Role of honesty in full implementation

This paper introduces a new concept of full implementation that takes into account agents’ preferences for understanding how the process concerning honest reporting works. We assume that the agents have intrinsic preferences for honesty in the sense that they dislike the idea of lying when it does not influence their welfare but instead goes against the intention of the central planner. We show that the presence of such preferences functions in eliminating unwanted equilibria from the practical perspective, even if the degree of the preference for honesty is small. The mechanisms designed are detail free and involve only small fines.     

Strategy-proof and individually rational social choice functions for public good economies

Summary This note is to inform about a mistake in my paper (Serizawa, 1996). In that paper, I characterized strategy-proof, individually rational, budget-balancing, non-exploitative and non-bossy social choice functions for economies with one public good and one private good. I established as Theorem 3 (page 507) that a social choice function is strategy-proof, individually rational with respect to endowment, budget-balancing, non-exploitative and non-bossy if and only if it is a scheme of semi-convex cost sharing determined by the minimum demand principle. I also exposed one example (Example 2, page 507) in order to emphasize that non-bossiness is indispensable for this characterization. I claimed that the social choice function in that example satisfies the above axioms except for non-bossiness, and is not a scheme of semi-convex cost sharing. However, the social choice function in the example is actually not strategy-proof, as shown in the simple discussion below. Therefore it is an open question whether or not a similar characterization theorem holds without non-bossiness.I thank Professor Rajat Deb, who kindly pointed out my mistake.     

Bargaining foundations of the median voter theorem

We give a game-theoretic foundation for the median voter theorem in a one-dimensional bargaining model based on Baron and Ferejohn's [D. Baron, J. Ferejohn, Bargaining in legislatures, Amer. Polit. Sci. Rev. 83 (1989) 1181-1206] model of distributive politics. We prove that as the agents become arbitrarily patient, the set of proposals that can be passed in any pure strategy, subgame perfect equilibrium collapses to the median voter's ideal point. While we leave the possibility of some delay, we prove that the agents' equilibrium continuation payoffs converge to the utility from the median, so that delay, if it occurs, is inconsequential. We do not impose stationarity or any other refinements. Our result counters intuition based on the folk theorem for repeated games, and it contrasts with the known result for the distributive bargaining model that as agents become patient, any division of the dollar can be supported as a subgame perfect equilibrium outcome.     

Interlinkage and Generous Tit‐for‐Tat Strategy

We investigate an infinitely‐repeated prisoners' dilemma with imperfect monitoring and consider the possibility that the interlinkage of the players' distinct activities enhances implicit collusion. We show a necessary and sufficient condition for the existence of a generous tit‐for‐tat Nash equilibrium. Such an equilibrium, if it exists, is unique. This equilibrium achieves approximate efficiency when monitoring is almost perfect, where the discount factors are fixed.     

Eliciting information from a committee

The paper addresses the mechanism design problem of eliciting truthful information from a committee of informed experts who collude in their information disclosure strategies. It is shown that under fairly general conditions full information disclosure is possible if and only if the induced outcome is Pareto undominated for the committee members.     

Collective decisions with interdependent valuations

Many collective decision problems have in common that individuals’ desired outcomes are correlated but not identical. This paper studies collective decisions with private information about desired policies. Each agent holds private information which mainly concerns his own bliss point, but private information also affects all other agents. We concentrate on two specific mechanism, the median and mean mechanisms establish the existence of symmetric Bayesian Nash equilibria of the corresponding games and compare the performance of the mechanisms for different degrees of interdependencies. Applications of our framework include the provision of public goods and the design of decision processes in international organizations.     

An impossibility result for virtual implementation with status quo

In this paper, virtual implementation is restricted to deliver, on the equilibrium path, either a socially optimal outcome or a status quo: an outcome fixed for all preference profiles. Under such a restriction, for any unanimous and implementable social choice function there is a dictator, who obtains her most preferable outcome as long as all agents prefer this outcome to the status quo. Further restrictions on the lottery space and the range of social choice functions allow the dictator to impose her most preferred outcome even when other agents prefer the status quo to this outcome.     

