a market to implement the core abstract i present a mechanism whose subgame perfect equilibrium outcomes coincide with the core of an underlying convex tu game the mechanism resembles an asset market in which one of the players is randomly selected as a broker who centralizes trade in addition the rules of the mechanism are independent of the coalitional function therefore the mechanism is useful for an incompletely informed designer who wishes to implement the core of these games the mechanism is inspired by the reduced games relevant for the consistency of the core journal of economic literature classification numbers c71 and c72

the price of beer this paper is an empirical exploration into factors which are responsible for differences in the inter state price of beer though primarily a statistical exercise the current work has implications for policy decisions in particular the role of taxes and regulatory constraints on the relationships between brewer wholesaler and retailer are highlighted using an as yet untapped data source regression analysis indicates that a substantial proportion of the variance in the inter state price of beer can be explained by demand pressure transportation costs and the price of substitutes as well as taxes and the presence of legally mandated exclusive territories governing the wholesale distribution of beer

nash implementation a complete characterization the authors extend e maskin s results on nash implementation first they establish a condition that is both necessary and sufficient for nash implementability if there are three or more agents the case covered by maskin s sufficiency result second and more important they examine the two agent case for which there existed no general sufficiency results the two agent model is the leading case for applications to contracting and bargaining for this case too they establish a condition that is both necessary and sufficient the authors use their theorems to derive simpler sufficiency conditions that are applicable in a wide variety of economic environments copyright 1990 by the econometric society

a life cycle consumption model with liquidity constraints theory and empirical results a structural consumption model incorporating endogenous liquidity constraints is fit to a cross section of 798 u s families liquidity constrained families are estimated to constitute 19 4 percent of the population sampled a group that accounts for 16 7 percent of consumption in the population sampled in sample simulations of the model suggest that a temporary tax has three to four times more impact on aggregate consumption than it would if liquidity constraints were not in effect copyright 1987 by the econometric society

vertical antitrust policy as a problem of inference the legality of nonprice vertical practices in the u s is determined by their likely competitive effects an optimal enforcement rule combines evidence with theory to update prior beliefs and specifies a decision that minimizes the expected loss because the welfare effects of vertical practices are theoretically ambiguous optimal decisions depend heavily on prior beliefs which should be guided by empirical evidence empirically vertical restraints appear to reduce price and or increase output thus absent a good natural experiment to evaluate a particular restraint s effect an optimal policy places a heavy burden on plaintiffs to show that a restraint is anticompetitive

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

advertising and the us market demand for beer the us per capita market demand for beer is empirically estimated to determine the effect of advertising on the demand for beer the empirical results indicate that the most important determinants of demand are the price of beer the price of substitutes demographic factors and a light beer dummy variable the positive effects of income and lagged consumption appear to be small although many have argued that advertising promotes beer consumption the empirical results of this study do not support this hypothesis

consumption with liquidity constraints an analytical characterization abstract how do liquidity constraints affect households this is a well researched subject with remarkably few theoretical results this paper bridges this gap by providing a closed form expression for consumption with liquidity constraints for a wide class of utility functions hara using this expression i prove that the consumption function is strictly concave in wealth if a relevant liquidity constraint exists moreover households respond to a tightening of the liquidity constraint by reducing consumption becoming more sensitive to wealth changes and having a more concave consumption function in wealth these results thus provide theoretical underpinnings for how contractions in credit supply affect households

minimal cooperation in bargaining abstract mid point domination requires that the solution outcome dominate or be dominated by a reference point by investigating two different formulations of the condition we present characterizations of the nash and the kalai rosenthal solutions for n person bargaining problems

