We propose a definition of egalitarian equivalence that extends Pazner and Schmeidler’s (1978) concept to environments with incomplete information. If every feasible allocation rule can be implemented by an incentive compatible mechanism (as, for instance, in the case of non-exclusive information), then interim egalitarian equivalence and interim incentive efficiency remain compatible, as they ...

This paper examines whether the average level of human capital in a region affects the earnings of an individual residing in that region in a manner that is external to the individual’s own human capital. I find little evidence of an external effect of human capital, which suggests that human capital spillovers of the form postulated by the new growth literature are unlikely to matter much in p...

In two-sided markets, two groups of agents interact through platforms. Because agents’ decision to join a platform is affected by the presence on other side, their interactions create indirect network externalities and make platforms’ strategies different from those firms in one-sided markets. this paper, I use structural model show that platforms may take loss one side market profit mergers be...

The paper starts by proposing an explicit and intuitive bargaining process to analyze coalitional externalities, which we then use to generate a value allocation extending the Shapley value to partition function from games, the Rational Belief Shapley value (RBS). We investigate the strategic foundation of the value by constructing a mechanism implementing it. It extends existing models of mult...

Regulatory agencies frequently present violators with warnings, not pursuing prosecution if the violation ceases upon receipt of the warning. We show how such warnings may help regulators to keep control: Prosecution is costly for the regulator, and insufficient prosecution efforts yield low penalties. Thus, with a limited regulatory budget, threats of harsh sanctions are credible only if the n...

The existence of a pure-strategy subgame-perfect equilibrium in qualities and prices is investigated in a duopoly model of vertical differentiation where quality improvements require a quadratic variable cost and network externalities operate. We show that there exists a parameter region where the incentive to predate at the quality stage prevents firms from reaching a pure-strategy non-coopera...

Contrary to communitarian market criticism institutions relying on money and bidding can strengthen faculties of ‘self-governance’. Securing procedurally egalitarian bidding on the basis of declared monetary evaluations guarantees that all realized changes of a status quo are in an ‘objective’ (pecuniary) sense equally advantageous for all members of the community. We show how to use this idea ...

In the current age of trade and financial openness, local economies in developing countries are becoming increasingly exposed to external investments. The objective of the proposed two-sector model with environmental externalities is to provide an insight into the interaction between external investors and local communities with a focus upon the different strategies and income sources available...

We study a firm in which the marginal productivity of agents’ effort increases with the effort of others. We show that the presence of an agent who overestimates his marginal productivity may make all agents better off, including the biased agent himself. This Pareto improvement is obtained even when compensation contracts are set endogenously to maximize firm value. We show that the presence o...

This article studies reproductive externalities within rural communities in poor countries. It is shown that such externalities create a link between household poverty, household size, and the local natural-resource base, each of which is viewed as being endogenous. The models presented here o!er an explanation for the fact that in recent decades large groups of people in various parts of the w...