894 research outputs found

    Fair Allocation Rules

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    Efficiency, Monotonicity and Rationality in Public Goods Economies

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    In economies with public goods, we provide a necessary and sufficient condition for the existence of cost monotonic selections from the set of Pareto optimal and individualIy ratiollal allocations. Such selections exist if and only if the preCerences of the agents satisfy what we call the equal ordering property. This requirement is very restrictive in the context of more than one public good. However, whenever it holds any such mechanism must choose an egalitarian equivalent allocation

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

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    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

    Stability and fairness in models with a multiple membership

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    This article studies a model of coalition formation for the joint production (and finance) of public projects, in which agents may belong to multiple coalitions. We show that, if projects are divisible, there always exists a stable (secession-proof) structure, i.e., a structure in which no coalition would reject a proposed arrangement. When projects are in- divisible, stable allocations may fail to exist and, for those cases, we resort to the least core in order to estimate the degree of instability. We also examine the compatibility of stability and fairness on metric environments with indivisible projects. To do so, we explore, among other things, the performance of several well-known solutions (such as the Shapley value, the nucleolus, or the Dutta-Ray value) in these environments.stability, fairness, membership, coalition formation

    An Ordinal Shapley Value for Economic Environments

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    We propose a new solution concept to address the problem of sharing a surplus among the agents generating it. The sharing problem is formulated in the preferences-endowments space. The solution is defined in a recursive manner incorporating notions of consistency and fairness and relying on properties satisfied by the Shapley value for Transferable Utility (TU) games. We show a solution exists, and refer to it as an Ordinal Shapley value (OSV). The OSV associates with each problem an allocation as well as a matrix of concessions ``measuring'' the gains each agent foregoes in favor of the other agents. We analyze the structure of the concessions, and show they are unique and symmetric. Next we characterize the OSV using the notion of coalitional dividends, and furthermore show it is monotone in an agent's initial endowments and satisfies anonymity. Finally, similarly to the weighted Shapley value for TU games, we construct a weighted OSV as well.Non-Transferable utility games, Shapley value, consistency, fairness

    Copmment on Egalitarianism under Incomplete Information

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    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

    Stability and Fairness in Models with a Multiple Membership

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    This article studies a model of coalition formation for the joint production (and finance) of public projects, in which agents may belong to multiple coalitions. We show that, if projects are divisible, there always exists a stable (secession-proof) structure, i.e., a structure in which no coalition would reject a proposed arrangement. When projects are indivisible, stable allocations may fail to exist and, for those cases, we resort to the least core in order to estimate the degree of instability. We also examine the compatibility of stability and fairness in metric environments with indivisible projects, where we also explore the performance of well-known solutions, such as the Shapley value and the nucleolus.Stability, Fairness, Membership, Coalition Formation

    Open loop and feedback solutions to an institutional game under non-quadratic preferences

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    Until now most research in dynamic games focus on models with quadratic objective functions because of practical considerations. But in reality, all problems are not quadratic. In this paper, we solve a differential game where players have non-quadratic preferences. In particular we consider an institutional game governing a permanent interaction between civil society organizations and Government in the economy in the presence of corruption. At the first stage, we compute analytically and solve numerically the open loop and cooperative outcome of the differential game. At the second stage, we approximated analytically and solved numerically the feedback strategies at equilibrium. As results, we found that both open loop and cooperative solution are unique and stable while multiple feedback Nash equilibria should arise. As economic implications, we found that under cooperative play the magnitude of the civil monitoring effort is lower than the one in open loop game. This in turn is smaller than the magnitude of effort associated to the best feedback equilibrium. Total factor productivity effects always dominate the detrimental effect of individual effort devoted to production in almost all situations. Furthermore, institutions improve much faster under cooperative scenario than in open loop game. These results have a similar format with the ones obtained under linear quadratic differential game at least for open loop and cooperative games.Institutions, corruption, civil society, dynamic games, dynamic programming, non-quadratic preferences, Markovian strategies

    On the impact of trade on industrial structures : The role of entry cost heterogeneity

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    entrepreneurship, trade liberalization, externality, heterogeneity, stability
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