sequential formation of coalitions in games with externalities and fixed payoff division this paper analyzes a sequential game of coalition formation when the division of the coalitional surplus is fixed and the payoffs are defined relative to the whole coalition structure gains from cooperation are represented by a valuation which maps coalition structures into payoff vectors i show that any core stable coalition structure can be attained as a stationary perfect equilibrium of the game if stationary perfect equilibria may fail to exist in general games a simple condition is provided under which they exist in symmetric games furthermore symmetric stationary perfect equilibria of symmetric games generate a coalition structure which is generically unique up to a permutation of the players a general method for the characterization of equilibria in symmetric games is proposed and applied to the formation of cartels in oligopolies and coalitions in symmetric majority games journal of economic literatureclassification numbers c78 c71 1996 academic press inc

do minority white unemployment differences really exist we develop a model of labor force status federal employment nonfederal employment unemployment and out of the labor force that depends on human capital variables local labor market conditions and personal characteristics according to the estimated model for white non hispanic males and females a substantial difference exists between blacks and white non hispanics even after correction for the control variables however the control variables explain almost all of the difference between hispanics and white non hispanics

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

dynamic group formation in the repeated prisonerʼs dilemma abstract we consider dynamic group formation in repeated n person prisoner s dilemma agreements in coalitional bargaining are self binding in that they are supported as subgame perfect equilibria of repeated games individuals are allowed to renegotiate the cooperating group agreement through a process of voluntary participation we prove that a cooperating group forms as an absorbing state of a markov perfect equilibrium after a finite number of renegotiations if and only if the group is pareto efficient provided that individuals are patient the cooperating group can only expand

the effects of hospitals governance on optimal contracts bargaining vs contracting we propose a two stage model to study the impact of different hospitals governance frameworks on the optimal contracts designed by third party payers when patients disease severity is the private information of the hospital in the second stage doctors and managers interact within either a bargaining or a contracting scenario in the contracting scenario managers offer a contract that determines the payment to doctors and doctors decide how many patients to treat in the bargaining scenario doctors and managers strategically negotiate on both the payment to doctors and the number of patients to treat we derive the equilibrium doctors payments and number of treated patients under both scenarios we then derive the optimal contract offered by the government to the hospital in the first stage results show that when the cost of capital is sufficiently low the informational rent is lower and the social welfare is higher in the contracting scenario

input demand elasticities for heterogeneous labor firm level estimates and an investigation into the effects of aggregation labor economists have paid increasing attention to the estimation of demand elasticities for heterogeneous labor the majority of these studies investigate the effect on wage rates resulting from exogenous changes in factor quantities i e the measurement of elasticities of complementarity examples of these studies abound borjas for example investigates the impact of differences in labor market representation on the earnings of racial groups 8 in another paper borjas defines immigrants as a separate labor group and is able to determine the impact of immigration on the wages earned by natives 9 berger defines labor inputs along education and gender lines thereby allowing for the investigation of changes in the age education composition of the work force on wage rates 5 and grant and hamermesh study the effect of increasing female labor force participation on the wages earned by youth and adults 17 less attention has been paid to the study of the responsiveness of employment to exogenous changes in wage rates i e the measurement of elasticities of substitution less attention has been focused on this issue because the data requirements are more stringent since in order to presume that wage rates are exogenously determined the unit of observation must be small ideally establishmentor firm level data would be used the relative inaccessibility of these type of data has led researchers to use more aggregated figures such as smsa level or industry level data to address microissues as long as wage rates are determined exogenously the unit of observation chosen is appropriate there are real concerns however about the adequacy of more aggregated units to describe the behavior of firms 2 this study addresses the issue of whether micro level data are in fact needed to accurately measure elasticities of substitution among labor groups a firm level data set that includes input

labor market competition among youths white women and others we estimate substitution possibilities among a set of age race sex groups in the labor force the estimates are based on cross section data from smsas in 1969 and they allow us to consider how substitutable adult women are for young women or young men the estimates are used along with assumptions about the extent of wage rigidity and elasticities of labor supply to simulate the direct and indirect effects of the growth of the female labor force on job opportunities for youth assuming rigid wages for young workers and on the wage rates of adult males assuming these wages are flexible this abstract was borrowed from another version of this item