international externalities strategic interaction and domestic politics abstract domestic politics can sometimes play an influential role when externalities have strategic and international implications if voters delegate the choice to policymakers and if individual countries independently determine their environmental policy using a consumption tax on the emissions generating good the result could be an outcome that is inferior to the one preferred by the median voter in the absence of delegation on the other hand if the international externality is unilateral in nature rather than reciprocal we find that delegation is largely irrelevant since voters choice of policymaker is no longer strategic in character similarly if voters anticipate policymakers successfully coordinating their policies at a later stage there also will be no difference between the policymakers and the median voters aggregate weighting of environmental emissions

on risk aversion and bargaining outcomes abstract we revisit the well known result that asserts that an increase in the degree of one s risk aversion improves the position of one s opponents to this end we apply yaari s dual theory of choice under risk both to nash s bargaining problem and to rubinstein s game of alternating offers under this theory unlike under expected utility risk aversion influences the bargaining outcome only when this outcome is random namely when the players are risk lovers in this case an increase in one s degree of risk aversion increases one s share of the pie

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

misrepresentation of utilities in bargaining pure exchange and public good economies in order to analyze bargaining in pure exchange and public good economics when the agents are not informed about their opponents payoffs we embed each bargaining problem into a noncooperative game of misrepresentation in pure exchange public good economies with an arbitrary number of agents whose true utilities satisfy a mild assumption the set of allocations obtained at the linear strategies nash equilibria of this game is equal to the set of constrained walrasian lindahl allocations with respect to the agents true utilities without this assumption the result holds for two agent pure exchange economies and under alternative assumptions for public good economies c 2002 elsevier science usa

are incentives against economic justice abstract we consider the problem of fairly allocating a social endowment of indivisible goods and money when the domain of admissible preferences contains but is not restricted to quasi linear preferences we analyze the manipulability of the generalized money rawlsian fair gmrf solutions i we show that the nash and strong nash equilibrium correspondences of the preference revelation game form associated with each gmrf solution coincide with the no envy solution in equilibrium efficiency is preserved according to agents true preferences ii a corollary is that the gmrf solutions naturally implement the no envy solution in nash and strong nash equilibria

nash equilibrium and welfare optimality if is a set of social alternatives a social choice rule scr assigns a subset of a to each potential profile of individuals preferences over a where the subset is interpreted as the set of welfare optima a game form or mechanism implements the social choice rule if for any potential profile of preferences 1 any welfare optimum can arise as a nash equilibrium of the game form implying in particular that a nash equilibrium exists and 2 all nash equilibria are welfare optimal the main result of this paper establishes that any scr that satisfies two properties monotonicity and no veto power can be implemented by a game form if there are three or more individuals the proof is constructive

strategic delegation in bargaining abstract principals have the opportunity to delegate to an agent in the context of the nash bargaining model this paper resolves a shortcoming in the related bargaining literature in equilibrium a symmetric outcome typically will not result and multiple equilibria exist

exclusive territories and manufacturers collusion this paper highlights the rationale for exclusive territories in a model of repeated interaction between competing supply chains we show that with observable contracts exclusive territories have two countervailing effects on manufacturers incentives to sustain tacit collusion first granting local monopolies to retailers softens competition in a one shot game hence punishment profits are larger thereby rendering deviation more profitable second exclusive territories stifle deviation profits because retailers of competing brands adjust their prices to the wholesale contract offered by a deviant manufacturer whereas intrabrand competition prevents such instantaneous reaction we show that the latter effect tends to dominate thereby making exclusive territories a more suitable organizational mode to cooperate these insights are robust to endogenous communication between manufacturers we also consider retailers service investments here a novel effect emerges that softens the procollusive value of exclusive territories retailers of a deviant manufacturer increase investments which renders deviation more profitable this paper was accepted by preyas desai marketing

delegation and threat in bargaining abstract two principals nations appoint one agent each to bargain over the provision of a public good two institutional set ups are studied each with a different level of authority given to the agents here authority means the right to decide the own side s provision if negotiations break down in equilibrium the principals choose agents with preferences differing from their own the low authority equilibrium pareto dominates with regard to the principals the case of the principals deciding on the provisions simultaneously autarchy the high authority equilibrium is pareto dominated by the low authority equilibrium and it may even be dominated by autarchy journal of economic literatureclassification numbers c71 and c72

