(with Mukul Majumdar), in B. Dutta, S. Gangopadhyay, D. Mookherjee and D. Ray (eds), Economic Theory and Policy: Essays in Honor of Dipak Banerjee, Oxford University Press, 1990.
Summary. We discuss quantity controls that can be used for decentralization of competitive economies with non-convex production sets.
(edited with Bhaskar Dutta, Shubhashis Gangopadhyay and Dilip Mookherjee), New Delhi: Oxford University Press, 1990.
Games and Economic Behavior 1, 295-326, 1989
We formalize the notion of collective dynamic consistency for noncooperative repeated games. Intuitively, we require that an equilibrium not prescribe any course of action in any subgame that players would jointly wish to renegotiate, given the restriction that any alternative must itself be invulnerable to subsequent deviations and renegotiation. While the appropriate definition of collective dynamic consistency is clear for finitely repeated games, serious conceptual difficulties arise when games are infinitely repeated.
(with Bhaskar Dutta), Econometrica 57, 615-635, 1989.
Summary. We introduce a new solution concept for transferable-utility games in characteristic function form, when individuals collectively believe in equality as a desirable social goal, although in their private actions they behave selfishly. This latter consideration implies that an “egalitarian solution” must satisfy core-like participation constraints, while the former implies that such a solution is also a Lorenz-maximal element of the constrained set. Despite the well-known fact that the Lorenz ordering is incomplete, we show that the egalitarian solution is unique whenever it exists.
(with Bhaskar Dutta and Kunal Sengupta), in P. Bardhan (ed.), The Economic Theory of Agrarian Institutions, Clarendon Press, Oxford (1989).
Summary. We study repeated principal-agent problems in which the agent can be evicted and replaced by another identical agent. Thus current output, which is perfectly observed, can be used for incentives as well as efficiency wages. We describe conditions under which eviction threats will be used in equilibrium, in addition to output-based incentives.
(with Kunal Sengupta), in P. Bardhan (ed.) The Economic Theory of Agrarian Institutions, Clarendon Press, Oxford, 1989.
Summary. This paper provides a broad set of conditions interlinked contracts will not be observed. These conditions are given to throw better light on the circumstances in which interlinkage will indeed be observed.
(with Bhaskar Dutta, Kunal Sengupta and Rajiv Vohra), Journal of Economic Theory 49, 93-112, 1989.
Summary. Both the core and the bargaining set fail to satisfy a natural requirement of consistency. In excluding imputations to which there exist objections, the core does not assess the “credibility” of such objections. The bargaining set goes a step further. Only objections which have no counter-objections are considered justified. However, the credibility of counter-objections is not similarly assessed. We formulate a notion of a consistent bargaining set in which each objection in a “chain” of objections is tested in precisely the same way as its predecessor. Various properties of the consistent bargaining set are also analyzed.
International Journal of Game Theory 18, 185-187, 1989.
Summary. A problem with the concept of the core is that it does not explicitly capture the credibility of blocking coalitions, This notion is defined, and the concept of a modified core introduced, consisting of allocations not blocked by any credible coalition. The core and modified core are then shown to be identical. The concept of credibility is thus implicit in the definition of the core.
(with Doug Bernheim), Journal of Economic Theory 47, 195-202, 1989.
Summary. This paper concerns the existence of Markov perfect equilibria in altruistic growth economies. Previous work on deterministic models has established existence only under extremely restrictive conditions. We show that the introduction of production uncertainly yields an existence theorem for aggregative infinite horizon models with very general forms of altruism.
(with Doug Bernheim), Review of Economic Studies 54, 227-243, 1987.
Summary. We consider the properties of equilibrium behavior in an aggregative growth model with intergenerational altruism. Various positive properties such as the cyclicity of equilibrium programs, and the convergence of equilibrium stocks to a steady state, are analyzed. Among other normative properties, it is established that under certain natural conditions, Nash equilibrium programs are efficient and “modified Pareto optimal”, in a sense made clear in the paper, but never Pareto optimal in the traditional sense.