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

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

the declining talent pool of government we consider a government for which success requires high performance by talented ministers a leader provides incentives to her ministers by firing those who fail however the consequent turnover drains a finite talent pool of potential appointees the severity of the optimal firing rule and ministerial performances decline over time the lifetime of an effective government is limited we relate this lifetime to various factors including external shocks the replenishment of the talent pool and the leader s reputation some results are surprising an increase in the stability of government and the exogenous imposition of stricter performance standards can both shorten the era of effective government and an increase in the replenishment of the talent pool can reduce incumbent ministers performance

the impact of immigration on the human capital of natives implications of the quantity number and quality skill of immigration on the destination economy are analyzed including impacts on value added wages quasi rents rates of return and the skill distribution of the native labor force quantity quality trade offs are considered for both immigrant and native workers medium and long run labor supply responses by natives to immigrant induced changes in wage rates are shown to have second order effects which substantively affect the impacts of immigrants the impact of immigration policy depends on the quality as well as quantity of immigrants the time horizon and the speed of factor market adjustment

elections coalitions and legislative outcomes predictions of electoral behavior in a multiparty setting should be a function of the voters beliefs about how parties will perform following an election similarly party behavior in a legislature should be a function of electoral promises and rewards we develop a multistage game theoretic model of three party competition under proportional representation the final policy outcome of the game is generated by a noncooperative bargaining game between the parties in the elected legislature this game is essentially defined by the vote shares each party receives in the general election and the parties electoral policy positions at the electoral stage parties and voters are strategic in that they take account of the legislative implications of any electoral outcome we solve for equilibrium electoral positions by the parties and final policy outcomes

labor market effects of language enclaves hispanic men in the united states in a model of a labor market with enclaves of spanish speakers a large enclave provides better jobs for persons lacking skills in english consequently the larger enclave lowers earnings returns to english returns to english also vary with the distribution of english skills among spanish speaking workers returns to english rise if the distribution becomes skewed toward less proficiency in english and fall if it becomes skewed toward more proficiency in english the model has broad implications for the consequences of enclaves the model is tested with an application to hispanic men in the united states using the 1980 census of population empirical results are consistent with theoretical predictions enclaves do reduce the earnings losses associated with limited english skills for hispanic men and increasing the fraction of hispanic men who speak english only does lower the returns to english

information aggregation rationality and the condorcet jury theorem the condorcet jury theorem states that majorities are more likely than any single individual to select the better of two alternatives when there exists uncertainty about which of the two alternatives is in fact preferred most extant proofs of this theorem implicitly make the behavioral assumption that individuals vote sincerely in the collective decision making a seemingly innocuous assumption given that individuals are taken to possess a common preference for selecting the better alternative however in the model analyzed here we find that sincere behavior by all individuals is not rational even when individuals have such a common preference in particular sincere voting does not constitute a nash equilibrium a satisfactory rational choice foundation for the claim that majorities invariably do better than individuals therefore has yet to be derived

information aggregation and optimal structure of the executive we model two aspects of executives in parliamentary democracies decision making authority is assigned to individuals and private information is aggregated through communication when information is relevant to all policies and communication is private all decisions should be centralized to a single politician a government that holds cabinet meetings where information is made available to all decision makers outperforms one where communication is private a multimember cabinet can be optimal it need not be single peaked around the most moderate politician or ideologically connected centralization is nonmonotonic in the degree of ideological divergence in a large cabinet all power should be given to the most moderate politician even when uncertainty is policy specific and a single politician is informed on each policy power should never be fully decentralized our model provides a justification for centralized authority and cabinet meetings that enhance the quality of policy

how to measure labour market effects of immigration a review abstract this paper surveys available empirical evidence on labour market effects of immigration many different approaches have been used already to try to find out whether immigration hurts the labour market opportunities of natives no doubt new approaches will follow in the future as globalization will keep the migration issue on the agenda this literature review discusses the different approaches concentrating on both the methodology and the results at the end it tries to summarize available evidence

voting blocs party discipline and party formation abstract i study the strategic incentives to coordinate votes in an assembly coalitions form voting blocs acting as single players and affecting the policy outcome in an assembly with two exogenous parties i show how the incentives to accept party discipline depend on the types of the agents the sizes of the parties and the rules the blocs use to aggregate preferences in a game of fully endogenous party formation i find sufficient conditions for the existence of equilibria with one bloc two blocs and multiple blocs

in defense of unanimous jury verdicts mistrials communication and strategic voting the requirement of unanimous jury verdicts in criminal trials is widely believed to reduce the likelihood of convicting the innocent this belief depends largely upon the assumption that jurors will vote nonstrategically based on their impression of the trial evidence recent literature however has questioned this assumption and feddersen and pesendorfer propose a model in which it is never a nash equilibrium for jurors to vote nonstrategically under unanimity rule and equilibrium behavior produces higher probabilities of both convicting the innocent and acquitting the guilty under unanimity rule than under numerous alternatives i extend this work by incorporating two additional features of actual jury procedure the possibility of mistrial and communication among jurors under each circumstance i demonstrate that nonstrategic voting is a nash equilibrium under fairly general conditions and that unanimity performs better than any alternative rule in minimizing probability of trial error and maximizing expected utility

