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Constitutional arrangements affect the decisions made by a society. We study how this effect leads to preferences of citizens over constitutions; and ultimately how this has a feedback that determines which constitutions can survive in a given society. Constitutions are stylized here, to consist of a voting rule for ordinary business and possibly a(More)
We test a two-stage compensation mechanism for promoting cooperation in Prisoner's Dilemma games. Players first simultaneously choose binding non-negative amounts to pay their counterparts for cooperating, and then play the induced game knowing these amounts. In our games, all payment pairs consistent with mutual cooperation in subgame-perfect equilibrium(More)
We analyze sunspot-equilibrium prices in nonconvex economies with perfect markets and a continuous sunspot variable. Our primary result is that every sunspot equilibrium allocation can be supported by prices that, when adjusted for probabilities, are constant across states. This result extends to the case of a finite number of equally probable states under(More)
This paper considers a credit mechanism for selecting a unique competitive equilibrium (CE). It is shown that in general there exists a " price-normalizing " bundle, with which the enlargement of the general-equilibrium structure to allow for default subject to appropriate penalties results in a construction of a simple credit mechanism for a credit using(More)
A competitive general equilibrium model with complete collateralized contracts under limited commitment is proposed and analyzed. With limited aggregate collateral, risk sharing is imperfect. There exists a minimal spanning set of finite collateralized contracts that generates the feasible space and that contains more than the complete set of collateralized(More)
We introduce log-convexity for bargaining problems. With the requirement of some basic regularity conditions, log-convexity is shown to be necessary and sufficient for Nash's axioms to determine a unique single-valued bargaining solution up to choices of bargaining powers. Specifically, we show that the single-valued asymmetric Nash solution is the unique(More)
A model of coalition government formation is presented in which inefficient, non-minimal winning coalitions can form in Nash equilibrium. Predictions for five games are presented and tested experimentally. The experimental data support potential maximization as a refinement of Nash equilibrium. In particular, the data support the prediction that non-minimal(More)
Fashion, as a " second nature " of human being, has great economic impacts. In this paper, we apply a heterogenous network game to analyze the existence of a fashion cycle. There are two types of agents in the network game, conformists and rebels. Conformists prefer to match the action taken by the majority of her neighbors while rebels like to mismatch.(More)