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Cooperation in capital deposits

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Author Info
Borm, P.
De Waegenaere, A.
Rafels, C. (Tilburg University, Center for Economic Research)

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Abstract

The rate of return earned on a deposit can depend on its term, the amount of money invested in it, or both. Most banks, for example, offer a higher interest rate for longer term deposits. This implies that if one individual has capital available for investment now, but needs it in the next period, whereas the opposite holds for another individual, then they can both benefit from cooperation since it allows them to invest in a longer term deposit. A similar situation arises when the rate of return on a deposit depends on the amount of capital invested in it. Although the benefits of such cooperative behavior may seem obvious to all individuals, the actual participation of an individual depends on what part of the revenues he eventually receives. The allocation of the jointly earned benefits to the investors thus plays an important part in the stability of the cooperation. This paper provides a game theoretical analysis of this allocation problem. Several classes of corresponding deposit games are introduced. For each class, necessary conditions for a nonempty core are provided, and allocation rules that yield core-allocations are examined.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 31.

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Date of creation: 1999
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Handle: RePEc:dgr:kubcen:199931

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ehud Kalai & Eitan Zemel, 1980. "On Totally Balanced Games and Games of Flow," Discussion Papers 413, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  2. Sprumont, Yves, 1990. "Population monotonic allocation schemes for cooperative games with transferable utility," Games and Economic Behavior, Elsevier, vol. 2(4), pages 378-394, December. [Downloadable!] (restricted)
  3. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June. [Downloadable!] (restricted)
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  4. Josep Maria Izquierdo Aznar & Carlos Rafels Pallarola, 1996. "A generalization of the bankruptcy game: financial cooperative games," Working Papers in Economics 9, Universitat de Barcelona. Espai de Recerca en Economia.
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  1. Suijs, J., 1999. "Price uncertainty in linear production situations," Discussion Paper 91, Tilburg University, Center for Economic Research. [Downloadable!]
  2. Ozen, U. & Slikker, M. & Norde, H.W., 2007. "A General Framework for Cooperation under Uncertainty," Discussion Paper 2007-57, Tilburg University, Center for Economic Research. [Downloadable!]
  3. Peter Borm & Herbert Hamers & Ruud Hendrickx, 2001. "Operations research games: A survey," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer, vol. 9(2), pages 139-199, December. [Downloadable!] (restricted)
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  4. Gulick, G. van & Borm, P.E.M. & De Waegenaere, A.M.B. & Hendrickx, R.L.P., 2007. "Deposit Games with Reinvestment," Discussion Paper 2007-22, Tilburg University, Center for Economic Research. [Downloadable!]
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