On the probability of breakdown in participation games

In this paper I analyze a participation game i.e. a public good game where contributions to the public good are binary (people either participate or not participate). Although variants of this game have been studied extensively, most previous work takes the benefit of provision of the public good to be independent of the number of players that contribute and show that the probability of breakdown, i.e. the probability that no one participates, is increasing in group size. Here this assumption is dropped. I show when the probability of breakdown is decreasing in group size and also present sufficient conditions under which the probability of breakdown is increasing in group size. Moreover I show that for large groups this probability is non-negligible and exceeding exp(−1) in the limit and that the expected number of participants is less than one. Also two economic examples, concerning R&D and debt overhang, are discussed.

Self-Serving Biases in Bargaining

There is strong evidence that in bargaining situations with asymmetric outside options people exhibit self-serving biases concerning their fairness judgements. Moreover, psychological literature suggests that this can be a driving force of bargaining impasse. This paper extends the notion of inequity aversion to incorporate self-serving biases due to asymmetric outside options and analyses whether this leads to bargaining breakdown. I distinguish between sophisticated and naive agents, that is, those agents who understand their bias and those who do not. I find that breakdown in ultimatum bargaining results from naiveté of the proposers

Ratification quotas in international agreements

This paper analyses the role of ratification quotas in multilateral agreements over emission reduction. The higher is the quota, the lower is the level of emissions in case the agreement comes into force, but the higher is also the risk of failure. In a setting with incomplete information, two country types and a binary contribution to the provision, I examine the differences between simultaneous and sequential ratification. When the benefits from emission of both types are smaller than the social costs, the outcome in the simultaneous case is essentially identical to the sequential case. The optimal quota is 100% and achieves the first best. With the high type's benefits exceeding the social costs, I find that the optimal quota is as small as possible, if ratification is simultaneous. In the sequential ratification case, I cannot determine the optimal quota. However, I find that the aggregate expected surplus decreases with respect to the simultaneous case

Self-Serving Biases in Bargaining

There is strong evidence that in bargaining situations with asymmetric outside options people exhibit self-serving biases concerning their fairness judgements. Moreover, psychological literature suggests that this can be a driving force of bargaining impasse. This paper extends the notion of inequity aversion to incorporate self-serving biases due to asymmetric outside options and analyses whether this leads to bargaining breakdown. I distinguish between sophisticated and naive agents, that is, those agents who understand their bias and those who do not. I find that breakdown in ultimatum bargaining results from naiveté of the proposers.fairness perceptions; self-serving bias; inequity aversion; ultimatum bargaining; outside options

Collective navigation of complex networks: Participatory greedy routing

Many networks are used to transfer information or goods, in other words, they are navigated. The larger the network, the more difficult it is to navigate efficiently. Indeed, information routing in the Internet faces serious scalability problems due to its rapid growth, recently accelerated by the rise of the Internet of Things. Large networks like the Internet can be navigated efficiently if nodes, or agents, actively forward information based on hidden maps underlying these systems. However, in reality most agents will deny to forward messages, which has a cost, and navigation is impossible. Can we design appropriate incentives that lead to participation and global navigability? Here, we present an evolutionary game where agents share the value generated by successful delivery of information or goods. We show that global navigability can emerge, but its complete breakdown is possible as well. Furthermore, we show that the system tends to self-organize into local clusters of agents who participate in the navigation. This organizational principle can be exploited to favor the emergence of global navigability in the system.Comment: Supplementary Information and Videos: https://koljakleineberg.wordpress.com/2016/11/14/collective-navigation-of-complex-networks-participatory-greedy-routing

Primary Market Design: Direct Mechanisms and Markets

We develop a model that allows for the coexistence of bookbuilding and when-issued trading. We show that, due to interactions between these two processes, allowing for when-issued trading is for the most part beneficial for issuers. When-issued trading may interfere with information gathering thorough bookbuilding, in the case that informative bookbuilding is not needed. However, informative bookbuilding may be a prerequisite for the when-issued market to function. In this case the existence of a liquid when-issued market will not interfere with information gathering through bookbuilding, and will strictly benefit the issuer.Initial public offerings, Information gathering mechanisms, When-issued trading

