A non-cooperative foundation for the continuous Raiffa solution

This paper provides a non-cooperative foundation for (asymmetric generalizations of) the continuous Raiffa solution. Specifically, we consider a continuous-time variation of the classic Ståhl–Rubinstein bargaining model, in which there is a finite deadline that ends the negotiations, and in which each player’s opportunity to make proposals is governed by a player-specific Poisson process, in that the rejecter of a proposal becomes proposer at the first next arrival of her process. Under the assumption that future payoffs are not discounted, it is shown that the expected payoffs players realize in subgame perfect equilibrium converge to the continuous Raiffa solution outcome as the deadline tends to infinity. The weights reflecting the asymmetries among the players correspond to the Poisson arrival rates of their respective proposal processes

Essays in microeconomic theory

My thesis considers various aspects of microeconomic theory and focuses on the different types of uncertainty that players can encounter. Each chapter studies a setting with a different type of uncertainty and draws conclusions about how players are likely to behave in such a situation. The first chapter focuses on games of incomplete information and is joint work with Peter Eccles. We provide conditions to allow modelling situations of asymmetric information in a tractable manner. In addition we show a novel relationship between certain games of asymmetric information and corresponding games of symmetric information. This framework establishes links between certain games separately studied in the literature. The class of games considered is defined by scalable preference relations and a scalable information structure. We show that this framework can be used to solve asymmetric contests and auctions with loss aversion. In the second chapter I move to situations in which information is almost complete. In joint work with Peter Eccles, we consider the robustness of subgame perfect implementation in situations when the preferences of players are almost perfectly known. More precisely we consider a class of information perturbations where in each state of the world players know their own preferences with certainty and receive almost perfectly informative signals about the preferences of other players. We show that implementations using two-stage sequential move mechanisms are always robust under this class of restricted perturbations, while those using more stages are often not. The third chapter deals with a case of complete information and is joint work with Peter Eccles. We introduce the family of weighted Raiffa solutions. An individual solution is characterised by two parameters representing the bargaining weight of each player and the speed at which agreement is reached. First we provide a cooperative foundation for this family of solutions, by appealing to two of the original axioms used by Nash and a simple monotonicity axiom. Using similar axioms we give a new axiomatization for a family of weighted Kalai-Smorodinsky solutions. Secondly we provide a non-cooperative foundation for weighted Raiffa solutions, showing how they can be implemented using simple bargaining models where offers are intermittent or the identity of the proposer is persistent. This shows that weighted Raiffa solutions have cooperative foundations closely related to those of the Kalai-Smorodinksy solution, and non-cooperative foundations closely related to those of the Nash solution. The fourth chapter is closely related to the third chapter and is joint work with Bram Driesen and Peter Eccles. It provides a non-cooperative foundation for asymmetric generalizations of the continuous Raiffa solution. Specifically, we consider a continuous-time variation of the classic Stahl-Rubinstein bargaining model, in which each player's opportunity to make proposals is produced by an independent Poisson process, and a definite deadline ends the negotiations. Under the assumption that future payoffs are not discounted, it is shown that the payoffs realized in the unique subgame perfect equilibrium of this game approach the continuous Raiffa solution as the time horizon tends to infinity. The weights reflecting the asymmetries among the players, correspond with the Poisson arrival rates of their respective proposal processesScalable games: modelling games of incomplete information / Nora Wegner and Peter Eccles. -- Robustness of Subgame Perfect Implementation / Nora Wegner and Peter Eccles. -- Generalised weighted Raiffa Solutions / Nora Wegner and Peter Eccles. -- A non-cooperative foundation for the continuous Raiffa solution / Nora Wegner, Bram Driesen and Peter EcclesPrograma Oficial de Doctorado en EconomíaPresidente: Christopher Wallace; Secretario: Miltiadis Makris; Vocal: Ludovic Reno

