Malice and patience in Rubinstein bargaining

If two players playing a Rubinstein alternating offers game are highly malicious (getting a high utility from “malice” in every period when the other player does not obtain a share in a fixed pie), and highly patient, no equilibrium with an agreement exists and players choose perpetual disagreement. This does not change if the players are subjected to a known deadline after which the pie will be appropriated by outside agencies or disappear: perpetual disagreement is still the only outcome. If in addition players are required to pay endogenously determined fines if they fail to reach agreement, players with discount factors in a certain range do reach agreement, but only at the deadline. However, infinitely patient players would never reach agreement for any feasible level of one-time fines. The result contrasts with spiteful or envious preferences. Our results highlight a novel reason for failure to resolve property disputes.     

ARBITRATION,INDIVISIBLE ASSETS AND THE POSSIBILITY OF MALICE

Many real‐life contexts involve allocating an indivisible prize between two claimants. One (or both) claimants may derive ‘malice utility’ from depriving the other claimant. I study an arbitrator who does not know if malice is involved in a particular dispute, but wishes the prize to be allocated to the party with the higher intrinsic valuation for it and discuss two simple mechanisms that achieve his purpose regardless of whether malice is actually present. I examine several extensions.     

Shadows of the past: path dependence of TV on its sub-systems,complements and substitutes

In this study, two levels of path dependence in the television technological system are examined: (1) How does the development of television (TV) core components affect the development of peripheral components? and (2) How does the development of complementary and substitute technologies affect the development of television technology? Results from the empirical analysis using patents from 1975 to 2004 indicate that: (a) the development of TV periphery technologies is path-dependent on the development of TV core technologies and (b) even after controlling for its own prior history, the development of the TV system is path-dependent on the development of its complementary technologies. However, there is weak evidence of the path dependence of the TV system on the development of its substitute technologies.     

Pirates and traders: Some economics of pirate-infested seas

Even where all agents are risk-neutral, merchants can insure themselves against piracy. Such self-insurance is surprisingly invulnerable to moral hazard. Further, there exist a patrolling intensity and/or penalties for captured pirates which, along with mercantile self-insurance, could eliminate piracy.     

Petty services,profit‐led growth and rural–urban migration in a developing economy

This paper develops a structuralist urban dual economy model for a developing economy consisting of a capitalist formal sector and a “petty” or informal service sector. The petty service sector plays an important role in wage determination and capital accumulation in the formal sector. The urban dual economy is situated in the midst of a rural area endowed with generous amount of surplus labour. The rural area augments urban labour supply over time through rural–urban migration. The paper, therefore, incorporates rural–urban migration within a structuralist framework and highlights its implication for growth and structural change in urban spaces of developing economies riddled with persistent formal–informal duality.     

Crime and moral hazard: Does more policing necessarily induce private negligence?

Even risk-neutral individuals can insure themselves against crimes by combining direct expenditure on security with costly diversification. In such cases — and even when one of these options is infeasible — greater policing often actually encourages private precautions.     

NEOCLASSICAL GROWTH AND THE DISTRIBUTION OF CONSUMPTION

Abstract.  The neoclassical growth model is used to compare an economy with growing per capita income with an economy with stationary per capita income, in terms of equity in distribution of consumption. The economies have the same initial conditions including the same initial wealth distribution. The outcome of the comparison depends on the nature of structural differences between the economies. Even with convergence in wealth distribution in the growing economy, the consumption distribution there may be less equitable and dynasties with least initial levels of wealth may be worse off than dynasties with same initial wealth levels in the stationary economy.     

Female labour force participation and labour saving gadgets

Abstract

We show under what conditions women would migrate out of the household sector into formal sector jobs, in response to increased ability to use labour saving household gadgets, which raise the productivity of female labour engaged in household tasks. We model a small open economy with three outputs: one labour-intensive manufactured export (cloth), one capital-intensive intermediate good (gadgets) and one non-traded ‘household-sector good’ (meals) which requires both female labour and household gadgets for production. A terms-of-trade improvement capturing greater world demand for labour-intensive manufactured exports enables greater adoption of labour-saving household gadgets in response to changing relative prices. If the elasticity of substitution between female labour and household gadgets exceeds a threshold, this will result in women migrating from the household to formal sector employment. What matters is not the actual date of invention of these labour-saving appliances (female labour force participation may not grow significantly until long after) but their increased adoption by the small economy in response to changing relative prices.     

Borrower Targeting under Microfinance Competition with Motivated Microfinance Institutions and Strategic Complementarity

We examine how increased competition among motivated microfinance institutions (MFIs) impacts the poorest borrowers' access to microfinance. We find that competition depends on inequality, technology, and the possibility of double‐dipping (borrowing from several sources). Without competition, even a motivated MFI may lend to the not‐so‐poor in preference to poor borrowers. If double‐dipping is feasible, competition may encourage lending to the poor. The presence of double‐dipping is critical for MFI competition to have a positive effect. When double‐dipping is feasible, MFI coordination may worsen borrower targeting whenever inequality is intermediate. We discuss policy implications dealing with double‐dipping, MFI coordination, and competition.