Ratification quotas in international agreements

This paper analyses the role of ratification quotas in multilateral agreements over emission reduction. The higher is the quota, the lower is the level of emissions in case the agreement comes into force, but the higher is also the risk of failure. In a setting with incomplete information, two country types and a binary contribution to the provision, I examine the differences between simultaneous and sequential ratification. When the benefits from emission of both types are smaller than the social costs, the outcome in the simultaneous case is essentially identical to the sequential case. The optimal quota is 100% and achieves the first best. With the high type's benefits exceeding the social costs, I find that the optimal quota is as small as possible, if ratification is simultaneous. In the sequential ratification case, I cannot determine the optimal quota. However, I find that the aggregate expected surplus decreases with respect to the simultaneous case.public goods; international bargaining; ratfication; emission games

A Dual Model of Cooperative Value

An expanded model of value in cooperative games is presented in which value has either a linear or a proportional mode, and NTU value has either an input or an output basis. In TU games, the modes correspond to the Shapley (1953) and proportional (Feldman (1999) and Ortmann (2000)) values. In NTU games, the Nash (1950) bargaining solution and the Owen- Maschler (1989, 1992) value have a linear mode and an input basis. The egalitarian value (Kalai and Samet (1985)) has a linear mode and an output basis. The output-basis NTU proportional value (Feldman (1999)) and the input-basis variant, identified here, complete the model. The TU proportional value is shown to have a random marginal contribution representation and to be in the core of a positive convex game. The output-basis NTU variant is shown to be the unique efficient Hart and Mas-Colell consistent NTU value based on equal proportional gain in two-player TU games. Both NTU proportional values are shown to be equilibrium payoffs in variations of the bargaining game of Hart and Mas-Colell (1996). In these variations, players' probabilities of participation at any point in the game are a function of their expected payoff at that time. Limit results determine conditions under which players with zero individual worth receive zero value. Further results show the distinctive nature of proportional allocations to players with small individual worths. In an example with a continuum of players bargaining with a monopolist, the monopolist obtains the entire surplus.cooperative game, value, mode, basis, bilateral cooperation, endogenous bargaining power, potential, equal proportional gain, consistency, noncooperative bargaining, zero players, monopoly

Everyday gambling in New Zealand

There is a sizeable body of statistics on gambling in New Zealand which points albeit unintentionally - to the everyday status of this activity. Max Abbott and Rachel Volberg, two leading figures in the rapidly growing discipline of gambling studies, note that in 15 short years there have been no less than seven surveys on gambling in New Zealand (not including a large number of university theses). These include three assessments of people's participation in gambling by the Department of Internal Affairs, plus two surveys funded by the department focusing on problem gambling. To these can be added one conducted by a regional health authority, North Health, under contract to the Committee on Problem Gambling Management and one conducted on behalf of the Casino Control Authority. This much research on gambling should suggest to the reader that there is something about gambling that piques the interest of government bureaucrats and agencies. Here the frequency of the phrase `problem gambling' is the giveaway. In this section we will review some of the findings of this research and cover its more pathological rationale later

Strategic Allocation of Liquidity in the InterBank Money Market

ABSTRACT This paper focuses on an ex post trading problem in inter-bank money markets. An “over the counter” inter-bank market is modeled in this paper. Relationship banking leads to private proprietary information that causes bargaining failure in such markets with positive probability. Both independent and interdependent bargaining games are studied. It is shown that the allocation is not constrained efficient under bargaining games without monetary intervention. Monetary intervention is characterized as state contingent market making by the Central Bank. Such intervention is shown to dominate under a variety of informational and bargaining assumptions. The literature on monetary policy design is thus extended in the present paper by providing a micro-rationale for Central Bank intervention and by characterizing the solution of state contingent market making in liquidity.KEY WORDS Liquidity, Incomplete Information, Bargaining Failure, Central Bank, Monetary Intervention, Market Making