FARSIGHTED COALITIONAL STABILITY OF A PRICE LEADERSHIP CARTEL

This paper analyzes the farsighted behaviour of firms that form a dominant price leadership cartel. We consider stability concepts such as the farsighted core, the farsighted stable sets, and the largest consistent set. We show that: (i) the farsighted core is either an empty set or a singleton set of the grand cartel; (ii) any Pareto efficient cartel is itself a farsighted stable set; and (iii) the set of cartels in which fringe firms enjoy higher profits than the firms in the minimal Pareto efficient cartel is the largest consistent set.     

THE IMPACT OF ANTI‐TERRORISM EXPENDITURE ON ECONOMIC GROWTH AND WELFARE

This paper examines the effects of increasing anti‐terrorism expenditure on economic growth rate and social welfare. It is shown that: (i) spending the least amount possible on anti‐terrorism expenditure will lead to a maximum economic growth rate; and (ii) to achieve maximum social welfare, the government should allocate its budget to anti‐terrorism expenditure. The results shed light on why the US government has chosen to uphold and pursue its anti‐terrorism policies in recent years to present day.     

THE SECOND‐PRICE AUCTION SOLVES KING SOLOMON'S DILEMMA*

The planner wants to give k identical, indivisible objects to the top k valuation agents at zero costs. Each agent knows her own valuation of the object and whether it is among the top k. Modify the (k+ 1)st‐price sealed‐bid auction by introducing a small participation fee and the option not to participate in it. This simple mechanism implements the desired outcome in iteratively undominated strategies. Moreover, no pair of agents can profitably deviate from the equilibrium by coordinating their strategies or bribing each other.     

SEQUENTIAL TWO‐PLAYER GAMES WITH AMBIGUITY*

If players' beliefs are strictly nonadditive, the Dempster–Shafer updating rule can be used to define beliefs off the equilibrium path. We define an equilibrium concept in sequential two‐person games where players update their beliefs with the Dempster–Shafer updating rule. We show that in the limit as uncertainty tends to zero, our equilibrium approximates Bayesian Nash equilibrium. We argue that our equilibrium can be used to define a refinement of Bayesian Nash equilibrium by imposing context‐dependent constraints on beliefs under uncertainty.     

STRATEGIC CANDIDACY AND SINGLE‐PEAKEDNESS*

In elections, the voting outcomes are affected by strategic entries of candidates. We study a class of voting rules immune to strategic candidacy. Dutta et al. (2001 ) show that such rules satisfying unanimity are dictatorial if all orderings of candidates are admissible for voters’ preferences. When voters’ preferences are single‐peaked over a political spectrum, there exist non‐dictatorial rules immune to strategic candidacy. An example is the rule selecting the m‐th peak from the left among the peaks of voters’ preferences, where m is any natural number no more than the number of voters. We show that immunity from strategic candidacy with basic axioms fully characterizes the family of the m‐th leftmost peak rules.     

UNIQUENESS OF EQUILIBRIUM PAYOFFS IN FINITELY REPEATED GAMES WITH IMPERFECT MONITORING*

This paper examines when a finitely repeated game with imperfect monitoring has a unique equilibrium payoff vector. This problem is nontrivial under imperfect monitoring, because uniqueness of equilibrium (outcome) in the stage game does not extend to finitely repeated games. A (correlated) equilibrium is equilibrium minimaxing if any player's equilibrium payoff is her minimax value when the other players choose a correlated action profile from the actions played in the equilibrium. The uniqueness result holds if all stage game correlated equilibria are equilibrium minimaxing and have the same payoffs. The uniqueness result does not hold under weaker conditions.     

ON THE NEUTRALITY OF COALITION FORMATION IN A PURE BARGAINING PROBLEM*

We consider the sequential bargaining game à la Stahl–Binmore–Rubinstein with random proposers, juxtaposing an ex ante coalition formation stage to their bargaining game. On the basis of the expected outcomes in the negotiation over how to split a dollar, players can form coalitions in a sequential manner, within each of which they can redistribute their payoffs. It turns out that the grand coalition does form, and that each player receives his discounted expected payoff, which is obtained by playing as a single player in the negotiation, although there could be many equilibria in the bargaining stage.     

TURNPIKE PROPERTIES OF A MONEY‐IN‐THE‐UTILITY‐FUNCTION MODEL*

This study establishes the global stability of a long‐run stationary state in a money‐in‐the‐utility‐function model. The major finding is that the constant money supply rule results in a stable allocation and price system if consumers discount their future utilities sufficiently weakly. Nominal and real interest rates will be in the neighbourhood of the inverse of the consumers’ discount factor β^‐1.     

AVAILABILITY OF HIGHER EDUCATION AND LONG‐TERM ECONOMIC GROWTH*

In the present paper, we examine the economic growth effects of a limited availability of higher education in a simple endogenous growth model with overlapping generations. It is shown that this limited availability might promote economic growth by increasing aggregate savings. If the supply of human capital is restricted, its price remains high and a large share of aggregate output is distributed to young households, which need to save for their old age. When this growth‐enhancing effect is strong enough, an excessive increase in availability leads to a shortage of investable funds, which substantially reduces economic growth.     

