Delegation in a Cheap-Talk Game: A Voting Example

Suppose an agent is contemplating an action with state-contingent payoffs, and has a prior belief about the probability of the states. She hires an expert to update her priors before the action. Experts may be both informed as well as uninformed, and are not necessarily truthful. The question asked in this paper is when, if at all, is it better for the agent to assign the task of playing with experts and deciding on the action to another agent with a different set of priors. In particular, can an agent increase her payoff in a cheap-talk game by delegating to others to play on her behalf? This paper shows that such profitable delegation is possible and characterizes the agents to whom a given agent may delegate the responsibility. While this generic problem can arise in many contexts, we have chosen to model it in a simple voting situation where the electoral issue is whether a certain policy with contingent outcomes should or should not be implemented. Voters have different priors about probable states of the world, and hence their expected pay-offs from the policy vary. The elected decision-maker can use the institution of an advisor before deciding whether to implement the policy. We show that unless the median voter has very sure beliefs about the probable states, she would be better off getting someone else elected than herself as the decision-maker. In particular, if the median is predisposed to (against) the policy action, she would be better off choosing a candidate more (less) pro-action than herself. The optimal choice of the decision-maker is shown to depend on the cost of misdirected policy, i.e. of implementing it when it is actually unwarranted.Delegation; cheap-talk games; median voter; Bayesian updating

Rational Choice: The Case of Path Dependent Procedures

Describing a procedure in which choice proceeds in a sequence, we propose two alternatives ways of resolving the decision problem whenever the outcome is sequence-sensitive. One way yields a rationalizable choice set, and the other way produces a weakly rationalizable choice set that is equivalent to von Neumann-Morgenstern's stable set. It is shown that for quasi-transitive rationalization, the maximal set must coincide with its stable set.choice function, rational choice, stable set.

Extremes and Moderates: A Characterization and an Application to Lobbying

Abstract: In a society where individuals differ in their valuation of different social policies, when might one consider a given individual as having references that are extreme relative to the others? And how important are such preferences in determining eventual policy? In this paper, we describe an individual as being extreme if her views differ from the mainstream to the extent that the rest of the society is able to unanimously agree on a compromise policy that they strictly prefer to what might have been the outcome if such an individual has her own way. Relying on the intermediate property of preferences due to Grandmont [1978] we provide a simple geometric characterization of extreme preferences. Furthermore, we also present an illustrative positive model of lobbying activity where we apply our characterization result to show that every equilibrium social policy is determined only by the activities of those holding extreme preferences even when they are a minorityExtremes, moderates, intermediate preferences, collective decisions and lobbying

Reputation, Cheap Talk and Delegation

A decision maker is contemplating an action whose outcome is state dependent. She has a ‘prior’ over the states of the world and before choosing an action, she can consult an ‘expert’. We model the communication game between the decision maker and the expert as a ‘cheap-talk’ game. Expert quality however is heterogenous. Some can obtain informative signals while the others can not. Since an expert known to be informed earns a rent in the future, uninformed experts would like to disguise as informed.We show that such concern for future reputation imposes severe constraints on the possibility of beneficial communication. Decision makers who can benefit from such communication are characterized in terms of the relevant parameters which include the prior of the decision makers and the cost of mistaken decisions. Next we address the issue of delegation. The questions that we ask are which decision makers choose to delegate, and to whom they delegate. In situations involving public goods, we characterize the decision makers who will strictly prefer to delegate, and show that when delegation occurs, the delegate is necessarily more extreme than the original decision maker in terms of her prior.Cheap-talk, delegation, reputation, median voter.

Multi-person Bargaining With Complementarity: Is There Holdout?

This paper studies a non-cooperative bargaining problem with one buyer and many sellers, focussing on the tension between the complementarity intrinsic to such a setup and efficiency. We address this problem in a very general setup with a technology that allows for variable degrees of complementarity, a bargaining protocol that is symmetric and allows for both secret, as well as publicly observable offers, and strategies that allow for history dependence. We examine equilibria for all parameter values. Interestingly, and in contrast to most of the literature, we demonstrate that there is a large class of parameter values such that an asymptotically efficient equilibrium with a positive buyer payoff exists - thus demonstrating that strategic holdout is not a serious obstacle to the working of the Coase theorem. For robustness we examine alternative contractual forms, i.e. conditional and equity contracts, as well as variations that allow for multiple project implementation and asymmetric sellers.Multi-person bargaining, holdout, complementarity, efficiency, Coase theorem

Transparency, complementarity and holdout

This paper characterizes the conditions under which holdout (i.e. bargaining inefficiency) may, or may not be significant in a two-sided, one-buyer-many-seller model with complementarity. We address this problem in a very general setup with a bargaining protocol that is symmetric and allows for both publicly observable, as well as secret offers, and a technology that allows for variable degrees of complementarity. The central insight is that the transparency of the bargaining protocol, formalized by whether offers are publicly observable or secret, as well as the extent of complementarity, play a critical role in generating efficiency. Even with perfect complementarity, holdout seems to be largely resolved whenever the bargaining protocol is public (but not if it is secret). Further, irrespective of the bargaining protocol, holdout is resolved if the marginal contribution of the last seller is not too large.Multi-person bargaining, holdout, complementarity, efficiency, secret offers, public offers, Coase theorem, transparency.

