Social Decision Rules are Not Immune to Conflict

(with Joan Esteban), Economics of Governance 2, 59–67, 2001.

Summary. Why is rent-seeking so endemic in societies? Might it not be possible to design a Pareto-improving social decision rule that sidesteps the inefficient waste of resources resulting from conflict? We assume that a benevolent planner knows the effectiveness of each rent-seeker, that the cost of expending resources is isoelastic, and that it is the same across all players. But she does not know the precise value of this elasticity. We show that this minimal lack of information leads to the impossibility of a Pareto-improving social decision rule, as long as there are at least four agents.

Aspiration-Based Reinforcement Learning in Repeated Interaction Games: An Overview

(with Jon Bendor and Dilip Mookherjee), International Game Theory Review 3, 159–174, 2001.

Summary. In models of aspiration-based reinforcement learning, agents adapt by comparing payoffs achieved from actions chosen in the past with an aspiration level. Though such models are well-established in behavioural psychology, only recently have they begun to receive attention in game theory and its applications to economics and politics. This paper provides an informal overview of a range of such theories applied to repeated interaction games.

Inequality, Control Rights, and Rent Seeking: Sugar Cooperatives in Maharashtra

(with Abhijit Banerjee, Dilip Mookherjee and Kaivan Munshi), Journal of Political Economy 109, 138-190, 2001.

Summary. This paper presents a theory of rent seeking within farmer cooperatives in which inequality of asset ownership affects relative control rights of different groups of members. . Predictions concerning the effect of the distribution of local landownership on sugarcane price, capacity levels, and participation rates of different classes of farmers are confirmed by data from nearly 100 sugar cooperatives in the Indian state of Maharashtra over the period 1971–93.

Credit Rationing in Developing Countries: An Overview of the Theory

(with Parikshit Ghosh and Debraj Ray), Chapter 11 in Readings in the Theory of Economic Development, edited by Dilip Mookherjee and Debraj Ray, London: Blackwell, 383–301l, 2000.

Summary. This paper surveys the theoretical development literature on credit markets.

What’s New in Development Economics?

The American Economist 44, 3-16, 2000.

Summary. This essay is meant to describe the current frontiers of development economics, as I see them. I might as well throw my hands up at the beginning and say there are too many frontiers. In recent years, the subject has made excellent use of economic theory, econometric methods, sociology, anthropology, political science and demography and has burgeoned into one of the liveliest areas of research in all the social sciences.

Wealth Constraints, Lobbying and the Efficiency of Public Allocation

(with Joan Esteban), European Economic Review 44, 694-705, 2000.

Summary. We formalize a model in which individuals lobby before the government in order to bene”t from some productivity-enhancing government action (infrastructures, direct subsidies, permissions, in short). The government honestly tries to allocate these permissions to the agents that will make the best use of them, as revealed by the intensity of their lobbying. If the marginal cost of resources varies with wealth, the amount of information transmitted through lobbying will depend on the degree of inequality. In this paper, we summarize the main approach and examine the special case of equal wealth. We show that the nature of signaling equilibria is critically a!ected by per-capita wealth.

Conflict and Distribution

(with Joan Esteban), Journal of Economic Theory 87, 379-415, 1999.

Summary. We develop a behavioral model that links the level and pattern of social conflict to the society-wide distribution of individual characteristics. The model can be applied to groups that differ in characteristics such as wealth, ethnicity, religion, and political ideology. We settle questions of existence and uniqueness of conflict equilibrium. Conflict is seen to be closely connected with the bimodality of the underlying distribution of characteristics. However, in general, the conflictdistribution relationship is nonlinear and surprisingly complex. Our results on conflict patterns also throw light on the phenomena of extremism and moderation.

A Theory of Endogenous Coalition Structures

(with Rajiv Vohra), Games and Economic Behavior 26, 286–336, 1999.

Summary. Consider an environment with widespread externalities, and suppose that binding agreements can be written. We study coalition formation in such a setting. Our analysis proceeds by defining on a partition function an extensive-form bargaining game. We establish the existence of a stationary subgame perfect equilibrium. Our main results are concerned with the characterization of equilibrium coalition structures. We develop an algorithm that generates such a  structure. Our characterization results are especially sharp for symmetric partition functions.