This paper provides a flexible strategic framework to analyze bargaining and values in environments with coalitional externalities. Within this framework we propose a new value that extends the Shapley value to partition function form games, the so-called Rational Belief Shapley (RBS) value. We investigate the strategic foundation of the RBS value by constructing an implementation mechanism. Th...

We examine the effects of changes in the income distribution in an economy where agents’ utility depends both on consumption and on their rank in the distribution of conspicuous consumption. We introduce a new methodology to compare the behavior of agents that occupy the same rank in the two different income distributions but typically have different levels of incomes. Here, an increase in inco...

Optimal policy rules—including those regarding income taxation, commodity taxation, public goods, and externalities—are typically derived in models with homogeneous preferences. This article reconsiders many central results for the case in which preferences for commodities, public goods, and externalities are heterogeneous. When preference differences are observable, standard second-best result...

Negative and positive externalities pose symmetrical problems to social welfare. The law internalizes negative externalities by providing general tort liability rules. According to such rules, those who cause harm to others should pay compensation. In theory, in the presence of positive externalities, negative liability should apply: those who produce benefits should be paid a compensatory awar...

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess “leverage” in that parties take on short OTC positions that lead to levels of default risk that are higher than Pareto-efficient ones. In particular, OTC markets feature a c...

This paper analyzes the joint design of fiscal and cap-and-trade instruments in climate policies under uncertainty. Whether the optimal mechanism is a mixed policy (with some firms subject to a tax and others to a cap-and-trade) or a uniform one (with all firms subject to the same instrument) depends on parameters reflecting preferences, production, and, most importantly, the stochastic structu...

We analyze a situation where individuals and coalitions can obtain effective property rights over a resource by means of an exclusion contest. Coalitions face a trade-off when they decide to incorporate new members: Big groups control the resource more likely but individual property rights are more diluted. Under cooperative explotation of the resource the grand coalition is the efficient parti...

Using techniques from evolutionary game theory, we analyze potential games with continuous player sets, a class of games which includes a general model of network congestion as a special case. We concisely characterize both the complete set of Nash equilibria and the set of equilibria which are robust against small disturbances of aggregate behavior. We provide a strong evolutionary justificati...

Comparison of the oscillatory behavior of a gravitating infinite Nambu-Goto string and a test string is investigated using the general relativistic gauge invariant perturbation technique with two infinitesimal parameters on a flat spacetime background. Due to the existence of the pp-wave exact solution, we see that the conclusion that the dynamical degree of freedom of an infinite Nambu-Goto st...

Attempting to take advantage of recent displays of preferences for goods with superior levels of environmental performance, many governments and independent organizations have implemented a variety of programs designed to disseminate information on the environmental performance of companies or products. The most popular type of program is known as an eco-labeling or environmental certification ...