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

on the early holocene foraging to early agriculture we consider a world in which the mode of food production foraging or agriculture is endogenous and in which technology grows exogenously within a model of coalition formation we allow individuals to form co operative communities bands of foragers or farmers rationally at the lowest levels of technology equilibrium entails the grand coalition of foragers a co operative structure which avoids over exploitation of the environment but at a critical state of technology the co operative structure breaks down through an individually rational splintering of the band at this stage there can be an increase in work and through the over exploitation of the environment a food crisis in the end technological growth may lead to a one way transition from foraging to agriculture

on the nonemptiness of the α core of discontinuous games transferable and nontransferable utilities abstract the nonemptiness of the core of games with continuous payoff functions was proved by scarf 1971 for nontransferable utilities and by zhao 1999 for transferable utilities in this paper we present generalizations of their results to games with possibly discontinuous payoff functions our handling of discontinuity is based on reny s 1999 better reply security concept we present examples to show that our generalizations are nonvacuous

endogenous structures of association in oligopolies the formulation of associations of firms in an oligopoly with linear demand is analyzed as a two stage noncooperative game in the first stage firms form associations in order to decrease their costs and in the second stage they compete on the market examples of associations include r d joint ventures and groups of firms adopting common standards in equilibrium the associations formed exhibit two general features they are asymmetric and inefficient

pricing of fluctuations in electricity markets abstract in an electric power system demand fluctuations may result in significant ancillary cost to suppliers furthermore in the near future deep penetration of volatile renewable electricity generation is expected to exacerbate the variability of demand on conventional thermal generating units we address this issue by explicitly modeling the ancillary cost associated with demand variability we argue that a time varying price equal to the suppliers instantaneous marginal cost may not achieve social optimality and that consumer demand fluctuations should be properly priced we propose a dynamic pricing mechanism that explicitly encourages consumers to adapt their consumption so as to offset the variability of demand on conventional units through a dynamic game theoretic formulation we show that under suitable convexity assumptions the proposed pricing mechanism achieves social optimality asymptotically as the number of consumers increases to infinity numerical results demonstrate that compared with marginal cost pricing the proposed mechanism creates a stronger incentive for consumers to shift their peak load and therefore has the potential to reduce the need for long term investment in peaking plants

whose deletion does not affect your payoff the difference between the shapley value the egalitarian value the solidarity value and the banzhaf value abstract this study provides a unified axiomatic characterization method of one point solutions for cooperative games with transferable utilities any one point solution that satisfies efficiency the balanced cycle contributions property bcc and the axioms related to invariance under a player deletion is characterized as a corollary of our general result bcc is a weaker requirement than the well known balanced contributions property any one point solution that is both symmetric and linear satisfies bcc the invariance axioms necessitate that the deletion of a specific player from games does not affect the other players payoffs and this deletion is different with respect to solutions as corollaries of the above characterization result we are able to characterize the well known one point solutions the shapley egalitarian and solidarity values in a unified manner we also studied characterizations of an inefficient one point solution the banzhaf value that is a well known alternative to the shapley value

