11,186 research outputs found
Stable Matchings for a Generalised Marriage Problem
We show that a simple generalisation of the Deferred Acceptance Procedure with men proposing due to Gale and Shapley (1962) yields outcomes for a generalised marriage problem, which are necessarily stable. We also show that any outcome of this procedure is Weakly Pareto Optimal for Men, i.e. there is no other outcome which all men prefer to an outcome of this procedure. In a final concluding section of this paper, we consider the problem of choosing a set of multi-party contracts, where each coalition of agents has a non-empty finite set of feasible contracts to choose from. We call such problems, generalised contract choice problems. The model we propose is a generalisation of the model due to Shapley and Scarf (1974) called the housing market. We are able to show with the help of a three agent example, that there exists a generalised contract choice problem, which does not admit any stable outcome.Stable outcomes, Matchings, pay-offs, Generalised marriage problem, Contract choice problem
Stable Matchings for the Room-mates Problem
We show that, given two matchings for a room-mates problem of which say the second is stable, and given a non-empty subset of agents S if (a) no agent in S prefers the first matching to the second, and (b) no agent in S and his room-mate in S under the second matching prefer each other to their respective room-mates in the first matching, then no room-mate of an agent in S prefers the second matching to the first. This result is a strengthening of a result originally due to Knuth (1976). In a paper by Sasaki and Toda (1992) it is shown that if a marriage problem has more than one stable matchings, then given any one stable matching, it is possible to add agents and thereby obtain exactly one stable matching, whose restriction over the original set of agents, coincides with the given stable matching. We are able to extend this result here to the domain of room-mates problems. We also extend a result due to Roth and Sotomayor (1990) originally established for two-sided matching problems in the following manner: If in a room-mates problem, the number of agents increases, then given any stable matching for the old problem and any stable matching for the new one, there is at least one agent who is acceptable to this new agent who prefers the new matching to the old one and his room-mate under the new matching prefers the old matching to the new one. Sasaki and Toda (1992) shows that the solution correspondence which selects the set of all stable matchings, satisfies Pareto Optimality, Anonymity, Consistency and Converse Consistency on the domain of marriage problems. We show here that if a solution correspondence satisfying Consistency and Converse Consistency agrees with the solution correspondence comprising stable matchings for all room-mates problems involving four or fewer agents, then it must agree with the solution correspondence comprising stable matchings for all room-mates problems.Stable matchings, Room-mate problem
Credible Group Stability in Multi-Partner Matching Problems
It is known that in two-sided many-to-many matching markets, pair-wise stability is not logically related with the (weak) core, unlike in many-to-one matching markets (Blair, 1988). In this paper, we seek a theoretical foundation for pairwise stability when group deviations are allowed. Group deviations are defined in graphs on the set of agents. We introduce executable group deviations in order to discuss the credibility of group deviations and to defined credibly group stable matchings. We show, under responsive preferences, that credible group stability is equivalent to pairwise stability in the multi-partner matching problem that includes two-sided matching problems as special cases. Under the same preference restriction, we also show the equivalence between the set of pairwise stable matchings and the set of matchings generated by coalition-proof Nash equilibria of an appropriately defined strategic form game. However, under a weaker preference restriction, substitutability, these equivalences no longer hold, since pairwise stable matchings may be strictly Pareto-ordered, unlike under responsiveness.Multi-partner matching problem, Pairwise stable matching network, Credible group deviation
Rationing in IPOs
We provide a model of bookbuilding in IPOs, in which the issuer can choose to ration shares. We consider two allocation rules. Under share dispersion, before informed investors submit their bids, they know that, in the aggregate, winning bidders will receive only a fraction of their demand. We demonstrate that this mitigates the winner’s curse, that is, the incentive of bidders to shade their bids. It leads to more aggressive bidding, to the extent that rationing can be revenue-enhancing. In a parametric example, we characterize bid and revenue functions, and the optimal degree of rationing. We show that, when investors’ information is diffuse, maximal rationing is optimal. Conversely, when their information is concentrated, the seller should not ration shares. We determine the optimal degree of rationing in a class of credible mechanisms. Our model reconciles the documented anomaly that higher bidders in IPOs do not necessarily receive higher allocations.IPOs
Local and Global Interactions in an Evolutionary Resource Game
