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Cooperation in capital deposits

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Author Info

  • Borm, P.E.M.

    (Tilburg University)

  • De Waegenaere, A.M.B.

    (Tilburg University)

  • Rafels, C.
  • Suijs, J.P.M.

    (Tilburg University)

  • Tijs, S.H.

    (Tilburg University)

  • Timmer, J.B.

    (Tilburg University)

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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Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-84639.

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Date of creation: 2001
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Publication status: Published in OR Spektrum (2001) v.23, p.265-281
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-84639

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Web page: http://www.tilburguniversity.edu/

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References

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  1. 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.
  2. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
  3. 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.
  4. 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.
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Cited by:
  1. Borm, P.E.M. & Hamers, H.J.M. & Hendrickx, R.L.P., 2001. "Operations Research Games: A Survey," Discussion Paper 2001-45, Tilburg University, Center for Economic Research.
  2. Suijs, J.P.M., 1999. "Price Uncertainty in Linear Production Situations," Discussion Paper 1999-91, Tilburg University, Center for Economic Research.
  3. Hitoshi Matsushima, 2010. "Finitely Repeated Prisoners' Dilemma with Small Fines: Penance Contract," CIRJE F-Series CIRJE-F-720, CIRJE, Faculty of Economics, University of Tokyo.
  4. van Gulick, Gerwald & Borm, Peter & De Waegenaere, Anja & Hendrickx, Ruud, 2010. "Deposit games with reinvestment," European Journal of Operational Research, Elsevier, vol. 200(3), pages 788-799, February.
  5. Eran Binenbaum, 2008. "Incentive Issues In R&D Consortia: Insights From Applied Game Theory," Contemporary Economic Policy, Western Economic Association International, vol. 26(4), pages 636-650, October.
  6. 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.

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