a social coalitional equilibrium existence lemma the purpose of this paper is to construct an abstract model of a society in which each member can cooperate with others by forming a coalition but at the same time can be influenced by the members outside the coalition a new concept of equilibrium called here a social coalitional equilibrium is proposed and a sufficient condition for its existence provided the social coalitional equilibrium may be considered a synthesis of the nash equilibrium a noncooperative solution concept and the core a cooperative solution concept the paper provides a broadly applicable mathematical tool for proving existence of equilibrium for models of labor managed market economies the purpose of the present paper is to construct an abstract model of a society in which each member can cooperate with others by forming a coalition but at the same time can be influenced by the members outside the coalition a new concept of equilibrium called here a social coalitional equilibrium is proposed and a sufficient condition for its existence provided a coalition structure is endogenously determined in equilibrium when the model is suitably specified it describes noncooperative behavior of the members and the social coalitional equilibrium is reduced to the nash equilibrium given another extreme specification the model is reduced to a cooperative game without sidepayments in characteristic function form and the set of social coalitional equilibria corresponds precisely to the core the need for study of the present model arose originally out of the author s recent investigation of labor managed market economies both the socialistic version and the capitalistic version in 10 11 12 indeed the model and the concept of social coalitional equilibrium were obtained by abstracting and generalizing the formal aspect of those studies the socialistic labor managed market economy has long been the object of study of various authors see e g vanek 19 the capitalistic labor managed market economy seems to reflect the institutional aspect of the modern capitalistic society better than the economies formulated by other available general equilibrium models it differs for example from the standard private ownership economy of arrow and debreu 1 see also debreu 6 sec 5 5 in that i the ownership and control of a firm are separated ii no particular firm is given a priori but instead the list of potential firms is given as a primitive datum and iii the behavioral principle of the economic agents involves both noncooperative behavior and cooperative behavior because of the above feature ii any general equilibrium model of this economy has to formulate the economic mechanism that underlies the formation of firms in equilibrium as

do binding agreements solve the social dilemma we investigate whether binding agreements can provide a solution to the social dilemma that arises in the presence of pure public goods by signing a binding agreement players can prevent free riding by the contributors to a public good however a well known theoretical result is that the outcome of the endogenous formation of agreements is not necessarily efficient in our setting the individual level of contribution to the public good increases with the size of the coalition reaching an agreement and the global coalition is always the socially optimal structure agreements form sequentially and the equilibrium outcome is an asymmetric structure which consists of two coalitions our experiment therefore lends force to the theoretical result that outcomes may be inefficient in fact we observe an outcome which is even less efficient than that predicted by the equilibrium agreement structure however it seems that when subjects reach agreements they do so with the intention of cooperating rather than free riding furthermore it seems that they learn to cooperate over time and reach the global agreement more often towards the end of sessions keywords

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

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

macroeconomic seasonality and the january effect many financial markets researchers have sought an explanation for the role of january in stock returns any explanation of this phenomenon that is consistent with rational pricing must specify a source of seasonality in expected returns the pervasive seasonality in the macroeconomy is an appealing possibility a multifactor model that links macroeconomic risk to expected return is found to show substantial seasonality in expected returns this model accounts for the seasonality in average returns while the capital asset pricing model cannot copyright 1994 by american finance association

equilibrium in a finite local public goods economy abstract this paper examines the existence of a noncooperative equilibrium in a finite local public goods economy where consumers have quasi linear preferences jurisdictions consist of consumers who chose the same public project and finance the cost of production of public goods through either a proportional income tax or a poll tax we show that under a proportional income tax scheme a nash equilibria may fail to exist under a poll tax scheme an equilibrium always exists but in general nash equilibria violate a very weak efficiency condition we conclude by commenting on the stabilizing effect of zoning policies journal of economic literatureclassification number c71

networks of collaboration in oligopoly abstract in an oligopoly prior to competing in the market firms have an opportunity to form pair wise collaborative links with other firms these pair wise links involve a commitment of resources and lead to lower costs of production of the collaborating firms we study the incentives of firms to form links and the architecture of the resulting collaboration network we find that incentives to form links are intimately related to the nature of market competition our analysis also suggests that collaborations are used by firms to generate competitive advantage and that strategically stable networks are often asymmetric with some firms having many links while others have few links or are isolated specifically we show that networks with the dominant group architecture stars and inter linked stars are stable we also present some results on the architecture of socially efficient networks

on weighted kalai samet solutions for non transferable utility coalitional form games abstract we investigate the implications of the axiom of coalitional concavity for non transferable utility coalitional form games this axiom says that if the feasible set of some coalition is uncertain whereas the feasible sets of other coalitions are known then all players in the coalition with the uncertain feasible set should weakly benefit from reaching a compromise before the uncertainty is resolved by imposing this axiom in addition to other minor axioms we characterize the weighted kalai samet econometrica 53 1985 307 solutions these solutions coincide with the weighted egalitarian solutions on the domain of bargaining problems and with the weighted shapley values on the domain of transferable utility coalitional form games

