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Equilibrium Binding Agreements under Diverse Bahavioral Assumptions

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  • Effrosyni Diamantoudi

    ()
    (Department of Economics, University of Aarhus, Denmark)

Abstract

This paper extends the work of Ray and Vohra (1997). It ascertains which partitions of players will emerge and what actions will these players choose under each partition, when they can sign binding agreements and their actions have externalities. The emphasis, however, is placed on situations with multiple outcomes and how agents behave in the presence of such multiplicity. In particular, a deviating coalition considers all the likely outcomes that may prevail upon its deviation, and selects (if possible) a subset of them, avoiding thus an excessively confident behavior, which is the case under Ray and Vohra's notion. Three augmentations of their solution concept are defined, capturing three distinct behavioral assumptions. Their efficiency and relation to each other are discussed.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2001-2.

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Length: 15
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Handle: RePEc:aah:aarhec:2001-2

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Web page: http://www.econ.au.dk/afn/

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Keywords: Coalition structure; binding agreement; stability;

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References

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  1. Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer, vol. 11(3), pages 603-627.
  2. Debraj Ray & Rajiv Vohra, 1996. "A Theory of Endogenous Coalition Structure," Papers 0068, Boston University - Industry Studies Programme.
  3. Boriss Siliverstovs, 2005. "The Bi-parameter Smooth Transition Autoregressive model," Economics Bulletin, AccessEcon, vol. 3(23), pages 1-11.
  4. Xue, Licun, 2002. "Stable agreements in infinitely repeated games," Mathematical Social Sciences, Elsevier, vol. 43(2), pages 165-176, March.
  5. Jamsheed Shorish, . "Quasi-Static Macroeconomic Systems," Economics Working Papers 2000-3, School of Economics and Management, University of Aarhus.
  6. Niels Haldrup & Peter Lildholdt, 2005. "Local power functions of tests for double unit roots," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 59(2), pages 159-179.
  7. Elliott, Graham & Jansson, Michael, 2000. "Testing for Unit Roots with Stationary Covariances," University of California at San Diego, Economics Working Paper Series qt47k7z69n, Department of Economics, UC San Diego.
  8. Effrosyni Diamantoudi, . "Equilibrium Binding Agreements under Diverse Bahavioral Assumptions," Economics Working Papers 2001-9, School of Economics and Management, University of Aarhus.
  9. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
  10. Ray, Debraj & Vohra, Rajiv, 1997. "Equilibrium Binding Agreements," Journal of Economic Theory, Elsevier, vol. 73(1), pages 30-78, March.
  11. d'ASPREMONT, Claude & JACQUEMIN, Alexis & GABSZEWICZ, Jean J. & WEYMARK, John A., . "On the stability of collusive price leadership," CORE Discussion Papers RP -522, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Peter Skott, . "Demand Policy in the Long Run," Economics Working Papers 2000-17, School of Economics and Management, University of Aarhus.
  13. Paul Auerbach & Peter Skott, . "Skill Asymmetries, Increasing Wage Inequality and Unemployment," Economics Working Papers 2000-18, School of Economics and Management, University of Aarhus.
  14. Michael Rosholm & Michael Svarer, . "Structurally Dependent Competing Risks," Economics Working Papers 2000-11, School of Economics and Management, University of Aarhus.
  15. Donsimoni, Marie-Paule & Economides, Nicholas S & Polemarchakis, Herakles M, 1986. "Stable Cartels," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 317-27, June.
  16. Effrosyni Diamantoudi & Licun Xue, . "Farsighted Stability in Hedonic Games," Economics Working Papers 2000-12, School of Economics and Management, University of Aarhus.
  17. Licun Xue, . "A Notion of Consistent Rationalizability - Between Weak and Pearce's Extensive Form Rationalizability," Economics Working Papers 2000-4, School of Economics and Management, University of Aarhus.
  18. Jakob Roland Munch & Michael Svarer, . "Mortality and Socio-economic Differences in a Competing Risks Model," Economics Working Papers 2001-1, School of Economics and Management, University of Aarhus.
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Cited by:
  1. James Lake & Halis M. Yildiz, 2014. "On the different geographic characteristics of Free Trade Agreements and Customs Unions," Departmental Working Papers 1403, Southern Methodist University, Department of Economics.
  2. Sheng-Chieh Huang & Xiao Luo, 2008. "Stability, sequential rationality, and subgame consistency," Economic Theory, Springer, vol. 34(2), pages 309-329, February.
  3. Effrosyni Diamantoudi, . "Equilibrium Binding Agreements under Diverse Bahavioral Assumptions," Economics Working Papers 2001-2, School of Economics and Management, University of Aarhus.
  4. Albert Banal & Ines Macho-Stadler & Jo Seldeslachts, 2003. "Mergers, Investment Decisions and Internal Organisation," UFAE and IAE Working Papers 569.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  5. Roland Pongou & Lawrence Diffo Lambo & Bertrand Tchantcho, 2008. "Cooperation, stability and social welfare under majority rule," Economic Theory, Springer, vol. 35(3), pages 555-574, June.

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