nep-des New Economics Papers
on Economic Design
Issue of 2019‒11‒11
three papers chosen by
Alex Teytelboym
University of Oxford

  1. Coalition Formation and History Dependence By Bhaskar Dutta; Hannu Vartiainen
  2. Choice via Social Influence By Abhinash Borah; Christopher Kops
  3. Axiomatizations of the proportional division value By Zhengxing Zou; Rene van den Brink; Youngsub Chun; Yukihiko Funaki

  1. By: Bhaskar Dutta (University of Warwick and Ashoka University); Hannu Vartiainen (University of Helsinki and Helsinki Graduate School of Economics)
    Abstract: Farsighted formulations of coalitional formation, for instance by Harsanyi (1974) and Ray and Vohra(2015), have typically been based on the von NeumannMorgenstern (1944) stable set. These farsighted stable sets use a notion of indirect dominance in which an outcome can be dominated by a chain of coalitional 'moves' in which each coalition that is involved in the sequence eventually stands to gain. Dutta and Vohra(2016) point out that these solution concepts do not require coalitions to make optimal moves. Hence, these solution concepts can yield unreasonable predictions. Dutta and Vohra (2016) restricted coalitions to hold common, history independent expectations that incorporate optimality regarding the continuation path. This paper extends the Dutta-Vohra analysis by allowing for history dependent expectations. The paper provides characterization results for two solution concepts corresponding to two versions of optimality. It demonstrates the power of history dependence by establishing nonemptyness results for all ï¬ nite games as well as transferable utility partition function games. The paper also provides partial comparisons of the solution concepts to other solutions.
    Keywords: Coalition
    Date: 2018–07
  2. By: Abhinash Borah (Department of Economics, Ashoka University); Christopher Kops (Heidelberg University)
    Abstract: We introduce a theory of socially influenced individual choices. The source of social influence on an individual are his reference groups in society, formed of societal members he psychologically or contextually relates to. Choices made within an individual’s reference groups have an influence on the choices he makes. Speciï¬ cally, we propose a choice procedure under which, in any choice problem, he considers only those alternatives that he can identify with at least one of his reference groups. From this “consideration set,†he chooses the best alternative according to his preferences. The procedure is an interactive one and captures the steady state of a process of mutual social influence. We behaviorally characterize this choice procedure. We also highlight the empirical content of the procedure by relating it to both experimental evidence and real world applications.
    Keywords: Individual choice, social influence, reference groups, consideration sets, interactive behavioral choices
    Date: 2018–12
  3. By: Zhengxing Zou (Vrije Universiteit Amsterdam); Rene van den Brink (Vrije Universiteit Amsterdam); Youngsub Chun (National University, Seoul); Yukihiko Funaki (Waseda University, Tokyo)
    Abstract: We present axiomatic characterizations of the proportional division value for TU-games, a value that distributes the worth of the grand coalition in proportion to the stand-alone worths of its members. First, a new proportionality principle, called balanced treatment, is introduced by strengthening Shapley's symmetry axiom, which states that if two players make the same contribution to any nonempty coalition, then they receive the amounts in proportion to their stand-alone worths.We characterize the family of values satisfying efficiency, weak linearty, and balanced treatment. We also show that this family is incompatible with the dummy player property. However, we show that the proportional division value is the unique value in this family that satisfies the dummifying player property. Second, we propose three appropriate monotonicity axioms by considering two games in which the stand-alone worths of all players are equal or in the same proportion to each other, and obtain three axiomatizations of the proportional division value without both weak linearity and the dummifying player property. Third, from the perspective of a variable player set, we show that the proportional division value is the only one that satisfies proportional standardness and projection consistency. Finally, we provide characterizations of proportional standardness.
    Keywords: Cooperative game, proportional division value, monotonicity, consistency
    JEL: C71
    Date: 2019–11–01

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