Bargaining and the theory of cooperative games: John Nash and beyond

This essay surveys the literature on the axiomatic model of bargaining formulated by Nash ("The Bargaining Problem," Econometrica 28, 1950, 155-162).Nash's bargaining model, Nash solution, Kalai-Smorodinsky solution, Egalitarian solution

Cost allocation and airport problems

We consider the problem of dividing the cost of a facility when agents can be ordered in terms of the need they have for it, and accommodating an agent with a certain need allows accommodating all agents with lower needs at no extra cost. This problem is known as the “airport problem”, the facility being the runway. We review the literature devoted to its study, and formulate a number of open questions.airport problem; monotonicity; consistency; core; Shapley value; nucleolus.

Copmment on Egalitarianism under Incomplete Information

The paper aims at extending the egalitarian principle to environments with incomplete information. The approach is primarily axiomatic, focusing on the characteristic property of monotonicity: no member of the society should be worse off when more collective decisions are available. I start by showing the incompat- ibility of this property with incentive efficiency, even in quasi-linear environments. This serious impossibility result does not follow from the mere presence of incentive constraints, but instead from the fact that information is incomplete (asymmetric information at the time of making a decision). I then weaken the monotonicity property so as to require it only when starting from incentive compatible mecha- nisms at which interim utilities are transferable (in a weak sense). Adding other axioms in the spirit of Kalai's (Econometrica, 1977, Theorem 1) classical character- ization of the egalitarian principle under complete information, I obtain a partial characterization of a natural extension of the lex-min solution to problems with incomplete information. Next, I prove that, in each social choice problem, there is a unique way of rescaling the participants' interim utilities so as to make this solu- tion compatible with the ex-ante utilitarian principle. These two criteria coincides in the rescaled utilities exactly at the incentive ecient mechanisms that maxi- mize Harsanyi and Selten's (Management Science, 1972) weighted Nash product. These concepts are illustrated on classical examples of profit-sharing, public good production and bilateral trade. The richness of the topic of social choice under in- complete information is illustrated by considering two alternative extensions of the egalitarian principle { one based on an idea of equity from the point of view of the individuals themselves (given their private information) instead of an uninformed third party (social planner or arbitrator), and another notion based on the idea of

Compensation and responsibility

This a chapter for the Handbook of Social Choice and Welfare. It deals with the theory of fairness applied to situations when individuals are partly responsible for their characteristics.fairness, responsibility, equal opportunity, compensation, handicap, talent, effort

Models of Political Economy

Models of Political Economy will introduce students to the basic methodology of political economics. It covers all core theories as well as new developments including: decision theory game theory mechanism design games of asymmetric information. Hannu Nurmi's text will prove to be invaluable to all students who wish to understand this increasingly technical field

Compensation and responsibility

This a chapter for the Handbook of Social Choice and Welfare. It deals with the theory of fairness applied to situations when individuals are partly responsible for their characteristics

Wage and employment determination in agricultural labour markets in India

The thesis is concerned with the problem of wage and employment determination in the (casual) agricultural labour markets of India. It is argued that the extant theories of wage determination poorly accord with the stylized facts of the Indian situation. An alternative perspective on agricultural labour markets is developed, where wage determination at the village level is interpreted as the outcome of tacit collective bargaining between village labourers and employers. It is argued that cooperative behaviour, necessary to support such collective bargaining, can often be sustained through the operation of certain informal social sanctions against wage cutting behaviour. With an asymmetric Nash framework, a theoretical model of the village-level market for agricultural labour is developed, which simultaneously determines the agricultural wage rate, the level of employment and the employers' profits. The model is consistent with the existence of involuntary unemployment, while also explaining variability of wages. In the extended version of the model, male and female labourers are introduced as separate bargaining parties. The extended model provides a possible explanation for the existence of gender wage (and employment) disparities. Both the basic and extended models are econometrically estimated for ten villages in central, south and west India, using data collected by the International Crops Research Institute for Semi-Arid Tropics (Hyderabad). Bargaining powers of employers', male and female labourers (interpreted as the coefficients on their net gains from agreement) are estimated. The results show significant inequalities of bargaining power between employers and labourers, and between male and female labourers. Simulations based on the estimated models indicate that the observed inequalities of bargaining power are a quantity decisive influence on wage, employment and profit outcomes in the village labour markets

Cost Allocation: Methods, Principles, Applications

This book provides a theoretical framework for systematically evaluating the "pros" and "cons" of various methods. It also includes a series of case studies in cost allocation to give a sense of the real problems encountered in implementation. Among the examples treated are telecommunications pricing, multipurpose reservoir charges, and airport landing fees. Finally several articles address the broader fairness issues inherent in the pricing of public services. The history of the notion of the "just price" from medieval to modern times is discussed, together with observations on what principles seem to guide decisions in telecommunications rate cases in the United States. The connections between cost allocation, efficiency, and entry in the telecommunications market are also examined in two different contexts: the U.S. and France. The overall aim of the book is to provide theoretical foundations for using specific methods, to examine the distributional and fairness issues involved in cost allocation, and to give a sense of the practical problems encountered in implementation. The book will appeal to practitioners interested in what allocation methods are available, and to theorists concerned with their axiomatic foundations