Stable schedule matching under revealed preference

Baiou and Balinski (Math. Oper. Res., 27 (2002) 485) studied schedule matching where one determines the partnerships that form and how much time they spend together, under the assumption that each agent has a ranking on all potential partners. Here we study schedule matching under more general preferences that extend the substitutable preferences in Roth (Econometrica 52 (1984) 47) by an extension of the revealed preference approach in Alkan (Econom. Theory 19 (2002) 737). We give a generalization of the Gale-Shapley algorithm and show that some familiar properties of ordinary stable matchings continue to hold. Our main result is that, when preferences satisfy an additional property called size monotonicity, stable matchings are a lattice under the joint preferences of all agents on each side and have other interesting structural properties.     

Condorcet Jury Theorem: An example in which informative voting is rational but leads to inefficient information aggregation

Recent research on the Condorcet Jury Theorem has proven that informative voting (that is, voting according to one’s signal) is not necessarily rational. With two alternatives, rational voting typically leads to the election of the correct alternative, in spite of the fact that not all voters vote informatively. We prove that with three alternatives, there are cases in which informative voting is rational and yet leads to the election of a wrong alternative.     

α‐SERIAL MECHANISMS FOR THE PROVISION OF AN EXCLUDABLE PUBLIC GOOD

We present a new class of “α‐serial mechanisms” for the provision of an excludable public good. Those mechanisms have a similar structure to the serial mechanism, but may let the non‐consumers pay a positive cost. They inherit desirable properties such as anonymity, envy‐freeness, Maskin monotonicity, and population monotonicity from the serial mechanism. We calculate the “maximal efficiency loss” and “maximal manipulation” of α‐serial mechanisms and point out a trade‐off between these two properties.     

Mediation, arbitration and negotiation

We compare three common dispute resolution processes - negotiation, mediation, and arbitration - in the framework of Crawford and Sobel [V. Crawford, J. Sobel, Strategic information transmission, Econometrica 50 (6) (1982) 1431-1451]. Under negotiation, the two parties engage in (possibly arbitrarily long) face-to-face cheap talk. Under mediation, the parties communicate with a neutral third party who makes a non-binding recommendation. Under arbitration, the two parties commit to conform to the third party recommendation. We characterize and compare the optimal mediation and arbitration procedures. Both mediators and arbitrators should optimally filter information, but mediators should also add noise to it. We find that unmediated negotiation performs as well as mediation if and only if the degree of conflict between the parties is low.     

The Value of Information in the Hold-Up Problem

Abstract In the literature, the information structure of the hold‐up problem is typically assumed to be exogenous. In this paper, we introduce an additional stage at which the head office may grant individual divisions access to an information system before they undertake their specific investments. Although more information ceteris paribus enhances each divisions' profits, more information can reduce divisions' investments and destroy synergies for the other division that would have been generated by the investments. If this negative effect dominates, then information can be harmful for the entire company. Hence, information control can be a subtle force to deal with the hold‐up problem to a certain extent. In this paper we analyze those conditions under which information is either harmful or beneficial for central management.     

Information transmission in coalitional voting games

A core allocation of a complete information economy can be characterized as one that would not be unanimously rejected in favor of another feasible alternative by any coalition. We use this test of coalitional voting in an incomplete information environment to formalize a notion of resilience. Since information transmission is implicit in the Bayesian equilibria of such voting games, this approach makes it possible to derive core concepts in which the transmission of information among members of a coalition is endogenous. Our results lend support to the credible core of Dutta and Vohra [Incomplete information, credibility and the core, Math. Soc. Sci. 50 (2005) 148-165] and the core proposed by Myerson [Virtual utility and the core for games with incomplete information, Mimeo, University of Chicago, 2005] as two that can be justified in terms of coalitional voting.     

