A Model of the Origins of Basic Property Rights

This paper studies the origins of one of the most basic of property rights, namely, the right of an individual or an organization to the fruits of its labour. My objective is to address the questions of why, when and how this property right can emerge and be made secure. I develop a model of the strategic interaction between two players in the state-of-nature, which is an environment characterized by the absence of any laws and institutions (including property rights and the state). My analyses explores, in particular, the roles of the players� fighting and productive skills on the emergence and security (or otherwise) of this property right.

Ex Ante Price Commitment with Renegotiation in a Dynamic Market

This paper studies the endogenous determination of the price formation procedure in markets characterized by match-specific heterogeneity; such heterogeneity captures, for example, markets in which sellers own differentiated commodities and buyers have heterogeneous preferences. Specifically, we study a dynamic, stochastic model of a market in which, in each time period, agents on one side (e.g., sellers) strategically choose whether or not to "post", or commit themselves to, incomplete price contracts before they encounter agents of the opposite type. After a pair of agents of the opposite types have encountered each other, their match-specific values from trading with each other are realised. If no price contract was posted, then the terms of trade (and whether or not it occurs) are determined by bilateral negotiations. Otherwise, depending upon the agents� match-specific trading values and equilibrium continuation payoffs, trade occurs (if it does) either on the terms specified in the posted contract or at a renegotiated price (when renegotiation of the posted, incomplete price contract is mutually beneficial). We study the Markov subgame perfect equilibria of this market game, and address a variety of issues such as the impact of market frictions on the equilibrium proportion of trades that occur at a price specified in the ex-ante posted contract rather than at a price determined by ex-post bargaining.

An Economic Model of Child Custody

This paper develops a model of child custody based on an incomplete-contract approach to the allocation of property rights. Because of the presence of transaction costs in marriage, altruistic parents cannot contract upon the investments they make into their children, but can reduce the resulting inefficiencies by determining ex ante the parent who would be allocated custody in case they divorce. We show that: (i) the optimal allocation of custodial rights depends on both preferences and technological factors; (ii) custodial rights can be allocated either to the parent who values the benefits from child welfare more or, vice-versa, to the parent with the lowest valuation; (iii) if one parent�s investment is significantly more important than the other parent�s investment, then sole custody is preferred to joint custody and it should be allocated to the parent whose investment is relatively more important; and (iv) if the importance of the parents� investments is sufficiently similar and if the differences in parents� valuations of child quality are large, then joint custody is optimal with the low-valuation parent receiving a relatively greater share, because the other parent would invest in the child anyway while the low-valuation parent would be endowed with greater bargaining power. The implications of these results are then interpreted in the context of current custody laws, discussed in relation to empirical estimates of some of the parameters underlying the optimal custody rule, and used to question the skepticism surrounding prenuptial contracts.

Agenda Setting Power in Organizations With Overlapping Generations of Players

This paper presents an analysis of the allocation of agenda-setting (or bargaining) power in organizations with overlapping generations of players. Such powers are typically institutionalized within an organization�s structure, and, given the focus of this paper, we identify the former with the latter. Our analysis concerns organizations (such as the US Senate) in which the number of periods each player participates is endogenously determined by his or her past performance. We derive several results and insights concerning (i) optimal organizational structure and (ii) conditions under which the unique, dynamically optimal outcome can be sustained (in equilibrium) in organizations with suboptimal structures. For example, we show that under a broad set of conditions, the optimal organizational structure should involve a seniority system, in which most of the agenda-setting power is allocated to the oldest generation of players.

Power and Inefficient Institutions

This paper is concerned with the persistence of inefficient institutions. Why are they not replaced by more effcient ones? What and/or who prevents such change? We provide an answer to these questions based on two key ideas. The principal idea is that institutional change on an issue may adversely affect the bargaining power of some agents on different issues. The second is that certain kinds of frictions (or transaction costs) are present, which do not allow for this deteriorating bargaining power to be compensated for. A key insight obtained from our analysis is that, the greater is the degree of inequality in the players� bargaining powers the more likely it is that ineffcient institutions will persist.

