Linear cost sharing in economies with non-Samuelsonian public goods: Core equivalence

 We consider an economy with non-Samuelsonian public goods and we focus on linear cost sharing. In a linear cost sharing equilibrium all agents in the economy optimize given a certain fixed cost share to be contributed towards the provision of public goods in the economy. Hence, each agent pays a certain fraction of the total establishment costs of public goods and these cost shares are common knowledge. We show that for a certain fixed contribution scheme the resulting linear cost share equilibria are equivalent to corresponding core allocations, in which the core is based on the integral of the individual cost shares. We also show that there is no equivalence of the Foley core with cost share equilibria, even in well-behaved large economies. Received: 16 August 1995/Accepted: 29 July 1996     

Representation of effectivity functions in coalition proof Nash equilibrium: A complete characterization

The concept of coalition proof Nash equilibrium was introduced by Bernheim et al. [5]. In the present paper, we consider the representation problem for coalition proof Nash equilibrium: For a given effectivity function, describing the power structure or the system of rights of coalitions in society, it is investigated whether there is a game form which gives rise to this effectivity function and which is such that for any preference assignment, there is a coalition proof Nash equilibrium.  It is shown that the effectivity functions which can be represented in coalition proof Nash equilibrium are exactly those which satisfy the well-known properties of maximality and superadditivity. As a corollary of the result, we obtain necessary conditions for implementation of a social choice correspondence in coalition proof Nash equilibrium which can be formulated in terms of the associated effectivity function. Received: 24 June 1999/Accepted: 20 September 2000     

BERTRAND COMPETITION WITH ASYMMETRIC MARGINAL COSTS

This article tests the prediction of three discrete asymmetric duopoly price competition games in the laboratory. The games differ from each other in terms of the size of the cost asymmetry that induces a systematic variation in the difference between the firms' marginal costs. While the standard theory requires the low‐cost firm to set a price just equal to the high‐cost firm's marginal cost, which is identical across all three games, and win the entire market, intuition suggests that market price may increase with a decrease in the absolute difference between the two marginal costs. We develop a quantal response equilibrium model to test our competing conjecture. (JEL L11, L12, C91, D43)     

Strategy-proofness of continuous aggregation maps

 We consider continuous aggregation maps (e.g., social welfare functions). By assuming that the voters have preferences over social outcomes, we regard the social decision procedure as a noncooperative game, with the aggregation map as a game form. The map is called strategy-proof if it is a Nash equilibrium that the voters report their most preferred outcomes. We give sufficient topological conditions on the space of outcomes so that only dictatorial maps are strategy-proof. Received: 28 February 1994/Accepted: April 22, 1996     

Transaction Costs and Coalition Stability under Majority Rule

Government program allocations are more stable and more equally shared than theory predicts. Although various explanations have been offered, we emphasize the high transaction costs of political negotiations and coalition enforcement. Cycling predictions ignore the cost to politicians of repeatedly forming coalitions and neglect the opportunity costs of failed coalitions and the loss of related government programs that bring valuable constituent benefits. Because of these costs, Congress relies on coalitions larger than the minimum necessary to enact a program, adopts relatively egalitarian programmatic sharing rules, and resists efforts to change those allocations. To illustrate we analyze the Federal Highway Trust Fund.     

On strategy-proofness and essentially single-valued cores: A converse result

In a general model of indivisible good allocation, S?nmez (1999) established that, whenever the core is nonempty for each preference profile, if an allocation rule is strategy-proof, individually rational and Pareto optimal, then the rule is a selection from the core correspondence, and the core correspondence must be essentially single-valued. This paper studies the converse claim of this result. I demonstrate that whenever the preference domain satisfies a certain condition of `richness', if the core correspondence is essentially single-valued, then any selection from the core correspondence is strategy-proof (even weakly coalition strategy-proof, in fact). In particular, on the domain of preferences in which each individual has strict preferences over his own assignments and there is no consumption externality, such an allocation rule is coalition strategy-proof. And on this domain, coalition strategy-proofness is equivalent to Maskin monotonicity, an important property in implementation theory. Received: 22 February 2000/Accepted: 22 January 2002 I am grateful to Ryo-ichi Nagahisa, Shinji Ohseto, Hiroshi Ono, Tomoichi Shinotsuka and Shigehiro Serizawa for valuable comments. And I am indebted to two anonymous referees for useful suggestions. Especially, I owe the present proof of Lemma 2 to one referee. I also thank Yukihiko Funaki, Atsushi Kajii, Mamoru Kaneko, Eiichi Miyagawa, Tatsuyoshi Saijo, Manimay Sengupta, Yves Sprumont, Yoshikatsu Tatamitani, Manabu Toda, Takashi Ui, Takehiko Yamato, Naoki Yoshihara and the participants of the seminars in Hokkaido University, Kansai University, ISER (Osaka University), Otaru University of Commerce and Tsukuba University. All errors are my own responsiblity.     

