Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment

Bilateral (sequential) negotiators delay agreements until a deadline if a player that rejects an offer is subsequently committed not to accept any poorer proposal, and if the common discount factor is close enough to one. Journal of Economic Literature Classification Numbers: C7, C78, J52.     

On the Relationship between Risk-Dominance and Stochastic Stability

In a 2 × 2 symmetric game with two symmetric equilibria, one risk-dominates another if and only if the equilibrium strategy is a unique best response to any mixture that gives itself at least a probability of one-half. In a two-person strategic form game, we call a Nash equilibriumglobally risk-dominantif it consists of strategies such that each one of them is a unique best response to any mixture that gives the other at least a probability of one-half. We show that if a weakly acyclic two-person game has a globally risk-dominant equilibrium, then this is the one that is selected by the stochastic equilibrium selection process of Young.Journal of Economic LiteratureClassification Numbers: C72, C73.     

Subgame-perfect implementation of bargaining solutions

We study house allocation problems introduced by L. Shapley and H. Scarf (1974, J. Math. Econ.1, 23–28). We prove that a mechanism (a social choice function) is individually rational, anonymous, strategy-proof, and nonbossy (but not necessarily Pareto efficient) if and only if it is either the core mechanism or the no-trade mechanism, where the no-trade mechanism is the one that selects the initial allocation for each profile of preferences. This result confirms the intuition that even if we are willing to accept inefficiency, there exists no interesting strategy-proof mechanism other than the core mechanism. Journal of Economic Literature Classification Numbers: C71, C78, D71, D78, D89.     

Choquet Rationality

Consider a decision problem under uncertainty for a decision maker with known (utility) payoffs over prizes. We say that an act is Choquet (Shafer, Bernoulli) rational if for some capacity (belief function, probability) over the set of states, it maximizes her “expected” utility. We show that an act may be Choquet rational without being Bernoulli rational, but it is Choquet rational if and only if it is Shafer rational. Journal of Economic Literature Classification Numbers: C72, D81.     

On Market Games When Agents Cannot Be in Two Places at Once

We consider markets in which agents supply their time or the services of a capital good and the duration of the market is limited. We show that a coalitional game can be generated by such a market if and only if the characteristic function of the game is superadditive. Journal of Economic Literature Classification Numbers: C71, D51.     

Pure-Strategy ε-Nash Equilibrium inn-Person Nonzero-Sum Discontinuous Games

In this paper we considern-person nonzero-sum games where the strategy spaces of players are compact subsets ofR^s. The main result states that if the payoff functions are semicontinuous and strongly quasi-concave then an ε-Nash equilibrium in pure strategies exists for every positive ε.Journal of Economic LiteratureClassification Number: C72.     

How Proper Is Sequential Equilibrium?

A strategy profile of a normal form game is proper if and only if it is quasi-perfect in every extensive form (with that normal form). Thus, properness requires optimality along a sequence of supporting trembles, while sequentiality only requires optimality in the limit. A decision-theoretic implementation of sequential rationality, strategic independence respecting equilibrium (SIRE), is defined and compared to proper equilibrium, using lexicographic probability systems. Finally, we give tremble-based characterizations, which do not involve structural features of the game, of the rankings of strategies that underlie proper equilibrium and SIRE.Journal of Economic LiteratureClassification Numbers: C70, C72.     

Perfect Information and Potential Games

Games with perfect information giving rise to potential normal forms are described. For agent normal forms, a potential is defined such that a strategy profile is a maximizer for the potential if and only if it is a subgame perfect equilibrium. In the normal form of any game with perfect information, every better reply path where the players do not change their choices at irrelevant nodes leads to an equilibrium. Journal of Economic Literature Classification Number: C72.     

A Characterization of Ordinal Potential Games

This note characterizes ordinal potential games by the absence of weak improvement cycles and an order condition on the strategy space. This order condition is automatically satisfied if the strategy space is countable.Journal of Economic LiteratureClassification Number: C72.     

Markov Perfect Equilibrium: I. Observable Actions

We define Markov strategy and Markov perfect equilibrium (MPE) for games with observable actions. Informally, a Markov strategy depends only on payoff-relevant past events. More precisely, it is measurable with respect to the coarsest partition of histories for which, if all other players use measurable strategies, each player's decision-problem is also measurable. For many games, this definition is equivalent to a simple affine invariance condition. We also show that an MPE is generically robust: if payoffs of a generic game are perturbed, there exists an almost Markovian equilibrium in the perturbed game near the initial MPE. Journal of Economic Literature Classification Numbers: C72, C73.     

The Partnered Core of a Game without Side Payments

A payoff for a game is partnered if it admits no asymmetric dependencies. We introduce the partnered core of a game without side payments and show that the partnered core of a balanced game is nonempty. The result is a strengthening of Scarf's Theorem on the nonemptiness of the core of a balanced game without side payments. In addition, it is shown that if there are at most a countable number of points in the partnered core of a game then at least one core point isminimallypartnered, meaning that no player requires any other player in particular to obtain his part of the core payoff.Journal of Economic LiteratureClassification Number: C71.     