The type-agent core for exchange economies with asymmetric information

The type-agent core is a new solution concept for exchange economies with asymmetric information. It coincides with the set of subgame-perfect equilibrium outcomes of a simple competitive screening game. Uninformed intermediaries help the agents to cooperate in an attempt to make some profit. The paper extends the work of Perez-Castrillo [Cooperative outcomes through non-cooperative games, Games Econ. Behav. 7 (1994) 428-440] to exchange economies with non-transferable utility and asymmetric information. The type-agent core is a subset of Wilson's coarse core [Wilson, Information, efficiency, and the core of an economy, Econometrica 46 (1978) 807-816]. It is never empty, even though it may be a strict subset of Wilson's fine core. In addition, it converges towards the set of constrained market equilibria as the economy is replicated.     

Group decision-making in the shadow of disagreement

A model of group decision-making is studied, in which one of two alternatives must be chosen. While agents differ in their preferences over alternatives, everybody prefers agreement to disagreement. Our model is distinguished by three features: private information regarding valuations, differing intensities in preferences, and the option to declare neutrality to avoid disagreement. There is always an equilibrium in which the majority is more aggressive in pushing its alternative, thus enforcing their will via both numbers and voice. However, under general conditions an aggressive minority equilibrium inevitably makes an appearance, provided that the group is large enough. Such equilibria invariably display a “tyranny of the minority”: the increased aggression of the minority always outweighs their smaller number, leading to the minority outcome being implemented with larger probability than the majority alternative. We fully characterize the asymptotic behavior of this model as group size becomes large, and show that all equilibria must converge to one of three possible limit outcomes.     

Role of linking mechanisms in multitask agency with hidden information

We investigate the adverse selection problem where a principal delegates multiple tasks to an agent. We characterize the virtually implementable social choice functions by using the linking mechanism proposed by Jackson and Sonnenschein (2007) [20] that restricts the message spaces. The principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss. We show the resemblance between the functioning of this message space restriction and that of incentive wage schemes. We also extend the results of the single-agent model to the multi-agent model.     

Bargaining one-dimensional social choices

We analyze bargaining over the one-dimension characteristic of a public good among n impatient players when decisions require q favorable votes, q?2. Stationary subgame perfect equilibrium strategies are characterized for all games with deterministic protocol. We provide a monotonicity condition (satisfied by all single-peak, strictly quasi-concave and concave utilities) that assures uniqueness for every q whenever player's utilities are symmetric around the peak. Without symmetry, the monotonicity condition assures uniqueness for qualified majorities, q>n/2, provided that agents are sufficiently patient and utilities satisfy an additional regularity condition. Asymptotic uniqueness is assured for qualified majorities by imposing only the monotonicity condition.     

Contracting with externalities and outside options

This paper proposes a model of multilateral contracting where players are engaged in two parallel interactions: they dynamically form coalitions and play a repeated normal form game with temporary and permanent decisions. We show that when outside options are independent of the actions of other players all Markov perfect equilibrium without coordination failures are efficient, regardless of externalities created by interim actions. Otherwise, in the presence of externalities on outside options, all Markov perfect equilibrium may be inefficient. This formulation encompasses many economic models, and we analyze the distribution of coalitional gains and the dynamics of coalition formation in four illustrative applications.     

Cooperation and Institution in Games

Based on recent developments in non‐cooperative coalitional bargaining theory, I review game theoretical analyses of cooperation and institution. First, I present basic results of the random‐proposer model and apply them to the problem of involuntary unemployment in a labour market. I discuss extensions to cooperative games with externalities and incomplete information. Next, I consider the enforceability of an agreement as an institutional foundation of cooperation. I re‐examine the contractarian approach to the problem of cooperation from the viewpoint that individuals may voluntarily create an enforcement institution.     

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.