Sequential Bargaining in a Stochastic Environment

This paper investigates the uniqueness of subgame perfect (SP) payoffs in a sequential bargaining game. Players are completely informed and the surplus to be allocated follows a geometric Brownian motion. This bargaining problem has not been analysed exhaustively in a stochastic environment. The aim of this paper is to provide a technique to identify the subgame perfect equilibria, i.e. the timing of the agreement and the SP payoffs at which agreement occurs. Even though the main focus is on the uniqueness of the equilibrium, we investigate other features of the equilibrium, such as the Pareto effciency of the outcome and the relation with the Nash axiomatic approach.

Increasing Workload in a Stochastic Environment

We show that a steeply increasing workload before a deadline is compatible with time-consistent preferences. The key departure from the literature is that we consider a stochastic environment where success of effort is not guaranteed.Increasing Workload, Deadline, Stochasticity

Negative mass corrections in a dissipative stochastic environment

We study the dynamics of a macroscopic object interacting with a dissipative stochastic environment using an adiabatic perturbation theory. The perturbation theory reproduces known expressions for the friction coefficient and, surprisingly, gives an additional negative mass correction. The effect of the negative mass correction is illustrated by studying a harmonic oscillator interacting with a dissipative stochastic environment. While it is well known that the friction coefficient causes a reduction of the oscillation frequency, we show that the negative mass correction can lead to its enhancement. By studying an exactly solvable model of a magnet coupled to a spin environment evolving under standard non-conserving dynamics we show that the effect is present even beyond the validity of the adiabatic perturbation theory.We are grateful to M Kolodrubetz for the careful reading of the manuscript and helpful comments. This work was partially supported by BSF 2010318 (YK and AP), NSF DMR-1506340 (LD and AP), AFOSR FA9550-10-1-0110 (LD and AP), ARO W911NF1410540 (LD and AP) and ISF grant (YK). LD acknowledges the office of Naval Research. YK is grateful to the BU visitors program. (2010318 - BSF; DMR-1506340 - NSF; FA9550-10-1-0110 - AFOSR; W911NF1410540 - ARO; ISF grant)Accepted manuscrip

Competing or Colluding in a Stochastic Environment

This paper analyses collusion by innovative firms and the role of patents in a continuous-time real options framework. A patent-investment race model is formulated in which innovative firms bargain and reach collusive agreements. It is shown that, while collusion always delays innovation, it does not necessarily delay competition. Depending on a number of factors, collusion can actually accelerate competitio

Spatial Monopoly Pricing in a Stochastic Environment

This paper reexamines the welfare implications of three pricing regimes (mill, uniform and discriminatory) for a monopoly in a stochastic environment. It con-siders a risk-averse monopolist faces two markets with stochastic and linear demands. The monopolist is assumed to commit to an irreversible price in each market before the uncertainty is resolved. Several unconventional results are shown to be triggered by the presence of demand uncertainty. The reason for the reversal of orthodox intuition is the asymmetry in the risk chacteristics of the markets and the willingness of the monopolist to trade increased level of expected prots for reduced risk.spatial pricing, monopoly, demand uncertainty

Competing or Colluding in a Stochastic Environment

This document analyses collusion by innovative firms and the role of patents in a continuous-time real options framework. A patent-investment race model is formulated in which innovative firms bargain and reach collusive agreements. It is shown that, while collusion always delays innovation, it does not necessarily delay competition. Depending on a number of factors, collusion can actually accelerate competition.Bargaining, Collusion, Competition, Geometric Brownian motion, Nash axiomatic approach, Stackelberg game