Sonata In Contracting

This thesis comprises two essays linked by their focus on problems in contracting and by their usage of game theory as the vehicle of analysis.;The first essay addresses the issue of how and why incomplete contracts might arise endogenously. It provides a model of contract formation that focuses on the differential bargaining power that is bestowed upon agents by the procedures implied by different contract settings. The model employs a multi-issue bargaining approach, and distinguishes between issue-by-issue bargaining, where issues are dealt with separately, and single-issue bargaining, where they are combined. Agents are free to bargain over the form of the equilibrium process. It is shown that this structure allows for incomplete contracts, in the form of issue-by-issue, or short-term agreements, to be derived as an equilibrium outcome for some environments. This is in contrast to much of the literature on incomplete contracts, which relies on the roles of unobservability or transaction costs in order to justify the imposition of incomplete contracts as equilibrium contract form by the modeler.;The second essay analyses an alternating offers bargaining game in which the payoff in every period in which no agreement has been reached is the outcome of a normal form stage game. Two insights are gained from this model: (i) only disagreement period opportunities available to a player when he makes an accept/reject decision can increase his game payoffs, and (ii) in general such negotiation games have many equilibria which are Pareto inefficient, even though the game is one of complete information and full rationality. There exist, however, stage games which lead to a unique efficient outcome if exit weakly dominates repeated play. An alternative interpretation of this model--relevant to implicit contracts--is as a repeated game with endogenous exit. In this context the model points to the restrictions imposed on equilibrium payoffs in potentially infinitely repeated games by the existence of the possibility of binding exit agreements. The set of supportable allocations, however, is generally smaller than the Folk Theorem literature would suggest

Advances in negotiation theory : bargaining, coalitions, and fairness

Bargaining is ubiquitous in real life. It is a major dimension of political and business activities. It appears at the international level, when governments negotiate on matters ranging from economic issues (such as the removal of trade barriers), to global security (such as fighting against terrorism) to environmental and related issues (such as climate change control). What factors determinethe outcomes of such negotiations? What strategies can help reach an agreement? How should the parties involved divide the gains from cooperation? With whom will one make alliances? The authors address these questions by focusing on a noncooperative approach to negotiations, which is particularly relevant for the study of international negotiations. By reviewing noncooperative bargaining theory, noncooperative coalition theory, and the theory of fair division, they try to identify the connections among these different facets of the same problem in an attempt to facilitate progress toward a unified framework.Economic Theory&Research,Social Protections&Assistance,Environmental Economics&Policies,Scientific Research&Science Parks,Science Education

Advances in Negotiation Theory: Bargaining, Coalitions and Fairness

Bargaining is ubiquitous in real-life. It is a major dimension of political and business activities. It appears at the international level, when governments negotiate on matters ranging from economic issues (such as the removal of trade barriers), to global security (such as fighting against terrorism) to environmental and related issues (e.g. climate change control). What factors determine the outcome of negotiations such as those mentioned above? What strategies can help reach an agreement? How should the parties involved divide the gains from cooperation? With whom will one make alliances? This paper addresses these questions by focusing on a non-cooperative approach to negotiations, which is particularly relevant for the study of international negotiations. By reviewing noncooperative bargaining theory, non-cooperative coalition theory, and the theory of fair division, this paper will try to identify the connection among these different facets of the same problem in an attempt to facilitate the progress towards a unified framework.Negotiation theory, Bragaining, Coalitions, Fairness, Agreements

Advances in Negotiation Theory: Bargaining, Coalitions and Fairness

Bargaining is ubiquitous in real-life. It is a major dimension of political and business activities. It appears at the international level, when governments negotiate on matters ranging from economic issues (such as the removal of trade barriers), to global security (such as fighting against terrorism) to environmental and related issues (e.g. climate change control). What factors determine the outcome of negotiations such as those mentioned above? What strategies can help reach an agreement? How should the parties involved divide the gains from cooperation? With whom will one make alliances? This paper addresses these questions by focusing on a non-cooperative approach to negotiations, which is particularly relevant for the study of international negotiations. By reviewing non-cooperative bargaining theory, non-cooperative coalition theory, and the theory of fair division, this paper will try to identify the connection among these different facets of the same problem in an attempt to facilitate the progress towards a unified framework.Negotiation theory, Bargaining, Coalitions, Fairness, Agreements

The logic of the CAP: Politics or Economics?

Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

Organizational Change and Vested Interest

The nature of organizational change and the value of headquarters is derived from a model with costs of delay, vested interests and costs of organizational change.The value of headquarters is derived from imposed organizational change. It is viewed as an institution which is able to prevent surplus reducing endogenous commitment.Imposed organizational change is predicted in circumstances where the desired change is not urgent, the loss of accepting lower offers than in the past is above a certain level, and the costs of imposed change are lower than the costs of delay.Delay occurs and change will be voluntary in these circumstances when the situation is not perceived as urgent and costs of imposed change are high.Voluntary organizational change occurs immediately when the desired change is perceived to be urgent.Case studies are presented along these lines of thought.organizational change

Worker flows and job flows: a quantitative investigation

Worker flows and job flows behave differently over the business cycle. The authors investigate the sources of the differences by studying quantitative properties of a multiple-worker version of the search/matching model that features endogenous job separation and intra-firm wage bargaining. Their calibration incorporates micro- and macro-level evidence on worker and job flows. The authors show that the dynamic stochastic equilibrium of the model replicates important cyclical features of worker flows and job flow simultaneously. In particular, the model correctly predicts that hires from unemployment move countercyclically while the job creation rate moves procyclically. The key to this result is to allow for a large hiring flow that does not go through unemployment but is part of job creation, for which procyclicality of the job finding rate dominates its cyclicality. The authors also show that the model generates large volatilities of unemployment and vacancies when a worker's outside option is at 83 percent of aggregate labor productivity.Employment ; Business cycles

Bargaining in Legislatures: An Empirical Investigation

While the theoretical literature on non-cooperative legislative bargaining has grown voluminous, there is little empirical work attempting to test a key prediction in this literature: proposal power is valuable. This paper aims to fill this gap in the literature by investigating the role of proposal power in the allocation of transportation projects across U.S. Congressional districts in 1991 and 1998. The evidence supports the key qualitative prediction of the Baron and Ferejohn legislative bargaining model: members with proposal power, those sitting on the transportation authorization committee, secure more project spending for their districts than do other representatives. Support for the quantitative restrictions on the value of proposal power, which are more powerful than the qualitative restrictions, is more mixed. I then empirically address several alternative models of legislative behavior, including partisian models, informational roles for committees, models with appropriations committees, and theories of committees as preference outliers.

Fiscal decentralization : a political economy perspective

This paper surveys recent contributions to the study of fiscal decentralization which adopt a political economy approach. It is argued that this approach can capture, in a variety of formal models, the plausible and influential ideas (increasingly, supported by empirical evidence) that fiscal decentralization can lead to improved preference-matching and accountability of government. In particular, recent work on centralized provision of public good provision via bargaining in a legislature shows how centralization reduces preference-matching, and recent work using "electoral agency" models formalizes the accountability argument. These models also provide insights into when decentralization may fail to deliver these benefits