Multi-person bargaining with complementarity: Is there holdout?

This paper studies a non-cooperative bargaining problem with one buyer and many sellers, focussing on the tension between the complementarity intrinsic to such a setup and efficiency. We address this problem in a very general setup with a technology that allows for variable degrees of complementarity, a bargaining protocol that is symmetric and allows for both secret, as well as publicly observable offers, and strategies that allow for history dependence. We examine equilibria for all parameter values. Interestingly, and in contrast to most of the literature, we demonstrate that there is a large class of parameter values such that an asymptotically efficient equilibrium with a positive buyer payoff exists - thus demonstrating that strategic holdout is not a serious obstacle to the working of the Coase theorem. For robustness we examine alternative contractual forms, i.e. conditional and equity contracts, as well as variations that allow for multiple project implementation and asymmetric sellers.Multi-person bargaining, holdout, complementarity, efficiency, Coase theorem

Transparency, Complementarity and Holdout

This article characterizes the conditions under which holdout (i.e. bargaining inefficiency) may, or may not be significant in a two-sided, one-buyer-many-seller model with complementarity. Our central result is that the severity of holdout (i.e. inefficiency) is critically dependent on three factors, (a) the transparency of the bargaining protocol, (b) the outside option of the buyer, and (c) the marginal contribution of the last seller. We find that although the accepted wisdom that holdout is severe, goes through whenever either the buyer has no outside option, or the bargaining protocol is secret, the holdout problem however is largely resolved whenever either the bargaining protocol is transparent and the buyer has a positive outside option, or if the marginal contribution of the last seller is not too large.Multi-person bargaining, holdout, complementarity, efficiency, secret offers, public offers, Coase theorem, transparency.

A Language for Inconsistency-Tolerant Ontology Mapping

Ontology alignment plays a key role in enabling interoperability among various data sources present in the web. The nature of the world is such, that the same concepts differ in meaning, often so slightly, which makes it difficult to relate these concepts. It is the omni-present heterogeneity that is at the core of the web. The research work presented in this dissertation, is driven by the goal of providing a robust ontology alignment language for the semantic web, as we show that description logics based alignment languages are not suitable for aligning ontologies. The adoption of the semantic web technologies has been consistently on the rise over the past decade, and it continues to show promise. The core component of the semantic web is the set of knowledge representation languages -- mainly the W3C (World Wide Web Consortium) standards Web Ontology Language (OWL), Resource Description Framework (RDF), and Rule Interchange Format (RIF). While these languages have been designed in order to be suitable for the openness and extensibility of the web, they lack certain features which we try to address in this dissertation. One such missing component is the lack of non-monotonic features, in the knowledge representation languages, that enable us to perform common sense reasoning. For example, OWL supports the open world assumption (OWA), which means that knowledge about everything is assumed to be possibly incomplete at any point of time. However, experience has shown that there are situations that require us to assume that certain parts of the knowledge base are complete. Employing the Closed World Assumption (CWA) helps us achieve this. Circumscription is a very well-known approach towards CWA, which provides closed world semantics by employing the idea of minimal models with respect to certain predicates which are closed. We provide the formal semantics of the notion of Grounded Circumscription, which is an extension of circumscription with desirable properties like decidability. We also provide a tableaux calculus to reason over knowledge bases under the notion of grounded circumscription. Another form of common sense logic, is default logic. Default logic provides a way to specify rules that, by default, hold in most cases but not necessarily in all cases. The classic example of such a rule is: If something is a bird then it flies. The power of defaults comes from the ability of the logic to handle exceptions to the default rules. For example, a bird will be assumed to fly by default unless it is an exception, i.e. it belongs to a class of birds that do not fly, like penguins. Interestingly, this property of defaults can be utilized to create mappings between concepts of different ontologies (knowledge bases). We provide a new semantics for the integration of defaults in description logics and show that it improves upon previously known results in literature. In this study, we give various examples to show the utility and advantages of using a default logic based ontology alignment language. We provide the semantics and decidability results of a default based mapping language for tractable fragments of description logics (or OWL). Furthermore, we provide a proof of concept system and qualitative analysis of the results obtained from the system when compared to that of traditional mapping repair techniques

Transparency, complementarity and holdout

This paper characterizes the conditions under which holdout (i.e. bargaining inefficiency) may, or may not be significant in a two-sided, one-buyer-many-seller model with complementarity. We address this problem in a very general setup with a bargaining protocol that is symmetric and allows for both publicly observable, as well as secret offers, and a technology that allows for variable degrees of complementarity. The central insight is that the transparency of the bargaining protocol, formalized by whether offers are publicly observable or secret, as well as the extent of complementarity, play a critical role in generating efficiency. Even with perfect complementarity, holdout seems to be largely resolved whenever the bargaining protocol is public (but not if it is secret). Further, irrespective of the bargaining protocol, holdout is resolved if the marginal contribution of the last seller is not too large