Toward general impossibility theorems in pure exchange economies

We study the possibility of strategy-proof and efficient mechanisms in pure exchange economies. In his remarkable paper, Zhou (1991) establishes an elegant impossibility result: there is no strategy-proof, efficient, and non-dictatorial mechanism in the two-agent case. He conjectures that there is no strategy-proof, efficient, and “non-inversely-dictatorial” mechanism in the case of three or more agents. However, we discover some counterexamples to his conjecture in the case of four or more agents. We present a new interesting open question: Is there any strategy-proof, efficient, and “non-alternately-dictatorial” mechanism? Received: 17 October 2000/Accepted: 20 April 2001     

Constitutions, voting and democracy: A review

This review of William Riker's work suggests that his interest in rational choice theory was based on his desire to understand profound constitutional transformation in U.S. political history. Although he argued that “anything can happen in politics,” his use of the notion of heresthetic allowed him to focus on key contingent events. Indeed his later work added depth to his inductive generalizations on the nature of “federal bargains” and coalition formation.  Recent work by Austen-Smith and Banks, Merrill and Grofman, and Lijphart is also discussed in the light of Riker's earlier ideas on voting and democracy. Received: 25 February 2000/Accepted: 16 March 2000     

Strategy-proofness on Euclidean spaces

 In this paper we characterize strategy-proof voting schemes on Euclidean spaces. A voting scheme is strategy-proof whenever it is optimal for every agent to report his best alternative. Here the individual preferences underlying these best choices are separable and quadratic. It turns out that a voting scheme is strategy-proof if and only if (α) its range is a closed Cartesian subset of Euclidean space, (β) the outcomes are at a minimal distance to the outcome under a specific coordinatewise veto voting scheme, and (γ) it satisfies some monotonicity properties. Neither continuity nor decomposability is implied by strategy-proofness, but these are satisfied if we additionally impose Pareto-optimality or unanimity. Received: 18 October 1993/Accepted: 2 February 1996     

CAPACITY CONSTRAINED EXPORTERS: IDENTIFYING INCREASING MARGINAL COST

This study revisits a central assumption of standard trade models: constant marginal cost technology. The presence of increasing marginal costs for exporters introduces significant market interdependence across borders missing from traditional models of international trade that rely on constant marginal cost technology. Such market interdependence represents an additional channel through which local shocks are transmitted globally. To identify increasing marginal cost at the level of the firm, we build in flexible production assumptions that nest increasing, decreasing, and constant marginal cost technology to an otherwise standard international trade model. We derive an estimating equation that can be taken directly to the data. Our structural equation explicitly guides our inference on the shape of the marginal cost curve from estimated coefficients. The results suggest that increasing marginal cost is predominant at the firm level. Moreover, utilizing plant‐level information on physical and financial capacity constraints, we find that the degree of increasing marginal cost is significantly exacerbated by both types of constraints. The evidence suggests that access to larger markets through greater international integration may not have the expected welfare gains typically predicted in standard models. (JEL F12, F14)     

The proportional random allocation of indivisible units

Indivisible units are randomly allocated among agents with a claim/demand on the resources. The available resources fall short of the sum of individual claims.  The proportional method distributes units sequentially, and the probability of receiving a unit at any step is proportional to the unsatisfied claims.  We characterize the family of probabilistic rationing methods meeting the three axioms Consistency, Lower and Upper Composition. It contains the proportional method, all deterministic fixed priority methods, and the priority compositions of proportional methods. The proportional method is the only fair method in the family. Received: 30 November 1999/Accepted: 15 November 2000     

Strategy-proof,efficient, and nonbossy quota allocations

We consider the problem of designing a mechanism to allocate objects to agents when each agent has a quota that must be filled exactly. Agents are assumed to have responsive preferences over items. We show that the only strategy-proof, Pareto optimal, and nonbossy mechanisms are sequential dictatorships. We also show that the only strategy-proof, Pareto optimal, nonbossy, and neutral mechanisms are serial dictatorships. Since these negative results hold for responsive preferences, they hold for more general preferences as well. We are grateful to Atila Abdulkadiroğlu, Syed Nageeb Mustafa Ali, Douglas Bernheim, Navin Kartik, Jon Levin, Paul Milgrom, and Azeem Shaikh and two anonymous referees and an editor for helpful discussions. This research has been supported by the Burt and Deedee McMurtry Stanford Graduate Fellowship.     