coalition formation and bargaining protocols a review of the literature this paper offers a review of the vast literature regarding bargaining and coalition formation this topic has been generally described as the attempt to provide strategic foundations to cooperative solution concepts it can therefore be seen as the linking ring between the non cooperative and the cooperative game theoretic approach to coalition formation its central role in economic theory and its relatively long history that goes back to the nash program have fostered a large academic production including surveys nonetheless this paper will focus on an aspect that is often neglected in the dedicated surveys the specificities of the bargaining protocols leading to different outcomes although generally downgraded to the rank of details the differences in bargaining protocols even when minor can cause significant changes in fundamental aspects such as the possibility to reach full cooperation the distribution of final pay offs and the time taken to reach an agreement focused on externalities free games therefore on bargaining protocols sustaining solution concepts for cooperative games in characteristic function form the paper aims at providing a brief but exhaustive review of the topic that could result in a very useful tool for any researcher approaching the subject of coalitional bargaining

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

macroeconomic factors strike back a bayesian change point model of time varying risk exposures and premia in the u s cross section this article proposes a bayesian estimation framework for a typical multi factor model with time varying risk exposures to macroeconomic risk factors and corresponding premia to price u s publicly traded assets the model assumes that risk exposures and idiosyncratic volatility follow a break point latent process allowing for changes at any point on time but not restricting them to change at all points the empirical application to 40 years of u s data and 23 portfolios shows that the approach yields sensible results compared to previous two step methods based on naive recursive estimation schemes as well as a set of alternative model restrictions a variance decomposition test shows that although most of the predictable variation comes from the market risk premium a number of additional macroeconomic risks including real output and inflation shocks are significantly priced in the cross section a bayes factor analysis massively favors the proposed change point model supplementary materials for th

social optimality and cooperation in nonatomic congestion games abstract congestion externalities may result in nonoptimal equilibria for these to occur it suffices that facilities differ in their fixed utilities or costs as this paper shows the only case in which equilibria are always socially optimal regardless of the fixed components in that in which the costs increase logarithmically with the size of the set of users therefore achieving a socially optimal choice of facilities generally requires some form of external intervention or cooperation for heterogeneous populations in which the fixed utilities or costs vary across users as well as across facilities this raises the question of utility or cost sharing the sharing rule proposed in this paper is the harsanyi transferable utility value of the game which is based on the users marginal contributions to the bargaining power of coalitions

joint estimation of factor sensitivities and risk premia for the arbitrage pricing theory the apt is represented as a multivariate regression model with across equations restrictions both observed and unobserved latent macroeconomic factors are included thus generalizing and unifying two previous strands of literature large portfolios representing unobserved factors are treated as endogenous and nonlinear 3sls estimates are shown to differ sharply from estimates that ignore this endogeneity using monthly stock returns and six factors we cannot reject january effects the following results are invariant with respect to the inclusioh of january effects we reject the capm in favor of the apt however we cannot reject the apt restrictions on the linear factor model most empirical work on the arbitrage pricing theory apt has followed a factor analysis approach papers by burmeister and wall 5 chan chen and hsieh 7 chen roll and ross 9 and mcelroy and burmeister 22 represent some exceptions in which measured macroeconomic factors such as unexpected inflation are used to explain asset prices in an apt or multifactor model both the factor analysis approach and the measured macroeconomic factor approach have their merits the primary advantages of using measured economic factors are 1 the factors and their apt prices in principle can be given economic interpretations while with a factor analysis approach it is unknown what factors are being priced and 2 rather than using only asset prices to explain asset prices measured macroeconomic factors introduce additional information linking asset price behavior to macroeconomic events in this exploratory paper we investigate an apt or multifactor model in which there are both measured macroeconomic factors and other nonobserved factors we impose the nonlinear across equation apt pricing restrictions exactly by using three multivariate estimation methods iterated nonlinear weighted least squares itnlwls iterated nonlinear seemingly unrelated regressions itnlsur and iterated nonlinear three stage least squares itnl3sls see gallant 13 and discussion below the appropriate estimation method depends upon alternative assumptions about the error terms nonsystematic risk in the asset returns equations the primary objective of this work is to investigate whether or not certain apt tests are sensitive to these alternative error assumptions the details of which are given in the text our focus is on the interrelation

