Status-Seeking in Hedonic Games with Heterogeneous Players

We study hedonic games with heterogeneous player types that reflect her nationality, ethnic background, or skill type. Agents' preferences are dictated by status-seeking where status can be either local or global. The two dimensions of status define the two components of a generalized constant elasticity of substitution utility function. In this setting, we characterize the core as a function of the utility's parameter values and show that in all cases the corresponding cores are non-empty. We further discuss the core stable outcomes in terms of their segregating versus integrating properties.Coalitions, Core, Stability, Status-seeking

Coalitional Matchings

A coalitional matching is a two-sided matching problem in which agents on each side of the market may form coalitions such as student groups and research teams who - when matched - form universities. We assume that each researcher has preferences over the research teams he would like to work in and over the student groups he would like to teach to. Correspondingly, each student has preferences over the groups of students he wants to study with and over the teams of researchers he would like to learn from. In this setup, we examine how the existence of core stable partitions on the distinct market sides, the restriction of agents’ preferences over groups to strict orderings, and the extent to which individual preferences respect common rankings shape the existence of core stable coalitional matchings.Coalitions, Common Rankings, Core, Stability, Totally Balanced Games, Two-Sided Matchings

Dynamic Multilateral Markets

We study dynamic multilateral markets, in which players’ payoffs result from coalitional bargaining. In this setting, we establish payoff uniqueness of the stationary equilibria when players exhibit some degree of impatience. We focus on market games with different player types, and derive under mild conditions an explicit formula for each type’s equilibrium payoff as market frictions vanish. The limit payoff of a type depends in an intuitive way on the supply and the demand for this type in the market, adjusted by the type-specific bargaining power. Our framework may be viewed as an alternative to the Walrasian price-setting mechanism. When we apply this methodology to the analysis of labor markets, we can determine endogenously the equilibrium firm size and remuneration scheme. We find that each worker type in a stationary market equilibrium is rewarded her marginal product, i.e. we obtain a strategic underpinning of the neoclassical wage. Interestingly, we can also replicate some standardized facts from the search-theoretical literature such as positive equilibrium unemployment.Multilateral Bargaining, Dynamic Markets, Labor Markets

Paths to stability in two-sided matching under uncertainty

We consider one-to-one matching problems under two modalities of uncertainty in which types are assigned to agents either with or without replacement. Individuals have preferences over the possible types of the agents from the opposite market side and initially know the ‘name’ but not the ‘type’ of their potential partners. In this context, learning occurs via matching and using Bayes’ rule. We introduce the notion of a stable and consistent outcome, and show how the interaction between blocking and learning behavior shapes the existence of paths to stability in each of these two uncertainty environments. Existence of stable and consistent outcomes then follows as a side result

A Look Upstream: Market Restructuring, Risk, Procurement Contracts and Efficiency

We study how market deregulation affects the upstream industry both theoretically and empirically. Our theory predicts that firms respond to increases in uncertainty due to deregulation by writing more rigid contracts with their suppliers. Using the restructuring of the U.S. electricity market as our case study, we find support for our theoretical predictions. Our findings imply a greater emphasis on efficiency at coal mines contracting with restructured plants. The evidence suggests a 17% improvement in productivity at these mines, relative to those contracting with regulated plants. We find, on the other hand, that transaction costs may have increased. We conclude that deregulation has significant impacts upstream from deregulated markets

Partial cooperation in strategic multi-sided decision situations

We consider a normal-form game in which there is a single exogenously given coalition of cooperating players that can write a binding agreement on pre-selected actions. The actions representing other dimensions of the strategy space remain under the sovereign, individual control of the players. We consider a standard extension of the Nash equilibrium concept denoted as a partial cooperative equilibrium as well as an equilibrium concept in which the coalition of cooperators has a leadership position. Existence results are stated and we identify conditions under which the various equilibrium concepts are equivalent. We apply this framework to existing models of multi-market oligopolies and international pollution abatement. In a multi-market oligopoly, typically, a merger paradox emerges in the partial cooperative equilibrium. The paradox vanishes if the cartel attains a leadership position. For international pollution abatement treaties, cooperation by a sufficiently large group of countries results in a Pareto improvement over the standard tragedy of the commons outcome described by the Nash equilibrium