the substitutability of black hispanic and white labor this paper analyzes the extent of labor market competition among blacks hispanics and whites in the united states the specification of a generalized leontief production function leads to an empirically tractable system of input demand functions the estimation of the demand system using the 1976 survey of income and education reveals that a blacks and hispanics are complementary inputs b hispanics and whites may also be complements and c blacks and whites are not complements and may be substitutes

immigrants minorities and labor market competition this paper investigates the extent of labor market competition among immigrants minorities and the native population an analysis of 1980 u s census data reveals that immigrants tend to be substitutes for some labor market groups and complements for others the effects of shifts in immigrant supply on the earnings of native born men are however very small on the other hand increases in the supply of immigrants do have a sizable impact on the earnings of immigrants themselves an increase of 10 percent in the supply of immigrants for example reduces the immigrant wage by about 10 percent

cheap talk with two audiences these problems have in common a simple structure an informed sender says something to two interested but uninformed receivers who then take actions based on their beliefs these actions affect the sender as well as the receivers in this paper we study how costless nonverifiable claims cheap talk can affect these beliefs and hence the actions and how the incentives for truthful revelation to one receiver are affected by the presence of the other we then ask how welfare is affected by whether claims are made in public or in private as some of the above examples suggest public messages may be more credible than private messages addressed to either audience one possibility is that the presence of one audience can discipline the sender s relationship with the other we call this one sided

contracts and externalities how things fall apart a single principal interacts with several agents offering them contracts the crucial assumption of this paper is that the outside option payoffs of the agents depend positively on how many uncontracted or free agents there are we study how such a principal unwelcome though he may be approaches the problem of contract provision to agents when coordination failure among the latter group is explicitly ruled out two variants are considered when the principal cannot re approach agents there is a unique equilibrium in which contract provision is split up into two phases in phase 1 simultaneousoffers at good though varying terms are made to a number of agents in phase 2 offers must be made sequentially and their values are discontinuously lower they are close to the very lowest of all the outside options when the principal can repeatedly approach the same agent there is a multiplicity of equilibria in some of these the agents have the power to force delay they can hold off the principal s overtures temporarily but they must succumb in finite time in both models despite beingable to coordinate their actions agents cannot resist an invasion by the principal and hold to their best payoff it is in this sense that things eventually fall apart

contracting with externalities and outside options this paper proposes a model of multilateral contracting where players are engaged in two parallel interactions they dynamically form coalitions and play a repeated normal form game with temporary and permanent decisions we show that when outside options are independent of the actions of other players all markov perfect equilibrium without coordination failures are efficient regardless of externalities created by interim actions otherwise in the presence of externalities on outside options all markov perfect equilibrium may be inefficient this formulation encompasses many economic models and we analyze the distribution of coalitional gains and the dynamics of coalition formation in four illustrative applications

non cooperative bargaining theory an introduction the paper provides an informal introduction to some of the main themes of the recent literature on non cooperative or sequential bargaining models it focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by nash bargaining theory it illustrates the new insights offered by the non cooperative approach by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome finally the difficulties which arise in extending this analysis to two person bargaining with incomplete information and to n person bargaining are discussed this is a revised version of the fourth review of economic studies lecture presented in april 1985 at the joint meeting of the association of university teachers of economics and the royal economic society held in oxford the choice of lecturer is made by a panel whose members are currently professors hahn mirrlees and nobay and the paper is refereed in the usual way this paper aims to provide an informal and elementary introduction to an approach to bargaining which has received a great deal of attention over the past few years the approach involves writing down some particular sequence of moves offers and replies to be made over time in the course of negotiations and then looking for a non cooperative equilibrium in the game thus specified in practice a perfect equilibrium or in games of incomplete information a sequential equilibrium while the approach appears at first sight to be very different in spirit from the traditional axiomatic approach in which a bargaining solution is specified by appealing to a number of general requirements which are deemed appropriate on the basis of some a priori considerations the two approaches are in fact complementary while the

the timing of contracting with externalities abstract this paper endogenizes the timing of bilateral contracting between one principal and multiple agents in the presence of externalities contracting simultaneously with all agents is optimal for the principal if externalities become weaker the more an agent trades if instead externalities become stronger sequential negotiations might benefit the principal as they lower the agents outside options under some linearity conditions the principal s preferences with respect to different timings of contracting are opposed to their efficiency ranking

coalition formation as a dynamic process abstract we study coalition formation as an ongoing dynamic process with payoffs generated as coalitions form disintegrate or regroup a process of coalition formation pcf is an equilibrium if a coalitional move to some other state can be justified by the expectation of higher future value compared to inaction this future value in turn is endogenous it depends on coalitional movements at each node we study existence of equilibrium pcfs we connect deterministic equilibrium pcfs with unique absorbing state to the core and equilibrium pcfs with multiple absorbing states to the largest consistent set in addition we study cyclical as well as stochastic equilibrium pcfs

