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

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

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

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

collusion in second price auctions with heterogeneous bidders abstract we show that efficient collusion by any subset of bidders in second price private value auctions is possible even when the bidders are heterogeneous an important property of efficient collusion is that a bidder s net payoff from participating in collusion is independent of her valuation we show that the cooperative game whose characteristic function evaluated at a coalition is the ex ante collusive surplus of that coalition has a nonempty core a feature of more technical interest is the mechanism characterization when the private information of agents does not enter in a linear or even piecewise linear manner

collusion and signaling in auctions with interdependent values abstract the standard approach to collusion in auctions posits an uninformed disinterested third party who prior to the auction designs and implements a collusive mechanism in environments where collusion agreements are likely to be both proposed and executed by the involved parties this approach may neglect information leakages from simply a proposal to collude we consider a model of collusion where one informed bidder proposes to another as in es and schummer 2004 we allow for general interdependent values and affiliated signals in contrast to third party modeling approaches collusion is inefficient from both a social perspective except for the case of pure common values and from the perspective of the ring both bidders are better off than without colluding but the surplus extracted from the seller is distributed asymmetrically between the bidders the potential for information leakage from proposing is bad for low types who reveal that they are weak competitors but is advantageous for high types because they are able to signal their strength we identify a so called briber s curse whereby acceptance of a proposal causes the proposer to downgrade her expected value for the object when there is additional competition in the form of bidders outside of the cartel the briber s curse significantly harms cartel profits and raises seller revenues

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

collusive bidder behavior at single object second price and english auctions models of collusive bidder behavior at single object second price and english auctions are provided the ind ependent private values model is generalized to permit the formulatio n of coalitions and a strategic response by the auctioneer cooperati ve strategies are found to be dominant in these models coalitions of any size are viable and the payoff to each member increases with th e size of the coalition in addition the collusive strategies of the coalition represent a noncooperative equilibrium the optimal respon se of the auctioneer is to establish a reserve price that is a functi on of the coalition s size these and other features of the model are found to be consistent with the essential features of actual behavio r copyright 1987 by university of chicago press

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

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

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

commodity and developing country terms of trade what does the long run show recently the debate surrounding the commodity net barter terms of trade and the terms of trade of developing countries has entered a new phase in this journal spraos i980 presents evidence of a stable declining commodity terms of trade and sapsford i985 although fl nding instability in the work of spraos argues in support of the stable declining terms of trade hypothesis grilli and yang i988 henceforth gy also provide evidence supporting this view and state the implications of this finding for developing country terms of trade a major contribution of gy is a published set of data on the main price indices with a high degree of consistency for the whole century 1 however cuddington and urzua i989 in thisjournal illustrate that the hypothesis of a secular deterioration in the commodity terms of trade is not robust to the alternative claim that there was a once and for all shift in commodity prices in the period i920 i after taking this shift into account these authors find little evidence to support the view of a secular decline 2 this debate has important implications for the prebisch singer hypothesis of a stable declining commodity terms of trade see for instance prebisch i 950 it also has implications for both development and stabilisation strategies adopted by commodity dependent developing countries a central issue in this analysis is the order of integration of the commodity terms of trade a time series is said to be integrated of order o i o if its mean and variance are constant or roughly speaking if the series is stationary a time series is said to be i n if the series requires first differencing n times before a stationary series is obtained alternatively if adding a time trend is sufficient to induce stationarity the series is termed trend stationary a trend stationary series implies that the variable in question simply adjusts around a constant growth path but an i i series is truly non stationary and displays very different properties a commonly cited example of an 1 i series is the random walk the order of integration of a single time series is related to the idea of cointegration of a number of time series consider two variables x and y that are not themselves i o but are of the same order of integration if the residuals from regressing x on y or vice versa are i o or roughly speaking if the residuals are stationary it can be concluded that the two variables are cointegrated in turn this implies that there is some form of equilibrium

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

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

bribing and signaling in second price auctions abstract we examine whether a two bidder second price auction for a single good with private independent values is immune to a simple form of collusion where one bidder may bribe the other to commit to stay away from the auction i e submit a bid of zero in either of two cases where the potential bribe is fixed or allowed to vary the only robust equilibria involve bribing in the fixed bribe case there is a unique such equilibrium in the variable bribes case all robust equilibria involve low briber types revealing themselves through the amount they offer while all high types offer the same bribe only one such equilibrium is continuous bribing in all cases causes inefficiency

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

bribing in first price auctions abstract i study a symmetric 2 bidder ipv first price auction prior to which one bidder can offer his rival a bribe in exchange for the latter s abstention i focus on pure and undominated strategies and on continuous monotonic equilibria equilibria in which the bribing function is continuous and nondecreasing when types are distributed continuously on the unit interval such an equilibrium if it at all exists is necessarily trivial its bribing function is identically zero i provide a sufficient condition for its existence and sufficient conditions for its nonexistence when the minimum type is strictly positive a non trivial equilibrium may exist but it must be pooling i provide a sufficient condition for the existence of such an equilibrium when types are distributed continuously on the unit interval and dominated strategies are allowed a non trivial non pooling equilibrium exists at least under the uniform prior

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

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

private monitoring in auctions abstract we study infinitely repeated first price auctions in which a bidder only learns whether or not he won the object while repetition of the stage game equilibrium is the unique nash equilibrium in public strategies with patient bidders there are simple nash equilibria in private strategies that improve on bid rotation sequential rationality is appropriately captured by essentially perfect bayesian equilibrium epbe which ignores behavior after irrelevant histories our main result is the construction of epbea that improve upon bid rotation assuming symmetry the exclusionary schemes of skrzypacz and hopenhayn tacit collusion in repeated auctions j econ theory 114 2004 153 169 including asymptotically efficient ones are supported as epbea

