AN ULTIMATUM WAGE BARGAINING EXPERIMENT ON TRADE UNION EFFICIENCY

We present an ultimatum wage bargaining experiment showing that a trade union facilitating non‐binding communication among workers, raises wages by simultaneously increasing employers’ posted offers and toughening the bargaining position of employees, without reducing overall market efficiency.     

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.     

A three-player dynamic majoritarian bargaining game

We analyze an infinitely repeated divide-the-dollar bargaining game with an endogenous reversion point. In each period a new dollar is divided among three legislators according to the proposal of a randomly recognized member—if a majority prefer so—or according to previous period's allocation otherwise. Although current existence theorems for Markovian equilibria do not apply for this dynamic game, we fully characterize a Markov equilibrium. The equilibrium is such that irrespective of the discount factor or the initial division of the dollar, the proposer eventually extracts the whole dollar in all periods. We also show that proposal strategies are weakly continuous in the status quo that equilibrium expected utility is not quasi-concave, and the correspondence of voters’ acceptance set (the set of allocations weakly preferred over the status quo) fails lower hemicontinuity.     

UNEMPLOYMENT IN AN EQUILIBRIUM MODEL WITH BARGAINING*

This paper develops a model which embeds the Nash-equilibrium version of McDonald and Solow's (1981) wage-bargaining model into an otherwise standard static equilibrium macro model. Equilibrium unemployment is possible. Real shocks to demand result in pro-cyclical employment and anti-cyclical real wage movements while money shocks are neutral. This is in some contrast to the results obtained by McDonald and Solow.     

A THEORY OF MAN AS A CREATOR OF THE WORLD*

The present paper proposes a theory of man, wherein man constructs models of the world based on past experiences in social situations. The present theory considers experiences, or chunks of impressions, as primitives instead of an objective game, which is assumed to be given in the standard game theory. Agents construct models of the world based on direct and indirect experiences. Each model comprises a structural part and a factual part. The structural part is represented as a game, while the factual part is represented as a strategy profile of this game. In constructing a model, an agent might use certain axioms—for example coherence, according to which the model should be able to explain his or her own experiences; conformity to a solution concept; and minimality with respect to some simplicity measure. A few applications are presented to demonstrate how this theory works.     

FEE VERSUS ROYALTY POLICY IN LICENSING THROUGH BARGAINING: AN APPLICATION OF THE NASH BARGAINING SOLUTION

In this paper, we consider a Cournot duopoly market in which the patent‐holding firm negotiates with its rival firm about payments for licensing a cost‐reducing innovation. Applying the Nash bargaining solution, we compare two licensing policies, a fixed fee and a royalty. Our results are as follows. Royalty licensing is better than fixed fee licensing for both firms if the innovation is not drastic. So, royalty licensing is always carried out. Moreover, though there exists a case in which consumers prefer fixed fee licensing, royalty licensing is always superior to fixed fee licensing from the social point of view.     

Rational expectations equilibria of economies with local interactions

We consider general economies in which rational agents interact locally. The local aspect of the interactions is designed to represent in a simple abstract way social interactions, that is, socioeconomic environments in which markets do not mediate all of agents’ choices, which might be in part determined, for instance, by family, peer group, or ethnic group effects. We study static as well as dynamic infinite horizon economies; we allow for economies with incomplete information, and we consider jointly global and local interactions, to integrate e.g., global externalities and markets with peer and group effects. We provide conditions under which such economies have rational expectations equilibria. We illustrate the effects of local interactions when agents are rational by studying in detail the equilibrium properties of a simple economy with quadratic preferences which captures, in turn, local preferences for conformity, habit persistence, and preferences for status or adherence to aggregate norms of behavior.     

THE BEHAVIOUR OF SOLUTIONS TO BARGAINING PROBLEMS ON THE BASIS OF SOLIDARITY*

The main purpose of this paper is to provide a systematic study of the solidarity‐type axioms for classical convex bargaining problems. As a consequence, we present alternative characterizations for some well‐known solutions in the literature. Instead of using the Monotonicity axiom, the paper provides characterizations of the egalitarian solution and the Kalai–Somorodinsky solution using slightly weaker versions of Nash's original IIA for convex bargaining problems with a fixed population.     

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.     

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.     

Reputation, group structure and social tensions

Social tensions impede social cohesion and public goods provision, and can be a driving force for more serious conflicts such as civil wars. Surprisingly, the emergence of social tensions has been studied only rarely in the literature. In the present contribution a game-theoretic model highlights how reputation concerns and the structure of group cleavages matter for the emergence of social tensions. In particular, the respective effects of ethnic fractionalization, polarization and segregation are analyzed. The differences between ethnicity and class, and the role of social mobility are also studied. The predictions of the model can account for recent empirical evidence.     