Conditions for the emergence of cooperation in a spatial common-pool resource game are studied. This combines in a unique way local and global interactions. A fixed number of harvesters are located on a spatial grid. Harvesters choose among three strategies: defection, cooperation, and enforcement. Individual payoffs are affected by both global factors, namely, aggregate harvest and resource stock level, and local factors, such as the imposition of sanctions on neighbors by enforcers. The evolution of strategies in the population is driven by social learning through imitation. Numerous types of equilibria exist in these settings. An important new finding is that clusters of cooperators and enforcers can survive among large groups of defectors. We discuss how the results contrast with the non-spatial, but otherwise similar, game of Sethi and Somanathan (1996).Common property, Cooperation, Evolutionary game theory, Global interactions, Local interactions, Social norms
The Egalitarian Sharing Rule in Provision of Public Projects
In this note we consider a society that partitions itself into disjoint jurisdictions, each choosing a location of its public project and a taxation scheme to finance it. The set of public project is multi-dimensional, and their costs could vary from jurisdiction to jurisdiction. We impose two principles, egalitarianism, that requires the equalization of the total cost for all agents in the same jurisdiction, and efficiency, that implies the minimization of the aggregate total cost within jurisdiction. We show that these two principles always yield a core-stable partition but a Nash stable partition may fail to exist.Jurisdictions, Stable partitions, Public projects, Egalitarianism
Voluntary Agreements under Endogenous Legislative Threats
The paper analyzes the welfare properties of voluntary agreements (VA) with polluters, when they are obtained under the legislative threat of an alternative stricter policy option. In the model, the threat is an abatement quota. Both the threat and its probability of implementation are endogenous. The latter is the outcome of a rent-seeking contest between a green and a polluter lobby group influencing the legislature. We show that a welfare-improving VA systematically emerges in equilibrium and that it is more efficient than the pollution quota. We also discuss various VA design aspects.Environmental policy, voluntary agreements, bargaining, legislatures, rent seeking, rent-seeking contests
Socially Responsible Investment in General Equilibrium
Socially responsible investment in analyzed in a general equilibrium context. This is important in order to understand the ultimate consequences of SRI on the decisions of economic agents. Building on models by Brock (1982) and Merton (1987), SRI is modelled as the choice to voluntarily give up investment in stocks and bonds issues by a firm producing an externality. The model is used to analyze the utility costs of SRI to the responsible investor and the impact on the price of the stock issued by the firm which is responsible for the externality. The results shed light on the factors which may magnify or reduce the impact of SRI, among which are crucial the wealth commended in relative terms by the responsible agents and the diversification possibilities offered by the firms which are excluded from the investment opportunity set. A set of firms targeted by SRI may be seriously affected by SRI only if the responsible investors command a large portion of overall wealth; moreover the same firms are more likely to be hit by SRI behavior if they do not represent important diversification instruments. Firms with unique characteristics from the point of view of overall diversification are less likely to be the target of SRI.General equilibrium, Redistributive effects, Public goods
Applied Computational Intelligence for finance and economics
This article introduces some relevant research works on computational intelligence applied to finance and economics. The objective is to offer an appropriate context and a starting point for those who are new to computational intelligence in finance and economics and to give an overview of the most recent works. A classification with five different main areas is presented. Those areas are related with different applications of the most modern computational intelligence techniques showing a new perspective for approaching finance and economics problems. Each research area is described with several works and applications. Finally, a review of the research works selected for this special issue is given.Publicad
Special Interests and Technological Change
We study an OLG economy where productivity growth comes from two alternative sources: process innovation and learning-by-doing. There is a trade-off between the two in so far as frequent technological updates reduce the scope for learning on existing technologies. A conflict is shown to arise between the young and the old, because the former favor innovation while the latter prefer learning. We model the interaction between overlapping generations and policy makers as a dynamic common agency problem, where competing generations invest a certain amount of resources to lobby either for the maintenance of the current technology or the adoption of a new one. By focusing on truthful Markov perfect equilibria, we characterize the political equilibrium and show its dependence on the underlying demographic, technological and preference parameters.Technological change, Technology option, Pressure goups, Dynamic common agency
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