bargaining in committees as an extension of nash s bargaining theory abstract this paper addresses the following issue if a set of agents bargain on a set of feasible alternatives in the shadow of a voting rule that is any agreement can be enforced if a winning coalition supports it what general agreements are likely to arise in other words what influence can the voting rule used to settle possibly nonunanimous agreements have on the outcome of consensus we model the situation as an extension of the nash bargaining problem in which an arbitrary voting rule replaces unanimity in this setting a natural extension of nash s solution is characterized

party formation and minority ideological positions we develop a model where voters differ in their exogenous income and in their ideological views with racism as an illustration electoral competition takes place between an endogenous number of parties which propose platforms consisting of both an ideological and an economic dimension our objective is to explain the emergence of minority ideological positions and to understand the role played by political parties in this emergence we first show that in a pure citizen candidate model where parties are absent the only equilibrium consists of the majority ideological position we then show that allowance for the formation of political parties generates equilibria with minority ideological positions

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

when do market games have transferable utility a pure exchange economy generates a market game in which the allocations achievable by any coalition are determined by the initial endowments of its members subject to certain regularity conditions it is shown that for a market game it is possible to find utility representations for each consumer so that the game can be treated as a game with transferable utility if and only if indirect utility of all consumers can be represented in the gorman polar form this is the class for which aggregate demand behaves as if it were the demand of a single consumer journal of economic literature classification numbers 021 022 cc 1985 academic press inc

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

comparative statics of altruism and spite abstract the equilibrium outcome of a strategic interaction may depend on the weight players place on other players payoffs or more generally on some social payoff that depends on everyone s actions a positive negative or zero weight represents altruism spite or complete selfishness respectively as it turns out even in a symmetric interaction the equilibrium level of social payoff may be lower for a group of altruists than for selfish or spiteful groups in particular a concern for others payoffs may paradoxically lower these payoffs however this can only be so if the equilibrium strategies involved are unstable if they are stable the social payoff can only increase or remain unchanged with an increasing degree of altruism in these results stability stands for a general notion of static stability which includes a number of established ones such as evolutionarily stable strategy as special cases

harsanyi values of large economies nonequivalence to competitive equilibria abstract we consider economies with many agents and compare the competitive equilibria and the value allocations of the resulting coalitional games in particular we provide a smooth and robust example where the value principle does not hold for the harsanyi ntu value there is a unique competitive equilibrium which however does not belong to the nonempty set of harsanyi value allocations journal of economic literature classification numbers c71 d51

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

perturbed adaptive dynamics in coalition form games abstract players adaptively learn how to bargain a characteristic function describes the available surplus the underlying bargaining game extends the nash demand game by allowing subcoalitions to reach an agreement players demands must be multiples of a money unit we show that stochastically stable allocations ssa i e allocations that are most stable to unlikely errors are a subset of the core uniqueness does not obtain even when the money unit becomes arbitrarily small nonetheless every ssa is related to the allocation that maximizes the product of players utilities over the core i e constrained egalitarian solution for tu games journal of economic literature classification numbers c71 c72 c78

bounding the inefficiency of equilibria in nonatomic congestion games abstract equilibria in noncooperative games are typically inefficient as illustrated by the prisoner s dilemma in this paper we quantify this inefficiency by comparing the payoffs of equilibria to the payoffs of a best possible outcome we study a nonatomic version of the congestion games defined by rosenthal int j game theory 2 1973 65 and identify games in which equilibria are approximately optimal in the sense that no other outcome achieves a significantly larger total payoff to the players games in which optimization by individuals approximately optimizes the social good in spite of the lack of coordination between players our results extend previous work on traffic routing games