An Economic Model of Child Custody

This paper develops a model of child custody based on an incomplete-contract approach to the allocation of property rights. Because of the presence of transaction costs in marriage, altruistic parents cannot contract upon the investments they make into their children, but can reduce the resulting inefficiencies by determining ex ante the parent who would be allocated custody in case they divorce. We show that: (i) the optimal allocation of custodial rights depends on both preferences and technological factors; (ii) custodial rights can be allocated either to the parent who values the benefits from child welfare more or, vice-versa, to the parent with the lowest valuation; (iii) if one parent's investment is significantly more important than the other parent's investment, then sole custody is preferred to joint custody and it should be allocated to the parent whose investment is relatively more important; and (iv) if the importance of the parents' investments is sufficiently similar and if the differences in parents' valuations of child quality are large, then joint custody is optimal with the low-valuation parent receiving a relatively greater share, because the other parent would invest in the child anyway while the low-valuation parent would be endowed with greater bargaining power. The implications of these results are then interpreted in the context of current custody laws, discussed in relation to empirical estimates of some of the parameters underlying the optimal custody rule, and used to question the skepticism surrounding prenuptial contracts

Validation of Decentralised Smart Contracts Through Game Theory and Formal Methods

Decentralised smart contracts represent the next step in the development of protocols that support the interaction of independent players without the presence of a coercing authority. Based on protocols a` la BitCoin for digital currencies, smart contracts are believed to be a potentially enabling technology for a wealth of future applications. The validation of such an early developing technology is as necessary as it is complex. In this paper we combine game theory and formal models to tackle the new challenges posed by the validation of such systems

Viable tax constitutions

Taxation is only sustainable if the general public complies with it. This observation is uncontroversial with tax practitioners but has been ignored by the public finance tradition, which has interpreted tax constitutions as binding contracts by which the power to tax is irretrievably conferred by individuals to government, which can then levy any tax it chooses. However, in the absence of an outside party enforcing contracts between members of a group, no arrangement within groups can be considered to be a binding contract, and therefore the power of tax must be sanctioned by individuals on an ongoing basis. In this paper we offer, for the first time, a theoretical analysis of this fundamental compliance problem associated with taxation, obtaining predictions that in some cases point to a re-interptretation of the theoretical constructions of the public finance tradition while in others call them into question

Long-Term Relationship Bargaining

We analyze a bargaining model where there is a long-term relationship between a seller and a buyer and there is bargaining over a sequence of surpluses that arrives at fixed points in time. Markov Perfect Equilibria are analyzed and equilibrium payoffs characterized. The transfers between the players can be described as a first-order system of difference equations. Payoffs depend on both current and future surpluses. Future surpluses are important partly because the risk of separation leads to the loss of surplus today and in the future and partly because delay without separation can last into future periods. We also find conditions for existence and uniqueness of equilibria with immediate agreement

The ‘T-Shaped Buyer’: a transactional perspective on supply chain relationships

This paper challenges the normative view of interdependent buyer-seller relationships and provides a more holistic perspective of the contextual reality that shapes buyer behaviour. By proposing an innovative qualitative methodology, which focusses on boundary-spanning, pre-sales interactions, the research penetrates complex and commercially sensitive buyer-seller relationships. The longitudinal research design uses web-based diaries and follow-up interviews to explore conditions of power based interdependence between buyers and sellers. The ensuing data is mapped using qualitative content analysis and the results are aggregated graphically for assessment. Using this approach the study develops a nuanced view of the dominant patterns of buyer behaviour, and challenges the opinion that a search for competitive advantage will strengthen cooperative relationships in conditions of power based interdependence. The paper introduces the metaphor of the 'T-Shaped Buyer' to explain the empirical findings and, while acknowledging the contextual limits of the study, suggests that this metaphor may cause both academics and practitioners to reflect on normative thinking