Anke Gerber

Providing public goods in the absence of strong institutions

This paper proposes a simple two-stage mechanism to establish positive contributions to public goods in the absence of powerful institutions to provide the public good and to sanction free-riders. In this mechanism players commit to the public good by paying a deposit prior to the contribution stage. If there is universal commitment, deposits are immediately refunded whenever a player contributes her specified share to the public good. If there is no universal commitment, all deposits are refunded and the standard game is played. For suitable deposits, prior commitment and full ex post contributions are supported as a strict subgame perfect Nash equilibrium for the resulting game. As the mechanism obviates the need for any ex post prosecution of free-riders, it is particularly suited for situations where players do not submit to a common authority as in the case of international agreements.

On coalition formation: durable coalition structures

Abstract We define a solution to the problem of coalition formation that applies to purely hedonic games. Coalition structures satisfying our requirements are called durable, and we interpret them as much more likely to last than those coalition structures not satisfying the requirements, which we call transient. Durability results from a combination of foresight and extreme risk aversion on the part of agents, when considering to join others to disrupt an existing structure in search of higher gains. Agents’ calculations are also constrained to satisfy a strong consistency requirement, which is reflected in the recursive structure of our definition. We prove that durable coalition structures always exist, and we provide examples of hedonic games where our solutions apply nicely.

Bargaining solutions at work: Qualitative differences in policy implications

Abstract Traditional bargaining theory characterizes solutions to bargaining problems by their properties in the utility space. In applications, however, one is usually interested in the implications of the conflict resolution within the economic environment, where the properties of axiomatic bargaining solutions are less well understood. By means of a standard bargaining model for the labor market we demonstrate that economic policy implications may be very sensitive to the choice of the bargaining solution. More specifically, the induced employment effects of a change in the reservation wage under the Nash-solution may differ substantially from those under the Kalai–Smorodinsky, the egalitarian, or the equal-loss solution. Hence, the choice of the bargaining solution is not innocuous, even if one is only interested in qualitative policy conclusions.

Sequential Voting and Agenda Manipulation

We study the possibilities for agenda manipulation under strategic voting for two prominent sequential voting procedures, the amendment and the successive procedure. We show that a well-known result for tournaments, namely that the successive procedure is (weakly) more manipulable than the amendment procedure at any given preference profile, extends to arbitrary majority quotas. Moreover, our characterizations of the attainable outcomes for arbitrary quotas allow us to compare the possibilities for manipulation across different quotas. It turns out that the simple majority quota maximizes the domain of preference profiles for which neither procedure is manipulable, but at the same time neither the simple majority quota nor any other quota uniformly minimize the scope of manipulation, once this becomes possible. Hence, quite surprisingly, simple majority voting is not necessarily the optimal choice of a society that is concerned about agenda manipulation.

Strategic Choices for Redistribution and the Veil of Ignorance: Theory and Experimental Evidence

We provide experimental evidence on the emergence of redistributive societies. Individuals first vote on redistribution by feet and then learn their productivity and invest. We vary the individuals’ information about their productivities at the time when they choose a distribution rule and find that there is more redistribution behind a veil of ignorance than under full information. However, the scope of redistribution is less sensitive towards the degree of uncertainty than predicted. For all degrees of uncertainty, we find a coexistence of libertarianism and redistribution as well as incomplete sorting, so that heterogeneous redistribution communities turn out to be sustainable.

Reference functions and solutions to bargaining problems with and without claims

Following an idea due to Thomson (Journal of Economic Theory, 1981, 25: 431–441) we examine the role of reference functions in the axiomatic approach to the solution of bargaining problems with and without claims. A reference function is a means of summarizing essential features of a bargaining problem. Axioms like Independence of Irrelevant Alternatives and Monotonicity are then reformulated with respect to this reference function. Under some weak conditions on the reference function we obtain characterizations of different parametrized classes of solutions. We present several examples of reference functions and thereby recover many well-known solutions to bargaining problems with and without claims.

Weighted Temporal Utility

We propose a utility representation for preferences over risky timed outcomes, the weighted temporal utility model. It separates subjective evaluations of outcomes from attitudes towards psychological distance induced by risks and delays. Subjective evaluations of outcomes may depend on the time of receipt. A natural special case of our model arises when decision makers evaluate an outcome according to the extra utility it generates on top of expected baseline consumption, which can be interpreted as the status quo. Thus, deviations from stationarity can be driven by expected changes in baseline consumption, and need not be irrational. Moreover, a decision maker with a weighted temporal utility function can have time-consistent yet non-stationary preferences or stationary yet time-inconsistent preferences. We provide a characterization of our model and propose a non-parametric approach to elicit a weighted temporal utility function.

Sequential Voting and Agenda Manipulation: The Case of Forward Looking Tie-Breaking

We provide characterizations of the set of outcomes that can be achieved by agenda manipulation for two prominent sequential voting procedures, the amendment and the successive procedure. Tournaments and super-majority voting with arbitrary quota q are special cases of the general sequential voting games we consider. We show that when using the same quota, both procedures are non-manipulable on the same set of preference profiles, and that the size of this set is maximized under simple majority. However, if the set of attainable outcomes is not single-valued, then the successive procedure is more vulnerable towards manipulation than the amendment procedure. We also show that there exists no quota which uniformly minimizes the scope of manipulation, once this becomes possible.

Anomalies in Intertemporal Choice

This paper argues that observations of non-stationary choice behavior need not necessarily imply specific properties of the individual’s discount function. As we show, the observed “anomalies” in intertemporal choice can alternatively be explained by an individual’s perception of the risk that is involved whenever an outcome is to be received in the future. This risk may concern the size of the actual outcome or the endowment consumption stream to which the outcome is added. Both types of uncertainty naturally appear in the context of intertemporal choice and both are difficult to control in experiments. We show how relative degrees of changes in risk over time can predict choices.

Finite-Order Beliefs and Welfare-Enhancing Instruments in the Centipede Game

This paper investigates the effectiveness of two instruments designed to defer termination in the centipede game: an insurance against termination by the opponent, and an option to offer the opponent a bonus for not terminating the game. The rational prediction in both cases is passing until close to the end. Empirically, however, only the bonus option is used by the subjects. The results indicate that subjects readily understand the strategic effect of the bonus, which, once offered, renders passing until close to the end the strictly dominant strategy for both players. Yet, they fail to realise the slightly more involved strategic signal entailed in the insurance, namely that passing until close to the end is a strictly dominant strategy for an insured player. In order to further investigate this effect, we propose a simple behavioural model based on level-k thinking and show that it is largely consistent with the data.