Retrading in Market Games

When agents are not price takers, they typically cannot obtain an efficient reallocation of resources in one round of trade. This paper presents a noncooperative model of imperfect competition where agents can retrade allocations,consistent with the Edgeworth’s idea of recontracting. We show that there are allocations on the Pareto frontier that can be approximated arbitrarily closely when trade is myopic, i.e., when agents play a static Nash equilibrium at every round of retrading. We then show that the converging sequence of allocations generated by myopic retrading can also be supported along some retrade-proof Subgame Perfect Equilibrium path when traders anticipate future rounds of retrading.Market Games, Retrading, Myopic versus Far-sighted Behavior, Retrade Proofness

Natural Resource Distribution and Multiple Forms of Civil War

We examine how natural resource location, rent sharing and fighting capacities of different groups matter for ethnic conflict. A new type of bargaining failure due to multiple types of potential con.icts (and hence multiple threat points) is identified. The theory predicts conflict to be more likely when the geographical distribution of natural resources is uneven and when a minority group has better chances to win a secessionist rather than a centrist con.ict. For sharing rents, resource proportionality is salient in avoiding secessions and strength proportionality in avoiding centrist civil wars. We present empirical evidence that is consistent with the model.Natural Resources, Conflict, Strength Proportionality, Resource Proportionality, Secession, Bargaining Failure.

Self Enforcing Voting in International Organizations

Some international organizations are governed by unanimity rule, some others by a majority system. Still others have moved from one system to the other over time. The existing voting models, which generally assume that decisions made by voting are perfectly enforceable, have a difficult time explaining the observed variation in governance mode, and in particular the widespread occurrence of the unanimity system. We present a model whose main departure from standard voting models is that there is no external enforcement mechanism: each country is sovereign and cannot be forced to follow the collective decision, or in other words, the voting system must be self-enforcing. The model yields unanimity as the optimal system for a wide range of parameters, and delivers rich predictions on the variation in the mode of governance, both across organizations and over time.

Bad politicians

We present a simple theory of the quality of elected officials. Quality has (at least) two dimensions: competence and honesty. Voters prefer competent and honest policymakers, so high-quality citizens have a greater chance of being elected to office. But low-quality citizens have a “comparative advantage” in pursuing elective office, because their market wages are lower than the market wages of high-quality citizens (competence), and/or because they reap higher returns from holding office (honesty). In the political equilibrium, the average quality of the elected body depends on the structure of rewards from holding public office. Under the assumption that the rewards from office are increasing in the average quality of office holders there can be multiple equilibria in quality. Under the assumption that incumbent policymakers set the rewards for future policymakers there can be path dependence in quality.Corruption

Mediation and peace

This paper applies mechanism design to conflict resolution. We determine when and how unmediated communication and mediation reduce the ex ante probability of conflict in a game with asymmetric information. Mediation improves upon unmediated communication when the intensity of conflict is high, or when asymmetric information is significant. The mediator improves upon unmediated communication by not precisely reporting information to conflicting parties, and precisely, by not revealing to a player with probability one that the opponent is weak. Arbitrators who can enforce settlements are no more effective than mediators who only make non-binding recommendations

Internal Hierarchy and Stable Coalition Structures

When an agent decides whether to join a coalition or not, she must consider both i) the expected strength of the coalition and ii) her position in the vertical structure within the coalition. We establish that there exists a positive relationship between the degree of inequality in remuneration across ranks within coalitions and the number of coalitions to be formed. When coalition size is unrestricted, in all stable systems the endogenous coalitions must be mixed and balanced in terms of members' abilities, with no segregation. When coalitions must have a fixed finite size, stable systems display segregation by clusters while maintaining the aforesaid feature within clusters.Stable Systems, Abilities, Hierarchy, Cyclic Partition

Party Formation and Policy Outcomes Under Different Electoral Systems

This paper provides a game-theoretic model of representative democracy with endogenous party formation. Coalition formation may occur before and after elections, and the expected payoffs from the after-election majority game affect incentives-to form parties before the elections. In this way Duverger\u27s hypothesis can be formally explained by the strategic behavior of political elites. If politicians care primarily about private benefits, the equilibrium policy outcome under a proportional electoralsystem coincides with the median party\u27s position. On the other hand, with quasilinear utility, the.distance from the median voter outcome may be lower with plurality rule