the permanent income hypothesis consumption euler relations are estimated with data from the 1986 1991 us consumer expenditure survey without creating a synthetic panel the stochastic implications of the permanent income hypothesis generally are not rejected and there is little evidence of liquidity constrained or rule of thumb behavior the results are robust with respect to consumption category changes in sample and choice of instruments 1999 elsevier science b v all rights reserved

comparative risk aversion abstract even when some risk prospects have no certain equivalents increases in risk aversion are equivalent to concave transformations of the utility function strict or sharp increases in risk aversion correspond to concave and non linear or strictly concave transformations respectively

maximal manipulation of envy free solutions in economies with indivisible goods and money abstract we consider the problem of the fair allocation of indivisible goods and money with non quasi linear preferences the purpose of the present study is to examine strategic manipulation under envy free solutions we show that under a certain domain richness condition each individual obtains the welfare level of his optimal envy free allocation by maximally manipulating the solutions this maximal manipulation theorem is helpful in analyzing the set of nash equilibrium allocations in the direct revelation games associated with a given envy free solution if an envy free solution satisfies a mild condition the set of nash equilibrium allocations in its associated direct revelation game coincides with that of envy free allocations

self optimality and efficiency in utility distortion games in social choice problems where players may strategically misrepresent their preferences we call a profile of preferences self optimal if reporting them is a nash equilibrium given that they are the true preferences self optimality can be interpreted as a very weak honesty requirement we apply the self optimality concept to a utility distortion game in the context of bargaining and obtain a characterization of efficient nash equilibria

nash implementation of the nash bargaining solution using intuitive message spaces abstract we provide mechanisms for the nash implementation of the nash bargaining solution if the set of possible payoff allocations is unknown to the planner while the status quo is known agents report payoff regions compatible with the status quo we remark that message spaces can be further reduced

coalition formation in games of fair division abstract i consider economies with a single indivisible good and money allowing agents to form coalitions i show that the set of equilibrium allocations in the manipulation game associated with any subcorrespondence of the no envy correspondence coincides with the set of envy free allocations for the true preference profile

nash bargaining and risk aversion it is widely accepted among axiomatic bargaining theorists that if one bargainer is more risk averse than a second the second will be a tougher bargaining opponent than the first against all opponents we argue that this relationship between risk aversion and bargaining toughness is both highly fragile and more nuanced than previously articulated in the nash and kalai smorodinsky bargaining frameworks we establish that when a bargainer is compared with a second who is almost globally more risk averse than the first the supposedly immutable relationship between bargaining effectiveness and risk aversion evaporates specifically we identify an upper hemicontinuity failure of a correspondence which maps the power set of all lotteries to those utility pairs that satisfy our almost global comparative risk aversion relation on these subsets we trace the consensus view that tougher bargainers are less risk averse to an exclusive focus on precisely the point at which this correspondence implodes

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

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

achieving efficiency with manipulative bargainers abstract two agents bargain over the allocation of a bundle of divisible commodities after strategically reporting utility functions to a neutral arbitrator the outcome is decided by using a bargaining solution concept chosen from a family that includes the nash and the raiffa kalai smorodinsky solutions when reports are restricted to be continuous strictly increasing and concave it has been shown that this kind of distortion game leads to inefficient outcomes we study the distortion game originated when agents are also allowed to claim non concave utility functions contrasting with the previous literature any interior equilibrium outcome is efficient and any efficient allocation can be supported as an equilibrium outcome of the distortion game in a similar fashion to the nash demand game we consider some uncertainty about the opponent s features to virtually implement the nash bargaining solution

