The theory of contests: a survey

This paper presents a survey of the theory of contests. This paper is an outgrowth of lecture notes of Ph.D. courses given in Carlos III University, Universitat Autònoma de Barcelona and Universidad de Málaga. I would especially like to thank to Carmen Beviá for her comments and suggestions and Matthias Dahm for allowing me free access to a joint paper and for correcting many mistakes and very helpful suggestions. I also thank Clara Eugenia García, Cristian Litan, Carlos Pimienta, Santiago Sánchez-Pages, Ramon Torregrosa, Galina Zudenkova and the students of this course for their helpful comments and CAICYT for research grant SEJ2005-06167/ECON.     

Characterization of an extended Walrasian concept for open economies

The consistency axiom, which is quite prominent in the framework of concepts of cooperative games, can be used to characterize concepts for economies as well. Dagan [Dagan, N., 1996b. Consistency and the Walrasian allocations correspondence. A revised version of Economics Working Paper No. 151, Universitat Pompeu Fabra, Barcelona, Spain.] and van den Nouweland et al. [van den Nouweland, A., Peleg, B., Tijs, S., 1996. Axiomatic characterization of the Walras correspondence for generalized economies. Journal of Mathematical Economics 25, 355–372.] used the setting of open economies to give axiomatic characterizations of an extension of the Walras correspondence. Here, we will characterize the proportional Walrasian concept, an extension which was proposed by Thomson [Thomson, W., 1992. Consistency in exchange economies. Mimeo, Department of Economics, University of Rochester, Rochester, NY.] and which is non-empty on a much bigger class of open economies. Apart from consistency properties and other frequently used axioms, we also employ an axiom on distribution.     

Multi-agent bilateral bargaining and the Nash bargaining solution

This paper studies a bargaining model where n   players negotiate how to share a pie through (n−1)$(n-1)$ bilateral bargaining sessions. In each session, two players bargain for a partial agreement that specifies who exits and who moves on to the next session (if there is any) via the alternating-proposal framework of Rubinstein [Rubinstein, A., 1982. Perfect equilibrium in a bargaining model. Econometrica 50, 97–109]. We consider two bargaining procedures under which the subgame perfect equilibrium outcomes converge to the Nash [Nash, J., 1950. The bargaining problem. Econometrica 18, 155–162] bargaining solution for the corresponding bargaining problem as the players’ discount factor goes to one. Hence, the model studied here provides a non-cooperative foundation for the Nash cooperative bargaining solution in the multilateral case.     

Sequential bargaining with common values

We study the alternating-offers bargaining problem of assigning an indivisible and commonly valued object to one of two players who jointly own this object. The players are asymmetrically informed about the object’s value and have veto power over any settlement. There is no depreciation during the bargaining process which involves signalling of private information. We characterise the perfect Bayesian equilibrium outcome of this game which is unique if offers are required to be strictly increasing. Equilibrium agreement is reached gradually and non-deterministically. The better informed player obtains a rent.     

Spatial social networks

We introduce a spatial cost topology in the network formation model analyzed by Jackson and Wolinsky, Journal of Economic Theory (1996), 71: 44–74. This cost topology might represent geographical, social, or individual differences. It describes variable costs of establishing social network connections. Participants form links based on a cost-benefit analysis. We examine the pairwise stable networks within this spatial environment. Incentives vary enough to show a rich pattern of emerging behavior. We also investigate the subgame perfect implementation of pairwise stable and efficient networks. We construct a multistage extensive form game that describes the formation of links in our spatial environment. Finally, we identify the conditions under which the subgame perfect Nash equilibria of these network formation games are stable. We are very grateful for the constructive comments of Matt Jackson and an anonymous referee. We also like to thank Vince Crawford, Marco Slikker, Edward Droste, Hans Haller, Dimitrios Diamantaras, and Sudipta Sarangi for comments on previous drafts of this paper.We acknowledge Jay Hogan for his programming support. Part of this research was done while visiting the CentER for Economic Research, Tilburg University, Tilburg, The Netherlands.Financial support from the Netherlands Organization for Scientific Resrarch (NWO), grant B46-390, is gratefully acknowledged.-->,     

Network formation with sequential demands

This paper introduces a non-cooperative game-theoretic model of sequential network formation, in which players propose links and demand payoffs. Payoff division is therefore endogenous. We show that if the value of networks satisfies size monotonicity, then each and every equilibrium network is efficient. The result holds not only when players make absolute participation demands, but also when they are allowed to make link-specific demands.     

Empirical approach to the analysis of university student absenteeism: proposal of a questionnaire for students to evaluate the possible causes

Works on student absenteeism in the universities have not been preferential for the authors in the field of educational research. Usually, what has been made is an approach to the available absenteeism data as an intervening variable or as a variable characteristic of the educational process, but not as a dependent variable in the strict sense of the term. In this work, we intend to make an empirical approach to the possible reasons of student absenteeism. There is a double point of view: the students’ and the professors’; the reasons that justify it according to its protagonists are studied. This paper focuses on the six university degrees taught at the School of Economy and Business of the University of Barcelona (Facultat d’Economia i Empresa de la Universitat de Barcelona). An “ad-hoc” questionnaire has been prepared and the opinions of 1,162 undergraduates have been analyzed. The reasons given by each population differ in hierarchy and motivations.     