contracting with externalities the paper studies inefficiencies arising in contracting between one principal and n agents when the utility of each agent depends on all agents trades with the principal when the principal commits to a set of publicly observable bilateral contract offers the arising inefficiency is due entirely to the externalities imposed on non signers in contrast when the principal s offers are privately observed the distortion is due to the externalities given agents equilibrium trades comparison of the two externalities determines the relative efficiency of the two contracting regimes in both cases we show that when n is large each agent can be treated as non pivotal provided that appropriate continuity assumptions are satisfied we also study the case in which the principal can condition each agent s trade on other agents messages we characterize the set of such mechanisms in which each agent s participation is voluntary when the principal can commit to any such mechanism she implements the first best outcome while threatening each deviator with the harshest possible punishment however in the presence of noise that goes to zero slower than n goes to infinity in the limit we obtain a generally inefficient outcome in which each agent feels non pivotal

confining the coase theorem contracting ownership and free riding if individuals own the right to take any action that they please and are free to contract about behaviour will outcomes be efficient in all situations that is does the coase theorem hold we study this classic question through the lens of a non cooperative model of contract negotiations considering both compulsory and voluntary participation in negotiations in either case we find that all consistent equilibria of the contracting game are efficient in the case of two players but if participation is voluntary and there are more than two players there are situations in which all consistent equilibria are inefficient specifically the provision of public goods tends to be inefficiently low due to strategic abstention from contracting free riding on others agreements can be avoided if individuals do not own all their actions when actions involve the use of assets efficient action ownership may correspond to collective rather than individual asset ownership

coalition formation with binding agreements we study coalition formation in real time a situation in which coalition formation is intertwined with the ongoing receipt of pay offs agreements are assumed to be permanently binding they can only be altered with the full consent of existing signatories for characteristic function games we prove that equilibrium processes whether or not these are history dependent must converge to efficient absorbing states for three player games with externalities each player has enough veto power that a general efficiency result can be established however there exist four player games in which all markov equilibria are inefficient from every initial condition despite the ability to write permanently binding agreements copyright 2007 wiley blackwell

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

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

information aggregation in polls we study information transmission via polling a policymaker polls constitu ents who differ in their information and ideology to determine policy full rev elation is an equilibrium in a poll with a small sample but not with a large one in large polls full information aggregation can arise in an equilibrium where constituents endogenously sort themselves into centrists who respond truth fully and extremists who do not we find polling statistics that ignore strate gic behavior yield biased estimators and mischaracterize the polvs margin of error we construct estimators that account for strategic behavior finally we compare polls and elections jel c42 d83

the private provision of excludable public goods an inefficiency result abstract does voluntary contracting suffice for the efficient provision of excludable public goods even in a complete information environment we find that the answer is negative the reason is that some agents may profit from not participating at the provision stage but instead negotiate access ex post

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

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

parties as political intermediaries this paper argues that parties regulate competition among like minded factions so as to enhance reputation building by and voter trust in the politicians standing for a given cause while intra and interparty competition contributes to keeping politicians on their toes unbridled competition may encourage politicians to challenge good platforms and to wage competition along socially suboptimal dimensions for example by privileging form over content the paper builds a simple model of intraparty competition and studies whether various hierarchical or democratic party institutions constitute an efe cient form of party governance the paper shows that intraparty disagreements when they occur hurt the party s position in the general election but that their possibility enhances party image and that parties must be able to avoid behind the scene allocations of portfolios and spoils in order to be credible last it analyzes the impact of political polarization and interparty competition on the choice of party governance

the swing voter s curse the authors analyze two candidate elections in which some voters are uncertain about the realization of a state variable that affects the utility of all voters they demonstrate the existence of a swing voter s curse less informed indifferent voters strictly prefer to abstain rather than vote for either candidate even when voting is costless the swing voter s curse leads to the equilibrium result that a substantial fraction of the electorate will abstain even though all abstainers strictly prefer voting for one candidate over voting for another copyright 1996 by american economic association

the substitutability of occupational groups using firm level data abstract labor demand elasticity estimates are presented for a model in which labor groups are defined by occupation while most studies construct labor groups according to non productive characteristics such as race or gender the results corroborate much of the existing research

immigration wages and education a labour market equilibrium structural model recent literature analysing wage effects of immigration assumes labour supply is fixed across education experience cells this article departs from this assumption estimating a labour market equilibrium dynamic discrete choice model on u s micro data for 1967 2007 individuals adjust to immigration by changing education participation and or occupation adjustments are heterogeneous 4 2 26 2 of prime aged native males change their careers of them some switch to white collar careers and increase education by about three years others reduce labour market attachment and reduce education also by about three years these adjustments mitigate initial effects on wages and inequality natives that are more similar to immigrants are the most affected on impact but also have a larger margin to adjust and differentiate adjustments also produce a self selection bias in the estimation of wage effects at the lower tail of the distribution which the model corrects