efficiency effects of exclusive territories evidence from the indiana beer market the welfare effects of vertically imposed exclusive territories and the appropriate antitrust policy toward them have long been debated this paper sheds light on the exclusive territory controversy by examing the effects of indiana s 1979 ban on the grant of exclusive territories to beer wholesalers using time series data for 1948 1990 we find the ban reduced beer consumption in indiana by 6 percent coupled with previous evidence that indiana s ban reduced price our results suggest that exclusive territories in the beer industry increase demand and enhance welfare by stimulating the provision of dealer services

deterring fraud the role of resale price maintenance the economics of fraud like the economics of information itself enjoys a limited but growing literature while economists since alfred marshall have recognized the importance of brand name capital and reputation in protecting consumers against fraud marshall 1949 4 xi only recently has the profession been able to build rigorous models for analyzing market transactions in which the quality of traded goods is subject to uncertainty and deception in a pioneering paper george akerlof 1970 presented a model in which buyer skepticism about the quality of privately offered used cars becomes so intense that all potential sellers of nonlemon used cars are driven from the market leaving it entirely populated with lemons as analyzed by michael spence 1973 this phenomenon may occur because nonlemon owners lack adequate signaling mechanisms specifically an effective signal would be an activity or characterusing a model like that of klein and leffler s we demonstrate theoretically that a manufacturer s desire to signal relative quality differences by relative retail price differences may be thwarted by the misleading markups of independent retailers resale price maintenance is one instrument that a manufacturer can use to avoid this problem we present empirical evidence from a recent antitrust case in which forcing a manufacturer to drop resale price maintenance did lead to misleading and also higher markups

a non cooperative bargaining game with risk averse players and an uncertain finite horizon abstract for an alternating offer bargaining game with an uncertain horizon the equilibrium payoff to a player is greater the less risk averse is he relative to his opponent as the horizon becomes infinite in length the equilibrium partition converges to the nash bargaining solution

manipulation of preferences and relative utilitarianism abstract given n agents with who wish to divide m commodities consider the n person noncooperative game with strategies consisting of concave increasing utility functions and whose outcomes are the relative utilitarian solution any constrained equal income competitive equilibrium allocation for the true utilities is shown to ba a nash equilibrium outcome for the noncooperative game conditions are presented under which these are the only pure strategy equilibrium outcomes journal of economic literature classification numbers c72 c78 d71

strategy proof risk sharing abstract we consider risk sharing problems with a single good and a finite number of states agents have a common prior and their preferences are represented in the expected utility form and are risk averse we study efficient and individually rational risk sharing rules satisfying strategy proofness the requirement that no one can ever benefit by misrepresenting his preference when aggregate certainty holds we show that fixed price selections from walrasian correspondence are the only rules satisfying efficiency individual rationality and strategy proofness however when aggregate uncertainty holds we show that there exists no rule satisfying the three requirements moreover in the two agents case we show that dictatorial rules are the only efficient and strategy proof rules dropping the common prior assumption in the model we show that this assumption is necessary and sufficient for the existence of rules satisfying the three main requirements in the two agents and aggregate certainty case

markets beer in germany and the united states between 1950 and 2000 the four firm producer concentration ratio for beer increased from 22 to 95 in the united states and anheuser busch s share of domestic output ballooned from 6 to 54 percent in germany concentration has risen but it remains low in 2000 the four firm producer concentration ratio was just 29 and the eight firm ratio in germany was smaller than the one firm ratio in the united states in 2005 after five years of important mergers involving big brewers the german beer industry was still much less concentrated than its american counterpart in this article i discuss several candidate explanations for the failure of beer producer concentration to rise as much in germany as in the united states the relevance of the new technologies to german brewers the preferences of german consumers the rules for advertising on german television and other factors largely absent from the consensus interpretation of american experience i find that market structure depends on a remarkably broad range of factors extending well beyond technological opportunity and market size