Strategy-proof Cardinal Decision Schemes

This paper analyses strategy-proof mechanisms or decision schemes which map profiles of cardinal utility functions to lotteries over a finite set of outcomes. We provide a new proof of Hylland’s theorem which shows that the only strategy-proof cardinal decision scheme satisfying a weak unanimity property is the random dictatorship. Our proof technique assumes a framework where individuals can discern utility differences only if the difference is at least some fixed number which we call the grid size. We also prove a limit random dictatorship result which shows that any sequence of strategy-proof and unanimous decision schemes defined on a sequence of decreasing grid sizes approaching zero must converge to a random dictatorship. We are most grateful to an Associate Editor and two referees for very helpful comments on an earlier version of the paper. An erratum to this article can be found at     

Indexing stance: Reported speech as an interactional evidential1

The notion of linguistic stance as a non‐grammaticalized form of evidentiality is here explored through an investigation of reported speech in English interaction. Reported speech is found to be one of a variety of resources with which speakers lay claim to epistemic priority vis‐à‐vis recipients. Such resources are not identifiable as stance markers independently of the sequential contexts in which they appear; sequential position is shown to be central in providing at once a constraint on what can be said and a resource to exploit in saying it. Resources dependent on sequential position to index stance are deemed to be interactional evidentials to distinguish them from the well‐documented stand‐alone evidentials. Interactional and stand‐alone evidentials, as forms of deixis, are directed to the orientations of epistemic authority and accountability respectively; their distinct means of marking evidentiality are grounded in the motivation to be explicit with regard to accountability and inexplicit with regard to authority.     

Entry deterrence in electoral spatial competition

 In this paper we examine a model of electoral competition with entry costs, where several established parties compete against each other under the threat of potential entry. Assuming single-peakedness of the distribution of voters’ ideal points, we show that, if there are two established parties, an equilibrium always exists and is unique, and demonstrate that the Hotelling-Downs and the Smithies-Palfrey equilibria represent special cases of the equilibrium in our model. If there are more than two established parties, an equilibrium is always unique and there exists an upper bound on the values of entry cost which guarantee the existence of an equilibrium. Received: 3 July 1995/Accepted: 10 June 1996     

Does International Outsourcing Really Lower Workers’ Income?

We analyze the impact of international outsourcing on income, if the domestic labor market is imperfect, i.e. there is a bilateral bargaining between a firm and a labor union. In our analysis we distinguish between the cases where the parties negotiate over the wage only and where they negotiate over both wage and profit sharing. We find in the first case that outsourcing has an ambiguous effect on the workers’ income, while it increases the workers’ income in the second case. For the optimal amount of international outsourcing, we find that, depending on the wage effect of outsourcing, in a pure wage bargaining system it can be higher or lower than the level where domestic and foreign marginal labor costs are the same. In contrast, in a wage and profit share bargaining system, the amount of outsourcing lies below this level.     

INFLATION DYNAMICS AND SUBJECTIVE EXPECTATIONS IN THE UNITED STATES

We estimate a forward‐looking New Keynesian Phillips Curve (NKPC) for the United States using data from the Survey of Professional Forecasters as proxy for expected inflation. We obtain significant and plausible estimates for the structural parameters independently of whether we use the output gap or unit labor costs as a measure of marginal costs. Moreover, when estimating a Phillips curve where lagged inflation enters due to price indexation by nonreoptimizing firms, we obtain significant parameter estimates of the sign predicted by theory independently of the marginal cost measure used. (JEL E31)     

Single-peaked preferences with several commodities

We consider the problem of allocating m commodities among n agents with single-peaked preferences. When m≥2 and n=2 any strategy-proof and efficient solution is dictatorial. We propose an extension of the Uniform Rule that (in the two-agents case) is the only one that satisfies strategy-proofness, envy-freeness, and a weak requirement related to efficiency. Alternatively, the envy-freeness property may be replaced by weak-anonymity. Received: 7 November 1997/Accepted: 1 August 2000     

Agenda control in coalition formation

Theoretical models of government formation in political science usually assume that the head of state is non-strategic. In this paper, we analyze the power of an agenda setter who chooses the order in which players are recognized to form coalitions in simple games. We characterize those sets of players which can be imposed in the equilibrium coalition and show that the only decisive structures where the agenda setter can impose the presence of any minimal winning coalition are apex games, where a large player forms a winning coalition with any of the small players. Keywords: Government Formation, Agenda Control, Coalitional Bargaining, Finite Bargaining Rules. Received: 26 January 2001/Accepted: 31 July 2001     

On strategy-proof social choice under categorization

I consider social choice problems such that (i) the set of alternatives can be partitioned into categories based on a prominent and objective feature and (ii) agents have strict preferences over the alternatives. Main results are characterizations of the structure of the strategy-proof social choice functions. I prove that each social choice function is strategy-proof if and only if it is decomposable into “small” strategy-proof social choice functions; one of them chooses one category and each of the others chooses one alternative from a category.