first things first the agenda formation problem for multi issue committees abstract the paper focuses on sequential bargaining procedures in which parties are allowed to differ in several respects we first highlight the strategic effects in the bargaining game and the often conflicting incentives that players need to take into account in forming their preferences over agendas we then show that there is a pareto superior agenda among the issue by issue procedures this consists in setting the most important issue first unless this is difficult urgent in the sense that there is probability of game breakdown after a rejection in the negotiations over this issue in this case parties prefer to negotiate over the easy issue first

strategic disclosure of feasible options abstract the paper illustrates how people who need to make a joint decision may have an incentive to withhold information regarding the existence of pareto improving options the resulting level of inefficiency varies with the way compromises are reached when the parties have to choose among multiple options various reasonable compromise rules can be ranked unequivocally and a rule resulting in a minimal level of inefficiency is identified qualitative results extend to sequential disclosure enforcing a hard deadline for disclosure may be welfare improving in some circumstances

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

secession and value abstract a model with random proposals where secession of coalitions is the only threat yields exploitative allocations if proposals for coalition s involve randomization the responders pay off vector consists of shapley values for coalition sizes ranging from 1 to s 1

multilateral bargaining problems abstract in many situations in economics and political science there are gains from forming coalitions but conflict over which coalition to form and how to distribute the gains this paper presents an approach to such multilateral bargaining problems a solution to a multilateral bargaining problem specifies an agreement for each coalition that is consistent with the bargaining process in every coalition we establish the existence of such solutions show that they are determined by reservation prices and characterize these reservation prices as the payoffs of subgame perfect equilibrium outcomes of a non cooperative bargaining model journal of economic literature classification numbers c71 c72 c78

welfarism in economic domains abstract in economies with public goods and agents with quasi linear preferences we give a characterization of the welfare egalitarian correspondence in terms of three axioms pareto optimality symmetry and solidarity this last property requires that an increase in the willingness to pay for the public goods of some of the agents should not decrease the welfare of any of them journal of economic literature classification numbers d63 h41

monotonicity of social welfare optima abstract this paper considers the problem of maximizing social welfare subject to participation constraints it is shown that for an income allocation method that maximizes a social welfare function there is a monotonic relationship between the incomes allocated to individual agents in a given coalition with at least three members and its participation constraint if and only if the aggregate income to that coalition is always maximized an impossibility result demonstrates that there is no welfare maximizing allocation method in which agents individual incomes monotonically increase in society s income thus for any such allocation method there are situations where some agents have incentives to prevent society in becoming richer

winter blues a sad stock market cycle and god said let there be light and there was light and god saw that the light was good genesis 1 3 depression has been linked with seasonal affective disorder sad a condition that affects many people during the seasons of relatively fewer hours of daylight experimental research in psychology has documented a clear link between depression and lowered risktaking behavior in a wide range of settings including those of a financial nature through the links between sad and depression and between depression and risk aversion seasonal variation in length of day can translate into seasonal variation in equity returns based on supportive evidence from psychology which suggests sad is linked closely with hours of daylight we consider stock market index data from countries at various latitudes and on both sides of the equator we model differences in the seasonal variation of daylight across coun

coalition theory and its applications a survey we survey some of the major advances in coalition theory in recent years we then look at the recent applications of the theory in the area of political economy and touch upon some important theoretical and applied open questions in the field

