash type of noncooperative equilibrium is a widely used equilibrium concept nevertheless the concept is frequently misunderstood and misleading explanations and interpretations are often given this paper presents a sample of such frequently appearing misleading explanations and goes on to explain why they are misleading the case for using the nash noncooperative equilibrium concept is stronger than what is implied by the many misleading statements found in the literature a basic issue is whether it can be argued that decisions in accordance with the noncooperative equilibrium theory are individually rational decisions this issue is not covered by the classical rationality postulate in economic theory this problem is tackled by stating certain postulates which may be taken as defining individual rationality in situations of noncooperative interaction it is shown that nash behavior satisfies these postulates

bargaining in stationary networks we study an infinite horizon game in which pairs of players con nected in a network are randomly matched to bargain players who reach agreement are replaced by new players at the same positions in the network we show that all equilibria are payoff equivalent the payoffs and the set of agreement links converge as players become patient several new concepts mutually estranged sets partners and shortage ratios provide insights into the relative strengths of the positions in the network we develop a procedure to deter mine the limit equilibrium payoffs for all players characterizations of equitable and nondiscriminatory networks are also obtained jel c78 d85 competitive equilibrium theory assumes large and anonymous markets in which every buyer can trade with every seller underlying these assumptions are standard goods and services that may be traded at low transaction costs by agents who are not in specific relationships with one another however in many markets goods and services are heterogeneous e g cars apartments or need to be tailored to particular needs e g manufacturing inputs technical support furthermore trad ing opportunities may depend on transportation costs social relationships infor mation advertising trust technological compatibility joint business opportunities free trade agreements etc in such cases it is natural to model the market using a network where only pairs of connected agents may engage in exchange new theories are needed to explore the influence of the network structure on market outcomes many questions arise how does an agent s position in the net work determine his bargaining power and the local prices he faces who trades with whom and on what terms when are prices uniform in the network one possible conjecture is that an agent s bargaining power is determined by his relative number of connections in the network however this simple theory is implausible consider the network of four sellers located at the top nodes and nine buyers located at the bottom nodes depicted in figure 1 assume that each seller supplies one unit of a homogeneous indivisible good each buyer demands one unit of the good and all buyers have identical values for the good the buyer located in the middle has the largest number of links in the network as he is connected to each

bilateral trading and incomplete information price convergence in a small market abstract we study a model of decentralised bilateral interactions in a small market where one of the sellers has private information about her value in addition to this seller with private information there are two identical buyers and another seller whose valuation is commonly known to be in between the two possible valuations of the seller with private information we consider an infinite horizon game with simultaneous one sided offers and simultaneous responses we construct one particular pbe of the game and show that as the discount factor goes to 1 prices in all transactions converge to the same value we then show that this is the case with any stationary equilibrium of the game that is the asymptotic outcome is unique across all stationary equilibria

litigation and settlement under two sided incomplete information this paper deals with a simple game of litigation and settlement with incomplete information parties are assumed to have the choice between settling their dispute out of court or resorting to costly litigation the set of sequential equilibria is characterized and conditions are given under which an efficient equilibrium does exist efficient equilibria however will be ruled out by various tests of refinement a comparative statics analysis is carried out with respect to the quality of private information which parties are assumed to receive before any moves have to be made

axiomatic characterizations of rational choice in strategic environments for more than forty years economists have wrestled with the elusive notion of rational behavior in strategic environments generating a variety of competing approaches even for simple simultaneous move games four distinct solution concepts including the notions of nash equilibria correlated equilibria rationalizability and iterated dominance currently have some standing as theories of strategic rationality here i propose four axioms for rational choice in strategic environments and use these to characterize the sets of pure strategies that players may select under each of the solution concepts mentioned above my results underscore both the similarities and differences between the four concepts

should buyers or sellers organize trade in a frictional market to answer the question in the title this article characterizes the socially efficient organization of the market with search frictions the efficient organization depends on the relative elasticity in the supply between the two sides of the market the costs of participating in the market and organizing trade and the a symmetry in matching we also show that the social optimum can be implemented by a realistic market equilibrium where the organizers set up trading sites to direct the other side s search the results provide a unified explanation for why trade has often been organized by sellers in the goods market by buyers firms in the labor market and by both sides in the asset market the analysis also sheds light on how the efficient market organization can change with innovations such as e commerce and just in time production