let them cheat abstract we consider the problem of fairly allocating a bundle of infinitely divisible goods among a group of agents with classical preferences we propose to measure an agent s sacrifice at an allocation by the size of the set of feasible bundles that the agent prefers to her consumption as a solution we select the allocations at which sacrifices are equal across agents and this common sacrifice is minimal we then turn to the manipulability of this solution in the tradition of hurwicz 1972 we identify under some mild assumptions on preferences the equilibrium allocations of the manipulation game associated with this solution when all commodities are normal for each preference profile each equal division constrained walrasian allocation is an equilibrium allocation conversely each equilibrium allocation is equal division constrained walrasian furthermore we show that if normality of goods is dropped then equilibrium allocations may not be equal division constrained walrasian

the services explanation for resale price maintenance deleterious results missed in the economics literature and in legal decisions acknowledgment we thank the participants of the economic policy and enforcement branch seminar series in particular alan gunderson patrick hughes and dennis lu the participants of the 2011 canadian economic association meeting especially patrick rey the participants of the 2011 international industrial organization conference for their feedback and the anonymous referees who provided valuable and detailed comments in an earlier draft the authors take responsibility for all remaining errors the views and opinions presented in this article do not necessarily represent those of the canadian competition bureau 1 introductionantitrust policy and court decisions toward resale price maintenance rpm have been influenced by literature that either emphasizes efficiency arguments or portrays rpm as a mechanism that may enable anticompetitive behavior such as collusion or exclusion as the portraying goes it is not rpm that should be abolished rather it is the anticompetitive behavior that must be eradicated however our analysis shows that rpm can indeed be a more socially harmful vertical restraint than has been recognized in the literature in our model rpm is a unilateral practice in isolation that is it is not an element of any illegal or legal strategic interaction among market participants those efficiency enhancing influential ideas are manifest in the 2007 u s supreme court ruling leegin 1 in the legal context 2 since leegin rpm is no longer a per se antitrust violation it is our concern that this current apparent legal leniency toward rpm stretches too far in light of the results of our model it is advisable that antitrust agencies remain vigilant against potentially harmful rpm practices even when apparently used in the way described by telser 1960 we focus on the presales services that inform consumers about the true value of a product prepurchase 3 which provides the single standard for measuring welfare we model optimizing behavior of retailers leading to zero profit no rents equilibrium with an endogenous wholesale price our post rpm demand need not be and in fact is not value in use it is the expected value in use with greater information this distinction is crucial for exposing flaws in some literature that unfortunately have had pivotal impacts on policy and court decisions 4 this has been unnoticed even by prominent dissenting authors 2 related literatureour departing point is telser s 1960 free riding rationale for rpm when manufacturers want retailers to offer demand stimulating services to consumers but telser does not evaluate the implications of vertical restraints for economic efficiency which is the object of bork 1966 who contends that restrictions on output are anticompetitive and that increases in output are procompetitive therefore bork concludes all restraints imposed by manufacturers must be efficiency enhancing and procompetitive because manufacturers would not find it profitable to impose vertical restraints when consumers did not value the services at least as much as their incremental cost bork s analysis is afflicted with what dixit and norman 1978 show is a double standard problem as we shall explain additionally his argument depends on all consumers valuing services by the same amount comanor 1985 and scherer 1983 using all but one of bork s assumptions come to a different conclusion if some inframarginal consumers value services at vi and marginal consumers value services at vm and vi vm then when manufacturers gain and provide rpm one may have a decrease in consumer surplus and total welfare as well thus comanor 1985 p 998 says there is no basis on which to conclude that vertical restraints will always enhance economic efficiency

a comment on the nash program and the theory of implementation abstract the nash program for cooperative games is made compatible with the framework of the theory of implementation it is shown that the core is the only major cooperative solution that is maskin monotonic the mechanisms in the nash program are adapted into our model closer to that of the theory of implementation