Conditional Universal Consistency

Players choose an action before learning an outcome chosen according to an unknown and history-dependent stochastic rule. Procedures that categorize outcomes, and use a randomized variation on fictitious play within each category are studied. These procedures are “conditionally consistent:” they yield almost as high a time-average payoff as if the player knew the conditional distributions of actions given categories. Moreover, given any alternative procedure, there is a conditionally consistent procedure whose performance is no more than epsilon worse regardless of the discount factor. We also discuss cycles, and argue that the time-average of play should resemble a correlated equilibrium. Journal of Economic Literature Classification Numbers: C72, C73, C63, D83.     

Evolution of Smartn Players

To model the evolution of strategic intelligence, player types are drawn from a hierarchy of "smartness" analogous to the levels of iterated rationalizability. Nonrationalizable strategies die out, but when higher levels of smartness incur maintenance costs, being right is always as good as being smart. Moreover, if a manifest way to play emerges, then dumb players never die out, while smarter players with positive maintenance costs vanish. These results call to question the standard game-theoretic assumption of super-intelligent players. Journal of Economic Literature Classification Numbers: B40, C70, C72, C73.     

Stochastic Cooperative Games: Superadditivity, Convexity, and Certainty Equivalents

This paper extends the notions of superadditivity and convexity to stochastic cooperative games. It is shown that convex games are superadditive and have nonempty cores, and that these results also hold in the context of NTU games. Furthermore, a subclass of stochastic cooperative games to which one can associate a deterministic cooperative game is considered. It is shown that such a stochastic cooperative game satisfies properties like nonemptiness of the core, superadditivity, and convexity if and only if the corresponding deterministic game satisfies these properties.Journal of Economic LiteratureClassification Number: C71.     

Testing for Ongoing Convergence in Transition Economies, 1970 to 1998

In this paper, the authors use a time-varying parameters procedure to test for a common growth path in the ex-Communist bloc, both pre- and postreform. They test whether there has been convergence within the bloc or between the bloc as a group and the West. Surprisingly, there is little evidence of convergence within the bloc, which brings into question the effectiveness of policies to reduce differentials in income per capita under the Communists. There is also little evidence of convergence with respect to the West, either during the period from 1970 to 1990 or if the reform years are included (i.e., 1970 to 1998). J. Comp. Econ., December 2001, 29(4), pp. 677–691. © 2001 Elsevier ScienceJournal of Economic Literature Classification Numbers: O40, C22, C23, C15.     

Two new proofs of Afriat’s theorem

Summary. We provide two new, simple proofs of Afriats celebrated theorem stating that a finite set of price-quantity observations is consistent with utility maximization if, and only if, the observations satisfy a variation of the Strong Axiom of Revealed Preference known as the Generalized Axiom of Revealed PreferenceReceived: 12 June 2003, Revised: 9 October 2003, JEL Classification Numbers: D11, C60.Correspondence to: A. Fostel     

Perfect versus Imperfect Observability—An Experimental Test of Bagwell's Result

In a seminal paper Bagwell ((1995). Games Econom. Behav.8, 271–280) claims that the first mover advantage, i.e., the strategic benefit of committing oneself to an action before others can, vanishes completely if this action is only imperfectly observed by second movers. In our paper we report on an experimental test of this prediction. We implement four versions of a game similar to an example given by Bagwell, each time varying the quality of the signal which informs the second mover. For experienced players we do not find empirical support for Bagwell's result. Journal of Economic Literature Classification Numbers: C72, C92.     

Multiperson Bargaining over Two Alternatives

We present a continuous-time model of multiperson bargaining with incomplete information, where only two agreements are possible. We show that under mild informational assumptions, players behave as if they were representing the other players who prefer the same alternative, individually playing a war-of-attrition against a conglomerate player of the opposite side. We also provide a characterization of the perfect Bayesian equilibria in undominated strategies of the game, which yields a unique outcome in most cases.Journal of Economic LiteratureClassification Numbers: C72, C78, D72, D74.     

Egalitarianism and Efficiency in Repeated Symmetric Games

We analyze the symmetric equilibria of repeated symmetric games where there is a conflict of interests over equilibria—the battle-of-the-sexes or the hawk–dove game are key examples. If one restricts attention to symmetric equilibria, efficient equilibria must be egalitarian. For finitely repeated games, and generic discount factors, there is a unique outcome path which ensures efficiency within the class of symmetric equilibria. This is also true for the infinitely repeated games if the players are sufficiently impatient. Journal of Economic Literature Classification Numbers: C72, C73.     

THE IMPACT OF TAX PRICE CHANGES ON CHARITABLE CONTRIBUTIONS TO THE NEEDY

Eliminating or reducing the federal charitable deduction can have serious impacts on the level of charitable donations. Tax price elasticity estimates from a multivariate sample selection model indicate that changing the deduction to a 12% tax credit would have reduced individual donations in 2012 by 18.9% if applied to itemizing taxpayers and by 10.5% if extended to nonitemizers. Elimination of the deduction would have led to a 35% reduction in individual charitable donations. Even if coupled with cuts in marginal tax rates, eliminating the charitable deduction will still likely result in substantial reductions given the inelastic income elasticities of charitable donations. The estimates justify the ardent opposition of many in the nonprofit sector to the more radical proposals for changing the tax treatment of charitable contributions. (JEL D34, C34)