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

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

bidder collusion at forest service timber sales allegations of bidder collusion at forest service timber sales in the pacific northwest were common in the 1970s of course prices may be low for reasons other than collusion we formulate an empirical model that allows for both bidder collusion and supply effects and in which we control for demand conditions noncooperative behavior in which a single unit is sold the standard auction model is a special case it is found to be definitively outperformed by a model of collusion we also find that supply effects are dominated by collusion in determining the winning bids in the market

the varieties of resource experience natural resource export structures and the political economy of economic growth many oil mineral and plantation crop based economies experienced a substantial deceleration in growth following the commodity boom and bust of the 1970s and early 1980s this article illustrates how countries dependent on point source natural resources those extracted from a narrow geographic or economic base such as oil and minerals and plantation crops are predisposed to heightened economic and social divisions and weakened institutional capacity this in turn impedes their ability to respond effectively to shocks which previous studies have shown to be essential for sustaining rising levels of prosperity analysis of data on classifications of export structure controlling for a wide array of other potential determinants of governance shows that point source and coffee and cocoa exporting countries do relatively poorly across an array of governance indicators these governance effects are not associated simply with being a natural resource exporter countries with natural resource exports that are diffuse relying primarily on livestock and agricultural produce from small family farms do not show the same strong effects and have had more robust growth recoveries

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

equilibria of the sealed bid mechanism for bargaining with incomplete information we study the nash equilibria of the sealed bid bargaining mechanism with incomplete information a nonzero sum game for the case of uniform priors we describe two uncountably numerous families of equilibria the first has differentiable strategies in the second the strategies are step functions the efficiencies of these equilibria range from second best to zero for independent nonuniform priors we show that a similar situation obtains these results seem discouraging with regard to using the sealed bid mechanism in practice the mechanism might be salvaged however if bargainers turn out to confine themselves to linear strategy equilibria

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

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

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

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

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

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

simple collusive agreements in one shot first price auctions abstract the paper demonstrates that collusion in a private value first price auction is likely to occur even in a one shot interaction the strategies of the colluding parties must be mixed since agreeing to submit a bid equal to the reservation price of the seller provides the incentive for that bidder to cheat on the designated winner we deal with a complete information environment with arbitrary number of bidders we characterize the sensible equilibrium outcome where the two bidders with the highest valuations collude we show that the equilibrium outcome is unique and that the probability of collusion exceeds 1 2

first price auctions in the asymmetric n bidder case i consider the first price auction when the bidders valuations may be differently distributed i show that every bayesian equilibrium is an essentially pure equilibrium formed by bid functions whose inverses are solutions of a system of differential equations with boundary conditions i then prove the existence of an equilibrium i prove its uniqueness when the valuation distributions have a mass point at the lower extremity of the support i give sufficient conditions for uniqueness when every valuation distribution is one of two atomless distributions i establish inequalities between equilibrium strategies when relations of stochastic dominance exist between valuation distributions

collusion and information revelation in auctions abstract the theoretical literature on collusion in auctions suggests that the first price mechanism can deter the formation of bidding rings however such analyses neglect to consider the effects of failed collusion attempts wherein information revealed in the negotiation process may affect bidding behaviour we experimentally test a setup in which theory predicts no collusion and no information revelation in first price auctions the results reveal a hitherto overlooked failing of the first price mechanism failed collusion attempts distort bidding behaviour resulting in a loss of seller revenue and efficiency moreover the first price mechanism does not result in less collusion than the second price mechanism we conclude that while the features of the first price mechanism may have the potential to deter bidder collusion the role of beliefs in guiding bidding behaviour make it highly susceptible to distortions arising from the informational properties of collusive negotiation auction designers should take this phenomenon into account when choosing the auction mechanism

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

bribing in first price auctions corrigendum abstract we clarify the sufficient condition for a trivial equilibrium to exist in the model of rachmilevitch 2013

cual es el destino de los paises abundantes en recursos minerales nueva evidencia sobre la relacion entre recursos naturales instituciones y crecimiento economico economies that have large endowments of natural resources especially the ones thatrely on oil and minerals are ofien regarded as unlikely to develop or even seen as cursedby nature it is said that the mineral rents which could be used to trigger a growthprocess have in practice several negative effects that by and large counteract their potentialpositive contributions nevertheless it seems that these results are sensitive tothe measures of resource abundance that are used and mineral resource abundancemight not be necessarily growth retarding this study will evaluate if the arguments touphold that mineral rich countries are dwmed to low economic growth are strong andsound by testing a number of robustness checks on the standard models of resourcesand growth we test if there are any specification bias in the model proposed i n pa rticularof omitted variables and if the resource curse thesis remains robust whenusing other measures of resource abundance and when testing specifically for a mineralrecource curse

bribing in second price auctions an ipv 2 bidder second price auction is preceded by two rounds of bribing prior to the auction each bidder can try to bribe his rival to depart from the auction so that he the briber will become the sole participant bribes are offered sequentially according to an exogenously given order restricting attention to pure strategies and imposing a certain refinement i study the efficient equilibria of this game in any such equilibrium whenever the first mover offers a strictly positive bribe this bribe is given by his surplus his valuation minus the payoff that he would have received in the dominant strategy equilibrium of the auction i derive a necessary and sufficient condition for the existence of such an equilibrium i also extend this equilibrium s construction to a model with general valuations not necessarily ipv

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

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

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association

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