Equilibrium allocations of endowment-pretension games in public good economies

In a public good economy where agents' preferences are known but endowments are private information, instituting an allocation rule and asking the agents their initial endowments induces an endowment-pretension game. We analyse the Nash equilibrium allocations of this game and discuss its welfare properties with reference to voluntary contributions allocations. Received: 30 May 2001, Accepted: 23 September 2005 JEL Classification: H41 I am grateful to Murat Sertel for his continuous support and encouragement; to G?ksel Asan and Arunava Sen for their invaluable help. I would also like to thank Fikret Adaman, Ahmet Alkan, Salvador Barberá, Semih Koray, Andrei Ratiu, Muhamet Yíldíz, ünal Zenginobuz, an Associate Editor and two referees of the Review of Economic Design for their enlightening comments on previous drafts. Earlier versions of this paper were written during my stay at Universitat Autónoma de Barcelona and at the Indian Statistical Institute. Both visits have been possible by the kindness of the host institutions and the financial support of the Turkish Academy of Sciences and Serem Ltd. It is a pleasure for me to express my gratitude to all these institutions. Of course, all possible errors are mine.     

Mediation and the Nash bargaining solution

This paper analyzes a model of bargaining in which two parties use a mediator who sequentially makes random proposals until agreement by both parties is reached. I show that as the cost of delay shrinks to zero, the subgame perfect payoff converges to the asymmetric Nash bargaining solution with weights determined by the relative discount rates of the players. I also establish conditions for the uniqueness of the subgame perfect equilibrium for arbitrary discount rates.     

Complexity, Identity and the Value of Knowledge-intensive Exchanges

ABSTRACT Researchers studying the structural embeddedness of firms in networks have focused on its effects on economic behaviour, strategic action and competitive behaviour, but network embeddedness as a source of firm value per se has been largely overlooked. I argue that neglecting the network context in which firms are embedded leads to an incomplete understanding of the value of the firm. I seek to understand how a focal firm's structural embeddedness network characteristics function as mechanisms that elucidate the value of its knowledge‐intensive exchanges. This paper presents a framework that identifies two processes of knowing exchange value, namely knowing through a learning bandwagon and knowing through a fad bandwagon. I argue that knowing value as a learning bandwagon is enabled by the normative and cognitive proximity of exchange partners, and that this is facilitated by the embeddedness of the focal firm in dense network structures. Knowing value as a fad bandwagon is based on a positional construction of the focal firm's status, which is determined by the centrality of the focal firm's network partners in their corresponding networks. This is a ranking system based on positional network data, whose efficacy stems from the inability of firms to manipulate their network positions.     

A dynamic analysis of collusive networks

This paper investigates the strategic formation of collusive networks in a dynamic framework. A collusive network is a set of market sharing agreements between firms in oligopolistic markets and auctions. Belleflamme and Bloch (Int Econ Rev 45(2):387–411, 2004) fully characterize the pairwise stable collusive networks in their symmetric model. In contrast, we characterize the collusive networks to which a dynamic network formation process converges with positive probability in the symmetric model. We provide a complete characterization for the case of the process that starts from a network with sufficiently few links. Moreover, we show that the process never cycles but always converges to a stable network. In addition, we discuss an asymmetric model where firms enjoy a home country advantage. We show that the expected number of collusive agreements may be reduced by an increase in the degree of the home country advantage. This implies that policies for discouraging entry may fail, and may lead to a decrease in expected social surplus.     

A note on linked bargaining

A recent result by Jackson and Sonnenschein (2007) describes a general framework for overcoming incentive constraints by linking together independent copies of a Bayesian decision problem. A special case of that work shows that if copies of a standard two-player Bayesian bargaining problem are independently linked (players receive valuations and trade simultaneously on a number of identical copies), then the utility cost associated with incentive constraints tends to 0 as the number of linked problems tends to infinity. We improve upon that result, increasing the rate of convergence from polynomial to exponential and eliminating unwanted trades in the limit, by introducing a mechanism that uses a slightly richer and more refined strategy space. Although very much in the same spirit, our declarations are constrained by a distribution which is skewed away from the expected distribution of player types. When a sufficiently large number of bargaining problems are linked, “truth” is an equilibrium. Moreover, this equilibrium is incentive compatible with the utility cost of incentive constraints almost surely equal to 0.     