endogenous formation of coalitions the formation of coalitions is a fundamental problem in game theory by a coalition is meant a group of players e g economic or political agents which decide to act together as one unit relative to the rest of the players this includes the instances of syndicates unions cartels blocks political parties parliamentary coalitions etc we would like to emphasize that forming a coalition does not eliminate the individual players as decision makers in all interactions with the other players coalition members act as one unit it may be useful to think of a representative agent taking their place 2 however this arrangement will continue only as long as each player finds it desirable to act this way further bargaining occurs among the members of each coalition on how to divide what they obtained together thus the existence of coalitions implies that the interactions among the players will be conducted on two levels first among the coalitions and second within each coalition most of the existing models in economics and game theory assume that the coalition structure is given exogenously instead we try here to obtain it as an endogenous outcome of our model namely we want to be able to predict which coalitions will in fact form in each given situation 3 our theory combines two kinds of game theoretic concepts value and stability the basic idea is first to evaluate the players prospects in the various coalition structures and then based on these values to find which ones are stable we will call this value coalition structure value or cs value for short the reason we are considering coalition structures i e partitions of the set of players into disjoint coalitions rather than just coalitions is that in general players may find it to their advantage to join forces in some situations and to act separately in others all depending on the way the other participants are organized this implies that both the value and the stability concepts should depend on the entire coalition structure the cs value we analyze in this paper was first developed by owen 7

seasonality stock returns and the macroeconomy this paper examines the relationship between seasonality stock returns and the macroeconomy using a multifactor model of stocks returns observed seasonal patterns in excess returns are found to be a result of seasonality in excess expected returns by utilising a multifactor model of stock returns these higher returns are found to be a compensation for risk associated with a number of macroeconomic factors at certain times of the year

the choquet bargaining solutions abstract we axiomatically investigate the problem of rationalizing bargaining solutions by social welfare functions that are linear in every rank ordered subset of r n such functions the so called choquet integrals have been widely used in the theories of collective and individual choice we refer to bargaining solutions that can be rationalized by choquet integrals as choquet bargaining solutions our main result is a complete characterization of choquet bargaining solutions as a corollary of our main result we also obtain a characterization of the generalized gini bargaining solutions introduced by blackorby et al 1994 econometrica 62 1161 1178 journal of economic literature classification numbers d71 c78

on the different geographic characteristics of free trade agreements and customs unions abstract casual observation reveals a striking phenomenon of preferential trade agreements ptas while customs unions cus are only intra regional free trade agreements ftas are inter and intra regional using a farsighted dynamic model we endogenize the equilibrium path of ptas among two close countries and one far country rising transport costs mitigate the cost of discrimination faced by the far country as a cu non member and diminish the value of preferential access as a cu member thus sufficiently large transport costs imply that an fta is the only type of pta that can induce the far country s participation in pta formation unlike cu formation fta formation can induce participation because ftas provide a flexibility benefit an fta member can form further ptas with non members but a cu member must do so jointly with all existing members hence in equilibrium cus are intra regional while ftas are intra and inter regional

bargaining and the value of money abstract search models of monetary exchange have typically relied on nash 1950 the bargaining problem econometrica 18 155 162 bargaining or strategic games that yield an equivalent outcome to determine the terms of trade by considering alternative axiomatic bargaining solutions in a search model with divisible money we show that the properties of the bargaining solutions do matter both qualitatively and quantitatively for questions of first degree importance in monetary economics such as i the efficiency of monetary equilibrium ii the optimality of the friedman rule and iii the welfare cost of inflation

the seasonal cycle and the business cycle almost all recent research on macroeconomic fluctuations has worked with seasonally adjusted or annual data this paper takes a different approach by treating seasonal fluctuations as worthy of study in their own right our results show that seasonal fluctuations are an important source of variation in all macroeconomic quantity variables but are small or entirely absent in both real and nominal price variables the timing of the seasonal fluctuations consists of increases in the second and fourth quarters a large decrease in the first quarter and a mild decrease in the third quarter the paper demonstrates that with respect to each of several major stylized facts about business cycles the seasonal cycle displays the same characteristics as the business cycle in some cases even more dramatically than the business cycle that is we find that at seasonal frequencies as well as at business cycle frequencies output movements across broadly defined sectors move together the timing of production and the

