Too Good To Be True? Retention Rules for Noisy Agents

(with Francisco Espinosa), revised January 2022, forthcoming American Economic Journal: Microeconomics. Supplementary Appendix.

Summary. An agent who privately knows his type (good or bad) seeks to be retained by a principal. A principal seeks to retain good agents. Agents signal their type with some ambient noise, but can alter this noise, perhaps at some cost. Our main finding, that we examine in several extensions, is that in equilibrium,  the principal treats extreme signals in either direction with suspicion, and retains the agent if and only if the signal falls in some intermediate bounded set. In short, she follows the maxim: “if it seems too good to be true, it probably is.”  

Partially Additive Utility Representations

(with Siddharth Chatterjee and Arunava Sen, 2021).

General classes of utility representations are introduced which are partially additive. Preferences that admit such representations are characterized.

Multiple Threats to Peace

October 2010.

Summary. This paper studies costly conflict in a world of complete information, in which society can commit to divisible transfers among all potentially warring groups. The difficulty in preventing conflict arises from the possibility that there may be several conflictual divisions of society, each based on a different marker, such as class, geography, religion, or ethnicity.

A Game-Theoretic Perspective on Coalition Formation

This book is open access. Click image to download.

From the back cover:

‘This beautifully written book synthesizes Ray’s compelling perspective on negotiation and coalition formation. It should be required reading for any young economic theorist who aspires to understand the frontiers of this critical topic.’ B. Douglas Bernheim, Edward Ames Edmonds Professor of Economics, Stanford University

‘Debraj Ray has systematically re-examined the theory of coalition formation. In this book, he develops a broad and fundamental theory to help us better understand the problems of forming efficient social structures.’ Roger Myerson, Glen A. Lloyd Distinguished Service Professor  of Economics, University of Chicago

‘Debraj Ray, a remarkable and versatile economist, brings a fresh economic perspective to cooperative game theory. A must for anyone who wishes to discover the treasures hidden within the cooperative approach.’ Ariel Rubinstein , Professor of Economics, Tel Aviv University and New York University

‘Debraj Ray’s strategic analysis of dynamic negotiations shows that coalition agreements are sensitive to factors such as the bargaining protocol, externalities, renegotiation, and transfer payments—and the Coase Theorem’s prediction of efficiency is sustained only in restricted situations. This is but one strand of a rich panorama of results in this important book, and Ray’s substantial accomplishments in this area will inspire researchers and students alike.’ Robert Wilson , Adams Distinguished Professor of Management, Emeritus, Stanford Graduate School of Business.

‘Debraj Ray has been a pioneering contributor to the literature on coalition formation over the last two decades. Here he provides a masterful account of the rich and interrelated body of theory he and his co-authors have played a seminal role in developing. A defining and val- uable element of Ray’s perspective is a view of binding agreements emerging in an environment of non-cooperative interaction.

The issues addressed lie at the heart of game theory, yet have received too little attention. One hopes that young scholars will use this superb monograph as a launching pad to explore the many important, fascinating and unresolved questions to which Ray directs our attention.’ Dilip Abreu, Edward E. Matthews, Class of 1953, Professor of Finance and Professor of Economics, Princeton University

A Principal-Agent Relationship With No Advantage to Commitment

(with Francisco Espinosa and Rajiv Vohra), in Pure and Applied Functional Analysis 6, 1043-1064 (2021).

Summary. This paper explores conditions under which the ability to commit in a principal-agent relationship creates no additional benefit for the principal, over and above simultaneous interaction without commitment. A central assumption is that the principal’s payoff depends only on the payoff to the agent and her type. Dedicated to Ali Khan on the occasion of his 70th birthday.

India’s Lockdown

(with S. Subramanian and Lore Vandewalle), August 2020, Centre for Economic Policy Research, Policy Brief 102, April 2020.

We discuss the modalities and wisdom of India’s lockdown as a response to the covid-19 pandemic. Here is a related video interview.

 

Decoding India’s Low Covid-19 Case Fatality Rate

(with Minu Philip and S. Subramanian),  Journal of Human Development and Capabilities 22, 27-51 (2021).

Summary. India’s case fatality rate (CFR) under covid-19 is strikingly low, trending from 3% or more, to a current level of under 1.8%. The world average rate is far higher. Several observers have noted that this difference is at least partly due to India’s younger age distribution. In this paper, we use age-specific fatality rates from comparison countries, coupled with India’s distribution of covid-19 cases to “predict” what India’s CFR would be with those age-specific rates. In most cases, those predictions are lower than India’s actual performance, suggesting that India’s CFR is, if anything, too high rather than too low.