A simple sufficient condition for strong implementation

In an important step forward Maskin [E. Maskin, Nash equilibrium and welfare optimality, Rev. Econ. Stud. 66 (1999) 23–38] showed that two properties – monotonicity and no veto power – are together sufficient for Nash implementation. In contrast to the vast literature that followed, this characterization has two major advantages: First, it is often easy to verify, and second, it has an elegant and simple interpretation. However, there does not exist a similar condition for social choice correspondences that are implementable in strong equilibrium. All existing characterizations are either hard to verify or apply only to comprehensive preference domains. In this paper we improve the situation by giving one such condition. Moreover, using well-known examples we show that this is a practical tool.     

POLITICAL ECONOMY OF STRATEGIC EXPORT POLICY IN A DIFFERENTIATED DUOPOLY*

This paper investigates the effect of a home firm's lobbying on a strategic export policy in a third market with a differentiated duopoly. We focus on its effect on domestic welfare under Bertrand and Cournot competition. Regardless of the mode of competition, the strategic export policy cannot improve domestic welfare in the presence of lobbying if the degree of product differentiation is high or the government is overly concerned with political contribution relative to domestic welfare. Moreover, for the same degree of product differentiation, the lobbying‐induced export policy is more likely to deteriorate domestic welfare relative to free trade under Cournot competition.     

EVOLUTIONARY DRIFT IN PREFERENCE AND EQUILIBRIUM SELECTION*

This paper studies the situation where myopic players repeatedly face a society with two actions where their common fitness exhibits economies of scale. Both states in which all players choose the same actions are equilibria. In each period, players adjust their actions based on their preferences, which are in turn shaped by natural selection. The preferences of the players need not match the underlying fitness. When rare mutations are introduced into the evolutionary process, their preferences may drift without affecting equilibrium behaviour. This paper shows that these drifts influence the results of equilibrium selection.     

A search model of two-sided matching under nontransferable utility

In a decentralized marriage market there are different types of men and women. Agents sequentially search for mating partners and meet bilaterally in a random fashion. Upon meeting, the paired agents complete mating if both agree, and separate and continue searching otherwise. The polarization of interests between men and women appears as in Gale-Shapley marriage problems; as agents of one sex become more selective about their mates, agents of the other sex lose. As search costs disappear, the set of equilibrium outcomes in a search model reduces to the set of stable matchings in a corresponding Gale-Shapley marriage problem.     

GENDER DISCRIMINATION ESTIMATION IN A SEARCH MODEL WITH MATCHING AND BARGAINING*

This article develops a search model of the labor market with matching, bargaining, and employers' taste discrimination in which—under necessary but standard distributional assumption—it is possible to separately identify gender discrimination and unobserved productivity differences. The equilibrium shows that both prejudiced and unprejudiced employers wage discriminate. Maximum likelihood estimates on CPS data indicate that half of the employers are prejudiced, average female productivity is 6.5% lower, and two‐third of the gender earning differential may be explained by prejudice. An affirmative action policy is implemented resulting in a redistribution of welfare from men to women at no cost for employers' welfare.     

EMERGENCE OF LEADERSHIP IN TEAMS*

This paper provides a simple model to explain the emergence of leadership in an unstructured team. Each agent has partial information about the productivity of the team. Each agent may invest a productive effort in one of two periods. If one agent voluntarily moves first and the other waits for the second period, and if the first‐move action successfully transmits his type, the first mover effectively exercises leadership in affecting the effort choice of the second mover. We prove that, if each agent holds stochastically independent information, leadership emerges with positive probabilities in Cho–Kreps stable outcomes.     

Coase theorem, complexity and transaction costs

This paper, by introducing complexity considerations, provides a dynamic foundation for the Coase theorem and highlights the role of transaction costs in generating inefficient bargaining/negotiation outcomes. We show, when the players have a preference for less complex strategies, the Coase theorem holds in negotiation models with repeated surplus and endogenous disagreement payoffs if and only if there are no transaction costs. Specifically, complexity considerations select only efficient equilibria in these models without transaction costs while every equilibrium induces perpetual disagreement and inefficiency with transaction costs. We also show the latter is true in the Rubinstein bargaining model with transaction costs.     

Structural holes in social networks: A remark

In a recent article, [S. Goyal, F. Vega-Redondo, Structural holes in social networks, J. Econ. Theory 137 (1) (2007) 460-492] the authors (GVR) showed the importance of stars and cycles in a given network formation game. Implicitly, in their article, a network is called an equilibrium if it is generated by an equilibrium strategy. We extend the results of GVR to the case of a stronger requirement: namely, that a network can be called an equilibrium only if all the strategies generating it are equilibria. We also show, in a dynamic framework, that both definitions differ in crucial ways.     

ON DETAIL‐FREE MECHANISM DESIGN AND RATIONALITY*

Mechanism design theory has been criticized, because mechanisms depend on the detail of specification and agents’ behaviour relies on strong rationality assumptions. Hence the study of “detail‐free” mechanism design with weak rationality is important as a practical theory. This paper emphasizes that, even if we confine our attention to detail‐free mechanisms with weak rationality, there exists plenty of scope for the development of new and significant ideas. I describe my recent work along these lines, and argue that stochastic decisions work in large double auction environments, and that moral preferences improve the implementability of social choice functions.