A COMPARISON OF CONDITIONAL AND UNCONDITIONAL APPROACHES IN VALUE‐AT‐RISK ESTIMATION*

In this paper, we attempt to find the most important factor causing the differences in the performance of Value‐at‐Risk (VaR) estimation by comparing the performances of conditional and unconditional approaches. For each approach, we use various methods and models with different degrees of flexibility in their distributions including S_U‐normal distribution, which is one of the most flexible distribution functions. Our empirical results underscore the importance of the flexibility‐of‐distribution function in VaR estimation models. Even though it seems to be unclear which approach is better between conditional and unconditional approaches, it seems to be clear that the more flexible distribution we use, the better the performance, regardless of which approach we use.     

SPILLOVER EFFECTS OF ECONOMIC INTEGRATION IN A THREE‐COUNTRY MODEL*

Using a simple monopoly model, we examine the effects of economic integration. We show that the number of markets and the shapes of marginal revenue curves, are crucial in evaluating economic integration when the marginal cost is not constant. The effects of tariff reductions in a three‐country model contrast with those found in a two‐country model. Effects also depend on which trade policy the non‐member country adopts. When both importing countries simultaneously lower their tariffs, the Metzler paradox may arise.     

FEMALE DUAL LABOUR MARKETS AND EMPLOYEE BENEFITS

The American workforce and the role of employee benefits have changed dramatically since the 1980s when economists seriously considered dual labour market models to describe pay and employment patterns. Then, dual labour market models described men's labour markets, but not women's and the tests applied to wages and salaries, not total compensation including employee benefits. Applying a switching regression technique using the 2000 Current Population Survey and including women workers and employee benefits, we find that the dual labour market hypothesis is consistent with both female and male labour market structures, especially when total compensation is considered.     

A CLASS OF PERFORMANCE‐BASED SUBSIDY RULES*

We consider a benchmark static incentive scheme, i.e. a per unit subsidy, that induces a monopoly to produce a target output level. We show that the same output level can be achieved by a continuum of dynamic subsidy rules based on a performance indicator. The rules require only local information. The present value of the subsidies paid is smaller than the amount paid under the static subsidy. Each of the dynamic subsidy rules results at each moment in a lower per unit subsidy than the static subsidy. The subsidy rate depends on a state variable that reflects the monopolist's performance history.     

ECONOMIC MODELLING OF SUICIDE UNDER INCOME UNCERTAINTY: FOR BETTER UNDERSTANDING OF MIDDLE‐AGED SUICIDE*

This paper formalises an individual's decision about suicide within a framework of lifetime utility maximisation models. This is in line with the literature on economic modelling of suicide. The novelty of the paper is to take into account income uncertainty. Income uncertainty reduces a risk‐averse individual's expected utility, making them more likely to commit suicide. On the other hand, income uncertainty creates a value to postponing suicide even when their income gets sufficiently low. This is because income uncertainty means that if things go well, they will get higher income in the future. Thus, income uncertainty has two opposite effects on suicidal behaviour. The main objective of this paper is to construct an economic model of suicide for investigating net impacts of income uncertainty on suicidal behaviour. For this purpose, it is assumed that the wage evolves according to a stochastic process. Then, the threshold wage, below which an individual commits suicide, is derived as a function of the parameters of the stochastic process assumed for the wage evolution. Impacts of changes in these parameters on the threshold wage are calculated. With the result, the paper shows how income uncertainty affects suicidal behaviour.     

Core tâtonnement

Two discrete time tâtonnement processes—one featuring successive tâtonnement, the other featuring simultaneous tâtonnement—for the core of coalitional games with transferable utility are introduced. For totally balanced games, the successive core tâtonnement process corresponds to the standard simultaneous price tâtonnement process of competitive equilibrium theory via the Shapley-Shubik (market game-direct market) correspondence. The simultaneous core tâtonnement process is based entirely on the intuition behind the definition of the core for games with transferable utility, and it does not correspond to any evident competitive equilibrium tâtonnement process. Both processes are proven to be globally stable. The two processes offer easily implementable algorithms for approximately computing core points.     

THE EXPECTED NUMBER OF COOPERATORS IN THE N‐PERSON PRISONERS’ DILEMMA WITH RANDOM ORDER MOVES*

The present paper examines the possibility of cooperation occurring in the N‐person prisoners’ dilemma, played with randomly ordered moves and imperfect information. To take into account imperfect cooperation, the degree of cooperation is evaluated in terms of the expected number of cooperators. It is shown that: (i) the expected number of cooperators is maximized at an equilibrium, a combination of strategies each of which is a type of trigger strategy; (ii) the maximum expected number of cooperators is attained in a state of imperfect cooperation for a range of payoff functions; and (iii) the maximum expected number of cooperators is non‐decreasing when the size of players’ group increases.     

THE ACCURACY OF INTERNATIONAL ECONOMIC OBSERVATIONS*

This paper investigates measurement errors in generally accepted figures on international transactions that are supplied by national statistical offices to the IMF and the OECD. Implicit minimal measurement errors in bilateral trade data for Germany and the Netherlands appear to be about 1.5–3 per cent. An investigation of foreign direct investment data for 20 OECD countries in the period 1950–89 shows that their accuracy has improved little if at all since the 1970s: in 15–25 per cent of the cases, implied minimal measurement errors are in excess of 10 per cent.