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

bargaining with uncertain disagreement points much of the uncertainty concerning the likely outcome of a typical management labor conflict pertains to the cost of possible conflict to the two sides in this paper we consider situations of this kind where the cost of conflict is not known with certainty however we will assume the benefits from cooperation to be known we place our analysis in the abstract framework formulated by nash 1950 nash described a bargaining problem as a pair consisting of a feasible set the amount to be divided among management and labor and a disagreement point giving the payoffs to both sides when they fail to reach agreement on a division that is the strike nash investigated the existence of solutions to such problems that would satisfy a certain list of appealing properties in his analysis both feasible set and disagreement point were assumed to be known here we assume only the feasible set to be known several studies have appeared of bargaining situations where the feasible set is unknown but the disagreement point is known while we are of course not denying the relevance of such studies we believe that an analysis of situations where it is the consequences of conflict that are unknown might be equally and perhaps even more relevant to industrial experience indeed consider a management labor conflict over wages and benefits in many industries the future profitability of the enterprise can be predicted with reasonable accuracy on the basis of its performance in the previous years whereas the impact of a strike might depend on a number of factors that are significantly harder to evaluate this is because strikes are infrequent and conjectures about these factors are often not put to the test a strike is a threat that is often not carried out and because they involve a number of parameters that are difficult to quantify such as the psychological readiness of the strikers the support they might receive from the population and the media and the likely response of competing and related industries we impose on solutions a new condition of disagreement point concavity guaranteeing that agents will agree on a compromise before the uncertainty concerning the disagreement point is resolved to illustrate this requirement somewhat more concretely suppose that bargaining takes place today without the precise location of the disagreement point being known this uncertainty being resolved tomorrow the bargainers have two options the first option is simply to wait until tomorrow and solve then whatever problem has come up unfortunately the resulting pair of contingent compromises evaluated today is in general strictly pareto dominated the other possibility is to solve today the problem obtained by replacing the uncertain disagreement point by its expected value this represents the cost of conflict evaluated today and to solve the resulting problem today this second option has the advantage of yielding paretoundominated compromises provided of course that agents would in the case of no uncertainty select such compromises but unfortunately it may make one of the agents worse off than under the first option in order to ensure that all agents agree to reaching a compromise today we require that the second option always pareto dominate the first one we show that disagreement point concavity when used in conjunction with three standard properties that are satisfied by virtually all of the solutions commonly discussed

endogenous parties in an assembly in this article i show how members of an assembly form voting blocs strategically to coordinate their votes and affect the policy outcome chosen by the assembly in a repeated voting game permanent voting blocs form in equilibrium these permanent voting blocs act as endogenous political parties that exercise party discipline in a stylized assembly i prove that the equilibrium parties must be two small polarized voting blocs one at each side of the ideological divide

egalitarian solutions and uncertain disagreement points abstract we consider bargaining problems with uncertain disagreement points we search for solutions providing agents the incentive to reach agreements before the uncertainty is resolved we identify the weighted egalitarian solutions as being the only ones in the family of directional solutions characterized in an earlier paper chun and thomson 1987 to satisfy three alternative lists of complementary conditions we also show that on the class of coalitional form games the kalai samet 1985 extension of the egalitarian solutions does not provide this incentive for early agreement

group formation in risk sharing arrangements we study informal insurance within communities explicitly recognizing the possibility that subgroups of individuals may destabilize insurance arrangements among the larger group we therefore consider self enforcing risk sharing agreements that are robust not only to single person deviations but also to potential deviations by subgroups however such deviations must be credible in the sense that the subgroup must pass exactly the same test that we apply to the entire group it must itself employ some self enforcing risk sharing agreement we observe that the stability of subgroups is inimical to the stability of the group as a whole two surprising consequences of this analysis are that stable groups have uniformly bounded size a result in sharp contrast to the individual deviation problem and that the degree of risk sharing in a community is generally non monotonic in the level of uncertainty or need for insurance in the community

do investments in specialized knowledge lead to composite good industries we try to understand why firms producing goods by means of complementary components do not merge especially in industries in which investments in component based knowledge matters as audretsch we state that these activities are developed by individuals who do their best to appropriate the return from their knowledge and whose effort is non contractible the organization of the industry into firms is identified to a partition of the set of individuals in this context we prove that an organization in which each individual hold his own firms is both stable with respect to unilateral deviation and optimal in the line of the property right approach if the returns are high enough this structure is even the only one which shares both properties