the limits of antitrust the author argues that the inhospitality tradition in antitrust has serious costs and causes judges to reject economically beneficial business practices he also contends that the main alternative to the inhospitality tradition the rule of reason enunciated by the supreme court does not provide useful guidance to judges in antitrust because it is completely open ended and provides no assistance in determining how to weigh the relevant factors he then proposes his own alternative approach error cost framework to deciding anti trust cases specifically he suggests that judges should mimic the approach taken by economists and deploy a series of presumptions or filters to guide their inquiry the author believes this would make it easier for businesses to plan their affairs and also reduce litigation costs

risk sensitivity in bargaining with more than two participants abstract in two person bargaining over riskless outcomes where the outcome is chosen according to the nash solution or the kalai smorodinsky solution an increase in a player s risk aversion is to the advantage of the opponent it is shown in this note that for the n person nash solution an increase in risk aversion is to the player s own disadvantage but needs not be advantageous to all the opponents for the n person kalai smorodinsky solution the increase is to the player s own disadvantage and to the advantage of all the opponents

subgame perfect implementation this paper examines the use of stage mechanisms in implementation problems and provides a partial characterization of the set of subgam e perfect implementable choice rules it is shown that in many economic environments virtually an y choice rule can be implemented to illustrate the power of this approach the paper discusses a number of models in which it is possible to implement the first best although it wouldn t have been possible to do so without using stage mechanisms the diversity of these models suggests that subgame perfect implementation may find wide application copyright 1988 by the econometric society

a theory of channel price promotions manufacturers can stimulate sales by a temporary wholesale price reduction for the retailer a rebate directed toward consumers or a combination of both the trade offs between these price promotions are analyzed providing insights about their roles profitability and welfare properties retailers rebates are also studied while price discrimination is a common explanation for rebates to consumers when a product is sold through a distribution channel the manufacturer may also use rebates to motivate retail participation in the promotion this explains why rebates may be offered even when all consumers use them and price discrimination does not occur copyright 1991 by american economic association

efficiencies without economists the early years of resale price maintenance resale price maintenance rpm continues to be a contentious topic both in economics and in antitrust during the 1980s economists derived new efficiency motivations for rpm while the supreme court reaffirmed the decades old per se ban on its use and congress threatened to extend that ban in the 1990s after several years of federal inactivity during the reagan administration the federal trade commission ftc has once again begun bringing rpm cases while economists have proposed a number of different efficiency explanations for rpm such theorizing has been performed largely without the help of businesses that actually use rpm with little practical evidence such hypotheses have been subject to substantial criticism of course since rpm has been per se illegal businesses may be reluctant to admit that they are engaged in the practice which would appear to be a necessary condition for generating an efficiency defense this article seeks to find out why businesses may believe that they benefit from rpm it does so by examining which efficiency rationales were advanced by firms during a critical time for rpm in the united states 1915 to 1917 these rationales drawn largely from previously unexplored materials are then examined in the light of current economic theory there are two basic sources for these rationales the first is three hearings on rpm held in 1915 1916 and 1917 in the u s house of representatives on a bill to legalize certain forms of rpm the second is the transcript of seven days of hearings the ftc held in 1917 to discuss efficiency motivations for rpm section ii explains several economic theories that have been posited for rpm and briefly discusses the critiques of these theories that have arisen in the legal and economic communities section iii examines federal rpm case law prior to 1918 and posits efficiency rationales from section ii to match the products involved in the case law section iii also discusses the uncertainty in the case law during the period 1908 to 1917 and the concepts behind the various judicial decisions section iv presents the efficiency arguments made during this period of legal uncertainty

an optimal control solution to the liquidity constraint problem abstract an analytical solution to the liquidity constraint problem is derived in an optimal control framework some properties of the solution are examined results in the existing literature derived there by disparate methods are obtained by a single approach thus providing a unified theory of consumption under liquidity constraint

games of manipulation in marriage problems abstract we analyze the equilibrium outcomes of thepreference revelation gamesinduced bypareto efficientandindividually rationalsolutions in the context ofmarriage problems we employ a nash equilibrium refinement which allows deviations by a set of permissible coalitions and show that the set of equilibrium outcomes coincides with a variant of the core that allows blocking by only permissible coalitions journal of economic literatureclassification numbers c71 c78 d71 d78