Essays in microeconomic theory

My thesis considers various aspects of microeconomic theory and focuses on the different types of uncertainty that players can encounter. Each chapter studies a setting with a different type of uncertainty and draws conclusions about how players are likely to behave in such a situation. The first chapter focuses on games of incomplete information and is joint work with Peter Eccles. We provide conditions to allow modelling situations of asymmetric information in a tractable manner. In addition we show a novel relationship between certain games of asymmetric information and corresponding games of symmetric information. This framework establishes links between certain games separately studied in the literature. The class of games considered is defined by scalable preference relations and a scalable information structure. We show that this framework can be used to solve asymmetric contests and auctions with loss aversion. In the second chapter I move to situations in which information is almost complete. In joint work with Peter Eccles, we consider the robustness of subgame perfect implementation in situations when the preferences of players are almost perfectly known. More precisely we consider a class of information perturbations where in each state of the world players know their own preferences with certainty and receive almost perfectly informative signals about the preferences of other players. We show that implementations using two-stage sequential move mechanisms are always robust under this class of restricted perturbations, while those using more stages are often not. The third chapter deals with a case of complete information and is joint work with Peter Eccles. We introduce the family of weighted Raiffa solutions. An individual solution is characterised by two parameters representing the bargaining weight of each player and the speed at which agreement is reached. First we provide a cooperative foundation for this family of solutions, by appealing to two of the original axioms used by Nash and a simple monotonicity axiom. Using similar axioms we give a new axiomatization for a family of weighted Kalai-Smorodinsky solutions. Secondly we provide a non-cooperative foundation for weighted Raiffa solutions, showing how they can be implemented using simple bargaining models where offers are intermittent or the identity of the proposer is persistent. This shows that weighted Raiffa solutions have cooperative foundations closely related to those of the Kalai-Smorodinksy solution, and non-cooperative foundations closely related to those of the Nash solution. The fourth chapter is closely related to the third chapter and is joint work with Bram Driesen and Peter Eccles. It provides a non-cooperative foundation for asymmetric generalizations of the continuous Raiffa solution. Specifically, we consider a continuous-time variation of the classic Stahl-Rubinstein bargaining model, in which each player's opportunity to make proposals is produced by an independent Poisson process, and a definite deadline ends the negotiations. Under the assumption that future payoffs are not discounted, it is shown that the payoffs realized in the unique subgame perfect equilibrium of this game approach the continuous Raiffa solution as the time horizon tends to infinity. The weights reflecting the asymmetries among the players, correspond with the Poisson arrival rates of their respective proposal processesScalable games: modelling games of incomplete information / Nora Wegner and Peter Eccles. -- Robustness of Subgame Perfect Implementation / Nora Wegner and Peter Eccles. -- Generalised weighted Raiffa Solutions / Nora Wegner and Peter Eccles. -- A non-cooperative foundation for the continuous Raiffa solution / Nora Wegner, Bram Driesen and Peter EcclesPrograma Oficial de Doctorado en EconomíaPresidente: Christopher Wallace; Secretario: Miltiadis Makris; Vocal: Ludovic Reno

Finite horizon bargaining and the consistent field

This paper explores the relationships between noncooperative bargaining games and the consistent value for non-transferable utility (NTU) cooperative games. A dynamic approach to the consistent value for NTU games is introduced: the consistent vector field. The main contribution of the paper is to show that the consistent field is intimately related to the concept of subgame perfection for finite horizon noncooperative bargaining games, as the horizon goes to infinity and the cost of delay goes to zero. The solutions of the dynamic system associated to the consistent field characterize the subgame perfect equilibrium payoffs of the noncooperative bargaining games. We show that for transferable utility, hyperplane and pure bargaining games, the dynamics of the consistent fields converge globally to the unique consistent value. However, in the general NTU case, the dynamics of the consistent field can be complex. An example is constructed where the consistent field has cyclic solutions; moreover, the finite horizon subgame perfect equilibria do not approach the consistent value.Noncooperative bargaining games, consistent value, consistent

Paradoxes versus formalism in economics. Evidence from the early years of game theory and experimental economics

This paper argues that the acceptance of two recent methodological advances in economics, namely game theory and laboratory experimentation, was affected by the history dependence constraining the formalization of economics. After an early period in which the two methods were coolly received by economists because their applications challenged some basic hypotheses of mainstream economics, their subsequent acceptance was the result of the corroboration of those same hypotheses. However, the recent emergence of some paradoxes has finally revealed that the effectiveness of game theory and experimental techniques in economics is improved when descriptively implausible and normatively unsatisfactory assumptions such as the centrality of individual maximization in decision theory and the definition of rationality as consistency in preferences are revised.paradoxes, game theory, experiments, individual maximization, economic rationality

Searching for policy reforms

We construct a model of policy reform in which two players continually search for Pareto improving policies. The players have imperfect control over the proposals that are considered. Inefficient gridlock takes place due to the difficulty in finding moderate policies. The reform process is path dependent, with early agreements determining long-run outcomes. The process may also be cyclical, as players alternate between being more and less accommodating. Our model provides a noncooperative foundation for the “Raiffa path”, by which bargainers gradually approach the Pareto frontier

Consumer theory with bounded rational preferences

The neoclassical consumer maximizes utility and makes choices by completely preordering the feasible alternatives and weighing when indifferent. The consumer studied in this paper chooses by weighing when indifferent and also when indecisive, without necessarily preordering the alternatives or exhausting her budget. Preferences therefore need not be complete, transitive or non-satiated but are assumed strictly convex and "adaptive". The latter axiom is new and parallels that of ambiguity aversion in choice under uncertainty.preferences: incomplete, intransitive, convex, adaptive; representation; demand.

INFORMATION SOURCES PREFERRED BY LIMITED RESOURCE FARMERS IN USING AGRICULTURAL RISK TOOLS

The paper examines limited resource farmers' perceptions of the usefulness of selected sources of risk management information. The rationale is to understand the information needs of this group of farmers and to customize outreach programs to address their needs.Risk and Uncertainty,