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Cooperation in capital deposits

Author

Listed:
  • Borm, P.E.M.

    (Tilburg University, School of Economics and Management)

  • De Waegenaere, A.M.B.

    (Tilburg University, School of Economics and Management)

  • Rafels, C.
  • Suijs, J.P.M.

    (Tilburg University, School of Economics and Management)

  • Tijs, S.H.

    (Tilburg University, School of Economics and Management)

  • Timmer, J.B.

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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Suggested Citation

  • Borm, P.E.M. & De Waegenaere, A.M.B. & Rafels, C. & Suijs, J.P.M. & Tijs, S.H. & Timmer, J.B., 2001. "Cooperation in capital deposits," Other publications TiSEM de31df8b-638a-43b2-b79e-f, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:de31df8b-638a-43b2-b79e-f9cd6b57c2f9
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    References listed on IDEAS

    as
    1. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    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.
    3. SCHMEIDLER, David, 1969. "The nucleolus of a characteristic function game," LIDAM Reprints CORE 44, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Ehud Kalai & Eitan Zemel, 1982. "Totally Balanced Games and Games of Flow," Mathematics of Operations Research, INFORMS, vol. 7(3), pages 476-478, August.
    5. Lloyd S. Shapley, 1967. "On balanced sets and cores," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 14(4), pages 453-460.
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    Cited by:

    1. 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;Sociedad de Estadística e Investigación Operativa, vol. 9(2), pages 139-199, December.
    2. Suijs, J.P.M., 1999. "Price Uncertainty in Linear Production Situations," Other publications TiSEM 7e9b38b7-5b6c-4f12-86c8-8, Tilburg University, School of Economics and Management.
    3. Ozen, U. & Slikker, M. & Norde, H.W., 2007. "A General Framework for Cooperation under Uncertainty," Other publications TiSEM 1972d523-d611-4906-a7c1-a, Tilburg University, School of Economics and Management.
    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. 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.
    6. Josep Maria Izquierdo & Carlos Rafels, 2020. "Core Allocations in Co-investment Problems," Group Decision and Negotiation, Springer, vol. 29(6), pages 1157-1180, December.
    7. Suijs, J.P.M., 1999. "Price Uncertainty in Linear Production Situations," Discussion Paper 1999-91, Tilburg University, Center for Economic Research.

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