robustness of intermediate agreements and bargaining solutions abstract most real life bargaining is resolved gradually during this process parties reach intermediate agreements these intermediate agreements serve as disagreement points in subsequent rounds we identify robustness criteria which are satisfied by three prominent bargaining solutions the nash proportional and as a special case to the egalitarian solution and discrete raiffa solutions we show that the robustness of intermediate agreements plus additional well known and plausible axioms provide novel axiomatizations of the above mentioned solutions hence we provide a unified framework for comparing these solutions bargaining theories

the effect of decision weights in bargaining problems abstract bargaining problems are considered where the preferences of the bargainers deviate from expected utility but can be modelled according to rank dependent utility theory under rank dependent utility both the utility function and the probability weighting function influence the risk attitude of a decision maker the same definition of risk aversion leads to two forms of risk aversion utility risk aversion and probabilistic risk aversion the main finding is that these two forms can have surprisingly opposite consequences for bargaining solutions that exhibit a weak monotonicity property in particular in a large class of bargaining problems both increased utility risk aversion and decreased probabilistic risk aversion of the opponent are advantagous for a player this is demonstrated for the kalai smorodinsky bargaining solution the nash bargaining solution does not behave regularly in this respect

market foreclosure and vertical merger a case study of the vertical merger between turner broadcasting and time warner abstract we employ an event study methodology the event being the vertical merger between time warner and turner broadcasting distribution and programming respectively in the cable television industry we assess the effects of the merger on final prices subscriptions and carriage and marketing decisions of time warner the analysis finds several interesting facts first foreclosure in time warner markets following the merger is observed for the rival channels that are not integrated with any cable distributors second the turner broadcasting channels that increased market shares because of this merger appeared to be foreclosed by time warner prior to the merger the preference for own channels by time warner persisted despite a lower quality of channel bundles in its markets efficiency gains from the merger were not passed on to consumers

an analytical solution to the inverse consumption function with liquidity constraints abstract this paper analyzes the consumption function induced by liquidity constraints under perfect foresight in continuous time obtaining an analytical expression for the inverse consumption function liquidity constraints have dramatic effects on consumption even long before the constraints bind

credible sales mechanisms and intermediaries we consider a seller who faces several buyers and lacks access to an institution to credibly close a sale if buyers anticipate that the seller may negotiate further they will prefer to wait before making their best and final offers this in turn induces the seller to bargain at length with buyers even if doing so is costly when the seller s cost of soliciting another round of offers is either very large or very small the seller credibly commits to an auction and experiences negligible bargaining costs otherwise there may be several rounds of increasing offers and significant seller losses in these situations an intermediary with a sufficiently valuable reputation and or weak marginal incentives regarding price can create value by credibly committing to help sell the object without delay

reversal of asymmetries of allocation mechanisms under manipulation abstract consider a two person economy in which resources are allocated so as to maximize agent 1 s utility subject to the condition that agent 2 remains at least as well off as he was initially we show that agent 1 who is explicitly favored by the mechanism gains nothing by manipulation while agent 2 can reverse the asymmetry of the mechanism in his favor we give two other examples of mechanisms for which an analogous reversal of asymmetries takes place

learning to like what you have explaining the endowment effect the endowment effect describes the fact that people demand much more to give up an object than they are willing to spend to acquire it the existence of this effect has been documented in numerous experiments we attempt to explain this effect by showing that evolution favors individuals whose preferences embody an endowment effect the reason is that an endowment effect improves one s bargaining position in bilateral trades we show that for a general class of evolutionary processes strictly positive endowment effects will survive in the long run

sincere and sophisticated players in an equal income market abstract we study the simultaneous direct revelation mechanism associated with each equal income competitive social choice function in the allocation of objects and money among sincere and strategic agents strategic agents take advantage of sincere agents they non cooperatively coordinate on the equal income competitive allocations for the true preferences that are pareto undominated for them within the set of equal income competitive allocations sincere agents are protected to some extent however their welfare is usually above their maximin payoff