axiomatic bargaining theory on economic environments abstract axiomatic bargaining theory is reexamined by focusing upon the economic exhange environment instead of the traditional utility possibility set it is argued that the axioms of the traditional theory impose stronger restrictions than can be supported by their motivating economic intuitions weaker alternative axioms making explicit use of economic information are used to characterize the standard bargaining solutions a key idea is to impose consistency of the solution with respect to changes in the dimension of the commodity space even these weaker economic axioms however may be unrealistic restrictions to impose on the bargaining solution in the context of many economic bargaining problems

monotonic solutions to general cooperative games etude de jeux cooperatifs qui sont des jeux a plusieurs joueurs mis sous la forme de coalition dans lesquels l utilite n est pas supposee etre transferable

dynamics and stability of constitutions coalitions and clubs a central feature of dynamic collective decision making is that the rules that govern the procedures for future decision making and the distribution of political power across players are determined by current decisions for example current constitutional change must take into account how the new constitution may pave the way for further changes in laws and regulations we develop a general framework for the analysis of this class of dynamic problems under relatively natural acyclicity assumptions we provide a complete characterization of dynamically stable states as functions of the initial state and determine conditions for their uniqueness we show how this framework can be applied in political economy coalition formation and the analysis of the dynamics of clubs the explicit characterization we provide highlights two intuitive features of dynamic collective decision making 1 a social arrangement is made stable by the instability of alternative arrangements that are preferred by sufficiently many members of the society 2 efficiency enhancing changes are often resisted because of further social changes that they will engender

endogenous games and mechanisms side payments among players we characterize the outcomes of games when players may make binding offers of strategy contingent side payments before the game is played this does not always lead to efficient outcomes despite complete information and costless contracting the characterizations are illustrated in a series of examples including voluntary contribution public good games cournot and bertrand oligopoly principal agent problems and commons games among others

constrained egalitarian allocations abstract this paper proposes a constrained egalitarian solution concept for tu games which combines commitment for egalitarianism and promotion of individual interests in a consistent manner the paper shows that the set of constrained egalitarian allocations is nonempty for weakly super additive games the solution is almost unique if the desirability relation between players is complete

diversity and redistribution abstract in this paper we analyze the interaction of income and preference heterogeneity in a political economy framework we ask whether the presence of preference heterogeneity arising for example from different ethnic groups or geographic locations affects the ability of the poor to extract resources from the rich we study the equilibrium of a game in which coalitions of individuals form parties parties propose platforms and all individuals vote with the winning policy chosen by plurality political parties are restricted to offering platforms that are credible in that they belong to the pareto set of their members the platforms specify the values of two policy tools a general redistributive tax which is lump sum rebated or used to fund a general public good and a series of taxes whose revenue is used to fund specific targeted goods tailored to particular preferences or localities our analysis demonstrates that taste conflict first dilutes but later reinforces class interests when the degree of taste diversity is low the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers as taste diversity increases in society the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution as diversity increases further however the only policy that can emerge supports exclusively general redistribution

negotiating free trade we develop a dynamic bargaining model in which a leading country endogenously decides whether to sequentially negotiate free trade agreements with subsets of countries or engage in simultaneous multilateral bargaining with all countries at once we show how the structure of coalition externalities shapes the choice between sequential and multilateral bargaining and we identify circumstances in which the grand coalition is the equilibrium outcome leading to worldwide free trade a model of international trade is then used to illustrate equilibrium outcomes and how they depend on the structure of trade and protection global free trade is not achieved when the political economy motive for protection is sufficiently large furthermore the model generates both building bloc and stumbling bloc effects of preferential trade agreements in particular we describe an equilibrium in which global free trade is attained only when preferential trade agreements are permitted to form a building bloc effect and an equilibrium in which global free trade is attained only when preferential trade agreements are forbidden a stumbling bloc effect the analysis identifies conditions under which each of these outcomes emerges