sticky aspirations organizational time perspective and competitiveness managers evaluate the organizational performance by comparing it with historical aspiration levels and are more likely to make strategic changes when the performance falls below the aspiration level historical aspiration levels can be updated with different speed because a focus on current performance will lead to quickly adjusting aspiration levels where historical performance has low weight while a focus on past performance will lead to slowly adjusting performance levels where the current performance has low weight a simulation model of aspiration level learning and strategic change under uncertainty yields the following findings 1 slow adjustments of an aspiration level gives higher performance across different levels of environmental uncertainty 2 slow adjustments of aspirations will dominate in populations with different adjustment levels if low performing organizations are removed and replaced by organizations of the form currently performing best and 3 stronger selection leads to faster domination by slow adjusters empirical analysis of format changes in radio stations finds slow adjustment of aspiration levels to be prevalent and finds slower adjustment in competitive markets as predicted

the evolution of new industries and the determinants of market structure several empirical regularities concerning firm growth rates and industry firm size distributions have been developed by studying primarily mature industries the primary purpose of this article is to bring together and extend empirical regularities on the evolution of new industries and to use these regularities to gain further insight into the forces governing industry evolution to explain these regularities a model is constructed which emphasizes how factors governing the early evolution of industries may shape their market structure at maturity it stresses how chance events and exogenous factors that influence the number of potential entrants to the industry the growth rate of incumbents and the ease of imitation of industry leaders will influence the ultimate number and size distribution of firms in the industry

the imprint of labor markets on entrepreneurial performance abstract using the 1979 2010 waves of the national longitudinal survey of youth our study tracks the earnings of individual entrepreneurs from the beginning of their entrepreneurial careers examining the effects of labor markets on their earnings trajectory results show that apart from self selection labor markets impose a penalty on the initial earnings of entrepreneurs who start a business in adverse economic conditions a disadvantage that persists for up to a decade we also identify two factors expected to alleviate the imprinting effect of labor markets migration outside the imprinting environment and serial entrepreneurship

on trade negotiation and trade diversification abstract the paper investigates the impact of a country s other trade opportunities or options on negotiated import quotas the predictions of the nash bargaining framework are supported by the data on canadian clothing import quotas and measures of outside options of developing countries with whom canada has negotiated voluntary export restraints

adverse selection with endogenous information in insurance markets abstract models of adverse selection assume that risk type is known to the consumer but not to the insurer many analyses suggest that information has zero social value and negative prior value why then would consumers become informed what is the incentive to gather information and why does adverse selection arise we show that the private value of information is non negative only if insurers cannot observe consumers information status or if consumers can conceal their informational status we examine the existence and characterization of equilibria under different configurations of information costs and benefits finally we examine some welfare implications of the endogenous information model for public policy regarding genetic testing and for state regulations concerning hiv testing

the life cycle of a competitive industry firm numbers first rise then later fall as an industry evolves this nonmonotonicity is explained using a competitive model in which innovation opportunities fuel entry and relative failure to innovate prompts exit equilibrium time paths for price and quantity also share features of the data the model is estimated using data from the u s automobile tire industry a particularly dramatic example of the nonmonotonicity in firm numbers

credible pretrial negotiation pretrial negotiation is a structured environment in which to study bargaining with incomplete information when a plaintiff believes that a defendant owes him damages he may first attempt to reach a private settlement before resorting to a costly court imposed judgment a central issue in their negotiations is whether the plaintiff s threat to litigate is credible it is possible for the plaintiff to undermine the credibility of his litigation threat by making a settlement demand that is insufficient as a result the plaintiff must raise his settlement demand to limit the amount of bad news he can learn if his offer is rejected when this credibility constraint is binding traditional comparative static results are reversed in addition even though the defendant is being sued he wants the plaintiff s threat to be credible

on the nash bargaining solution with noise abstract suppose two parties have to share a surplus of random size each of the two can either commit to a demand prior to the realization of the surplus as in the nash demand game or remain silent and wait until the surplus was observed adding the strategy to wait results in two strict equilibria in each of which one player takes almost the whole surplus provided uncertainty is small if commitments concern only who makes the first offer the more balanced nash bargaining solution is approximately restored in all cases commitment occurs in equilibrium despite the risk of breakdown of negotiations

brand loyalty and market equilibrium two concepts of brand loyalty are defined inertial brand loyalty resulting from time lags in awareness and cost based brand loyalty resulting from intertemporal utility effects their market level implications are formally derived in a continuous time model it is found that inertial brand loyalty leads to equilibria with price dispersion while cost based brand loyalty also may allow single price equilibria in all cases as brand loyalty vanishes so does the difference between the average trading price and the price which obtains with no brand loyalty consistent with empirical results the theory predicts that the relationship between market share and performance is positive in cross sectional studies but flat in time series studies the theory is also consistent with the view that market share is an asset in itself after developing the theory several strategic implications are drawn in the end some questions for further theoretical and empirical research are raised