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

advertising restrictions and concentration the case of malt beverages the relationship between state imposed advertising restrictions and state level market concentration in the malt beverage industry is examined the authors find that the presence of proscriptions on price advertising significantly increases market concentration at the state level both absolutely and relative to a measure of national concentration the evidence also indicates that banning local nonprice advertising in addition to price advertising yields no marginal significant change in either measure of state level concentration analysis of individual brewers market shares suggests that large national brewers gain at the expense of smaller brewers when price advertising is restricted copyright 1995 by mit press

the conditional auction mechanism for sharing a surplus a first bid auction to allocate the leadership role is used to choose a public decision and a balanced set of transfers the mechanism is shown to implement an equal sharing of the surplus above the average utility level at the equilibrium an agent s message reveals the other agent s utility when only two players are involved and the exact value of the joint surplus a variety of other contexts allow for the construction of similar auction like mechanisms displaying the same mirror image effect

bargaining with noisy delegation principals delegate to an agent in the context of the nash bargaining model but communicate instructions to their agents imperfectly numerical methods are used to find a unique equilibrium in the principals strategies agents fail to agree with a positive probability invoking a secondary mechanism for the resolution of disputes such as arbitration comparative statics are informative the risk sensitivity of the nash bargaining solution is mitigated but not eliminated as uncertainty goes to zero a stable unique limiting equilibrium is identified from the set of multiple equilibria identified in a model in which principals delegate without trembles

weighted randomized dictatorship and the asymmetric nash solution a characterization of the asymmetric nash bargaining solution is presented in it a weighted randomized dictatorship axiom plays a central role

a meta allocation mechanism in cooperative bargaining abstract we analyze an iterative meta allocation mechanism the minimal agreement procedure which can be used to resolve bargaining conflicts generated by players proposal of differing solution concepts in two person cooperative bargaining at each stage of the iteration our procedure improves the disagreement point so that its limit is on the pareto frontier

the manipulability of resource allocation mechanisms the vulnerability to manipulate behaviour of resource allocation mechanisms is evaluated by determining the nash equilibria of associated manipulation games under manipulation all monotonic correspondences are essentially equivalent to the walrasian correspondence for most non monotonic correspondences of interest the initial position appears at equilibrium to be efficient

the advantageous nature of risk aversion in a three player bargaining game where acceptance of a proposal requires a simple majority abstract in a three player bargaining game in which acceptance of a proposed allocation requires only the approval of a simple majority it is shown that the most least risk averse player receives the highest lowest expected share when the preferences of the players are not too diverse

industry investment in basic research assuming interdependence of benefits from appropriable and inappropriable activities using a model of the resource allocation behavior of a group of firms joglekar and hamburg 1983 demonstrate that unaided industry allocation to basic research is suboptimal and that in stimulating this allocation provision of government seed money is generally counterproductive while the provision of matching subsidies is not cost efficient using basically the same model but focusing on the case of a homogeneous industry joglekar and hamburg 1986 further identify several industry characteristics that increase the degree of suboptimality of investment in basic research and consequently the need for government intervention joglekar and hamburg 1983 1986 assume that a firm s benefits from its investment in appropriable activities are independent of its benefits from the industry s total investment in the pertinent basic i e inappropriable research investment theory suggests that a firm s benefits often depend upon its investment portfolio and that an investment in basic research that is not supported by suitable investments in other activities e g plant and equipment personnel training etc may yield far smaller benefits than could be potentially obtained therefore in this paper i present a model that assumes such an interdependence of benefits i find that most of joglekar and hamburg s 1983 1986 conclusions are confirmed by the new model