Ex-ante Novelty and Creative Destruction in Inventions: A Network Approach to Patent Data Analysis

Researchers have long been studying technological innovation due to its significance in driving economic growth. Designed to protect the deemed values of inventions, patents and their information have been widely used in such studies to generate statistics for innovation evaluation. However, many of the commonly used patent indicators are or based on simple counts of inventions. Such conventional indicators fall short of providing in-depth understanding of the quality of innovation. In this paper we build on the literature of the origin of innovation and our previous work to propose two new indices based on a network method: IRII to capture the novelty in technological recombination, and NTR to represent the novelty brought by introducing new knowledge elements in innovation in a sector. Through empirical studies using patent filed in the Pharmaceuticals and Computer Technology sectors, we show that our proposed indices are not only correlated with the conventional patent quality indicators, but also related to the patents’ potential impact on future inventions. The analysis also explores into the sector-specific characteristics and country-specific differences

Paths to stability in two-sided matching under uncertainty

Abstract We consider one-to-one matching problems under two modalities of uncertainty that di¤er in the way types are assigned to agents. Individuals have preferences over the possible types of the agents from the opposite market side and initially know the 'name' but not the 'type'of their potential partners. In this context, learning occurs via matching and using Bayes'rule. We introduce the notion of a stable and consistent outcome, and show how the interaction between blocking and learning behavior shapes the existence of paths to stability in each of the uncertainty environments. Existence of stable and consistent outcomes then follows as a side result

Ex-ante Novelty and Invention Quality: A Cross-country Sectoral Empirical Study

The research on measuring technological innovation quality has evolved with our understanding of the origin of novelty. Patents have been widely used in such studies because they are a form of copyright-protected outcome of inventions deemed to be valuable. The quality of technological innovation can be measured in multiple dimensions. In this paper, we make a methodological contribution to the literature on ex-ante technological novelty and propose two new indices based on a network approach: the Inverse Recombination Intensity Index (IRII) to capture the extent to which an invention is the outcome of a novel combination of pre-existing technological components; and the New Technology Ratio (NTR) to measure the share of new knowledge elements in the invention. Through an in-depth empirical study of patents filed in the Pharmaceuticals and Computer Technology sectors, we show that our proposed indices are correlated with some of the conventional patent quality indicators and go beyond that to reveal previously unnoticed features of the inventions process, of which some are sector-specific. Moreover, through our regression analysis, we demonstrate that IRII and NTR are important predictors of a patents' potential impact on future inventions, which confirms the ex-ante nature of our indices. In the regression analysis we also include sector-country-specific R&D input variables as controls to test the robustness of our results. Our analysis suggests that the distinct characteristics of each sector affect how the quality of innovation is related to the ex-ante measures of technological novelty. We argue, therefore, that future analysis of the link between ex-ante novelty and ex-post quality of innovation needs to take into consideration the recombinant content of the invention and account for sectoral characteristics

A Look Upstream: Electricity Market Restructuring, Risk, Procurement Contracts and Efficiency

This paper analyzes theoretically and empirically how upstream markets are affected by deregulation downstream. Deregulation tends to increase the level of uncertainty in the upstream market. Our theoretical analysis predicts that deregulated firms respond to this increase in uncertainty by writing more rigid contracts with their suppliers. Using the restructuring of the electricity market in the U.S. as our case study, we find support for our theoretical predictions. Furthermore, we investigate the impact this change in procurement contracts has on efficiency. Focusing on coal mines, we find that those selling coal to plants in restructured markets are significantly more productive than their counterparts working with regulated plants. On the other hand, we also find that transaction costs may have increased as a consequence of deregulation