Agustín Maravall: An interview with the International Journal of Forecasting

Agustín Maravall Herrero (Madrid, 1944) is one of the world’s authorities in seasonal adjustment and automatic forecasting of economic time series. He studied Agricultural Engineering and completed a doctorate at the Universidad Politécnica de Madrid. With a Ford-Fulbright fellowship he moved to the University of Wisconsin-Madison to obtain a Ph.D. in Economics in 1975. He worked at the Research Division of the Federal Reserve Board of Governors (the Fed) in Washington D.C. and in 1979 returned to Madrid as a Senior Economist in the Research Department of the Banco de España (BE). In the period 1989-96, he was a full professor in the Department of Economics of the European University Institute (EUI) in Florence. He returned to the BE as Chief Economist and Head of the Time Series Analysis Unit and retired in December 2014.Maravall has done outstanding research in time series and has been a pioneer in developing methodology and writing computer programs for automatic estimation and model selection, seasonal adjustment, and forecasting of time series. His programs “Time Series Regression with ARIMA noise, Missing observations and Outliers” (TRAMO) and “Signal Extraction in ARIMA Time Series” (SEATS), jointly developed with Victor Gómez, have had a large influence in applied forecasting, including adjusting series for seasonality and possibly other undesirable effects, such as outliers, or missing observations, and have been used in many economic institutions around the world. He has been very active in promoting the automatic analysis of time series, teaching short courses in many countries. Also, he has stimulated research in this field being on the editorial board of the Journal of Business and Economic Statistics and the Journal of Econometrics. He has been a Special Advisor to the European Central Bank (ECB) and Eurostat in time series analysis. His research contributions have been recognized as Fellow of the Journal of Econometrics, 1995; Fellow of the American Statistical Association, 2000; Julius Shiskin Award for Economic Statistics, 2004, and the highest prizes for Economic Research in Spain: The Rey Jaime I Prize in Economics, 2005 and the Rey Juan Carlos Prize in Economics, 2014.     

Network formation models with costs for establishing links

Abstract. In this paper we study endogenous formation of communication networks in situations where the economic possibilities of groups of players can be described by a cooperative game. We concentrate on the influence that the existence of costs for establishing communication links has on the communication networks that are formed. The starting points in this paper are two game-theoretic models of the formation of communication links that were studied in the literature fairly recently, the extensive-form model by Aumann and Myerson (1988) and the strategic-form model that was studied by Dutta et al. (1998). We follow their analyses as closely as possible and use an extension of the Myerson value to determine the payoffs to the players in communication situations when forming links is not costless. We find that it is possible that as the costs of establishing links increase, more links are formed.     

The evolution of free trade networks

This paper considers the evolutionary dynamics of a free trade agreement (FTA) network formation game among N countries. We first explore the static model introduced by Goyal and Joshi (2006) and precisely characterize the set of pairwise stable FTA networks. Then, we develop a dynamic model under random perturbations and identify long-run outcomes to remove prediction uncertainty inherited from static analysis. The results show that both partial free trade and global free trade will result when there are only three countries. However, when more countries are involved, only the complete FTA network emerges.     

Network structure,portfolio diversification and systemic risk

We investigate the effect of portfolio diversification on banking systemic risk, where the network effect is incorporated. We analyze three kinds of interbank networks, namely, random networks, small-world networks and scale-free networks. We show that the effect of portfolio diversification on banking systemic risk depends on interbank network structures and shock types. First, systemic risk increases first and then reduces with the increase of the level of portfolio diversification in the case of the individual shock. Second, in the case of the systemic shock, systemic risk reduces with the increases of the level of portfolio diversification. Third, banking systems with scale-free network structures are the most stable, and those with small-world network structures are the most vulnerable.     

A noncooperative approach to the Mas-Colell bargaining set

We propose an extensive form game to give a noncooperative interpretation of the Mas-Colell bargaining set for transferable utility games. Based on the objection and counterobjection in the sense of the Mas-Colell bargaining set, a bilateral negotiation is designed in our model. We show that the equilibrium outcomes of our extensive form game coincide with the Mas-Colell bargaining set in the supperadditive environments.     

Community connectivity and heterogeneity: clues and insights on cooperation on social networks

While studies on the emergence of cooperation on structured populations abound, only few of them have considered real social networks as the substrate on which individuals interact. As has been shown recently [Lozano et al., PLoS ONE 3(4):e1892, 2008], understanding cooperative behavior on social networks requires knowledge not only of their global (macroscopic) characteristic, but also a deep insight on their community (mesoscopic) structure. In this paper, we look at this problem from the viewpoint of the resilience of cooperation, in particular when there are directed exogenous attacks (insertion of pure defectors) at key locations in the network. We present results of agent-based simulations showing strong evidence that the resilience of social networks is crucially dependent on their community structure, ranging from no resilience to robust cooperative behavior. Our results have important implications for the understanding of how organizations work and can be used as a guide for organization design. This work was supported by Ministerio de Educación y Ciencia (Spain) under grants FIS2006-13321-2 and MOSAICO and by Comunidad de Madrid (Spain) under grant. SIMUMAT-CM. S. Lozano was supported by URV through a FPU grant and by the EU Integrated Project IRRIIS (027568).