A Coase Theorem Based on a New Concept of the Core

The core is reformulated to incorporate the externality typical in strategic form games. �Any coalition of players may deviate by trying to commit to a profile of actions different from a status quo. �The outsiders of the coalition may take a coordinated measure, incentive-feasibly for themselves, to preempt the coalition's commitment. �If a coalition succeeds in committing to its action profile, the outsiders' reactions constitute a core solution among themselves. �A core solution is robust against the deviations of coalitions which expect such preemptive and reactive responses from the other players. �In an externality problem where pollution is the dominant action, the core is nonempty. �In any two-player strategic form game, the core is also nonempty.core; equilibrium; cooperative game theory; coalition; externality; competing principals; Coase Theorem

Debt- Versus Equity-Financing in Auction Designs

�A social planner wishes to launch a project but the contenders capable of running the project are cash-constrained and may default. �To signal their capabilities, the contenders may finance their bids through debt or equity, depending on the mechanism chosen by the social planner. �When moral hazard is absent, it is established as theorems that the ex post efficient social choice function cannot be achieved by any mechanism using only debt financing and can be achieved by a mechanism using equity financing. �When moral hazard is present, however, it is illustrated heuristically that equity share discourages effort and exacerbates default more than risky debt does.auction; finance; debt; equity; default; financial constraint; budget constraint

Jump Bidding and Overconcentration in Decentralized Simultaneous Ascending Auctions

A model of English auction that allows jump bidding is proposed. When two objects are sold separately via such English auctions, I construct an equilibrium such that bidders signal via jump bids, thereby forming rational expectations of the prices without relying on any central mediator. This equilibrium eliminates the exposure problem for a bidder whose valuation function is superadditive. Consequently, the auction game overly concentrates the goods to a multi-item bidder and never overly diffuses them to single-item bidders.complementarity; auction; multiple object aucrtions; simultaneous auctions; synergy; exposure problem; threshold problem

The Default-Prone U.S. Toxic Asset Auction Plan

Applying auction theory to the toxic-asset rescue plan currently released by the United States Treasury Department, this paper demonstrates an equilibrium where moderately poor bidders outbid rich bidders in such auctions. After defeating their rich rivals and acquiring the toxic assets, such bidders will default on government-provided loans whenever the toxic assets turn out to be unsalvageable. An alternative mechanism is discussed.auction; toxic assets; default; rescue plan

Core Equivalence Theorem with Production

In production economies, the extent to which non-equilibria are blocked depends on the allocation of control rights among shareholders, because a blocking coalition's resources are affected by the firms it jointly owns with outsiders. We formulate a notion of blocking that takes such interdependency problem into account, and we prove an analog of the Debreu-Scarf theorem for replica production economies. Our theorem differs from theirs in using an additional assumption, which we argue is indispensable and is driven by the interdependency problem.

Interactive Blocking in Arrow-Debreu Economies

Competitive behaviors such as outbidding one's rivals may be countered by the rivals' threat of mutually destructive objections. In an Arrow-Debreu model of production economies with firms privatized by property rights, we model such hindered competitive behaviors as a coalition's attempt to block a status quo given the threat that the outsiders of the coalition, especially those with whom the coalition shares ownership of firms, may resort to production-ruining secession. We introduce new concepts of the core such that a coalition's blocking plan is feasible only if it is not blocked by the outsiders with such secession. Based on such notions, we prove core equivalence theorems in the replication framework.core; coalition; core equivalence; blocking; production; firms

Stochastic Blocking and Core Convergence in Nonconvex Production Economies

In production economies, the extent to which non-equilibria are blocked depends on specific rules that allocate authority among shareholders, because a blocking coalition's resources are affected by the firms it jointly owns with outsiders. Based on a notion of stochastic blocking, we extend Anderson's (1978) core convergence theorem to production economies where preferences and technologies are not necessarily convex.core; coalition; production; blocking; core convergence; nonconvexity; stochastic blocking

A Coase Theorem based on a new concept of the core

The core is reformulated to incorporate the externality typical in strategic form games. Any coalition of players may deviate by trying to commit to a profile of actions different from a status quo. The outsiders of the coalition may take a coordinated measure, incentive-feasibly for themselves, to preempt the coalition\u27s commitment. If a coalition succeeds in committing to its action profile, the outsiders\u27 reactions constitute a core solution among themselves. A core solution is robust against the deviations of coalitions which expect such preemptive and reactive responses from the other players. In an externality problem where pollution is the dominant action, the core is nonempty. In any two-player strategic form game, the core is also nonempty

Auctions with Costly Information Acquisition

We characterize optimal selling mechanisms in auction environments where bidders must incur a cost to learn their valuations. These mechanisms specify for each period, as a function of the bids in previous periods, which new potential buyers should be asked to bid. In addition, these mechanisms must induce the bidders to acquire information about their valuations and to reveal this information truthfully. Using a generalized Groves principle, we prove a very general full extraction of the surplus result: the seller can obtain the same profit as if he had full control over the bidders' acquisition of information and could have observed directly their valuations once they are informed. We also present appealing implementations of the optimal mechanism in special cases.