Asher Wolinsky

Bilateral Monopolies and Incentives for Merger

We analyze a duopoly in which firms acquire inputs through bilateral monopoly relations with suppliers. We combine a bargaining model with a duopoly model to examine how input prices and profits are affected by the structures of the upstream and downstream industries, by the demand relations among the final products, and by the nature of bargaining between suppliers and firms. We find that the implications for the incentives for merger are significantly different from what they would be in an environment in which input prices are not determined in bargaining.

Equilibrium in a Market with Sequential Bargaining

This paper considers a market where pairs of agents who are interested in carrying out a transaction are brought together by a stochastic process and, upon meeting, initiate a bargaining process over the terms of the transaction. The basic bargaining problem is treated with the strategic approach. The paper derives the steady state equilibrium agreements; analyzes their dependence on market conditions such as the relative numbers of agents of different types; and discusses their relations with the competitive equilibrium outcome and other results in the search equilibrium literature. THIS PAPER CONSIDERS a market that operates in the following way. Pairs of agents who have mutual interest in carrying out a transaction are brought together by a stochastic process. When two agents meet, they initiate a bargaining process over the terms of the transaction. If two agents reach an agreement a transaction takes place and they leave the market. Of course, the bargaining positions and hence the agreement reached in any particular meeting will be affected by the conditions prevailing in the market. These will include the chances that each of the negotiating parties have of meeting other partners in the event that the agreement in the current negotiations is delayed; also the expected length of time required to achieve an alternative transaction, and the expected behavior of alternative partners. The study of such a market mechanism is of interest for two reasons. Firstly, it captures some realistic aspects of the trade in certain specific markets (e.g., asset markets such as housing and some labor markets). Secondly, it contributes to an understanding of the micro-mechanisms of price formation and their role in shaping market outcomes. In both cases, the features studied are largely neglected in the traditional market equilibrium analyses. The related literature includes the articles by Diamond [4, 5], Diamond and Maskin [6], Mortensen [8, 9], and Zusman and Bell [13]. These articles consider markets of the type described above, in which transactions are concluded at pairwise meetings of agents. The major difference between our work and these articles is in the approach to the basic bargaining problem. In the cited articles it is assumed that a meeting is concluded with an instantaneous agreement which divides the associated surplus in an arbitrary predetermined way (when the surplus is assumed to be divided equally, the division rule is, in fact, Nashs axiomatic bargaining solution). In contrast, the present paper treats the basic bargaining problem with the strategic approach (see Rubinstein [19]) which constitutes an attempt to look into the bargaining black-box. This approach explicitly models the time dimension of the bargaining process, describes in-detail the bargaining procedure, and justifies the agreement as a perfect equilibrium in

Competition in a Market for Informed Experts' Services

Many important services share the feature that the seller is also the expert who determines who much of the service is needed. Even when the outcomes of such service are observable, it might be difficult for the customer to determine what the expert actually did and whether it was needed. This paper presents a simple model of a market of this type and investigates how the information asymmetries characteristic of such markets might affect their organization. The main insights of this paper are as follows. The asymmetry of information special to these markets may induce vertical specialization. When experts are liable to make diagnosis errors, there is a negative search externality present in such markets which tends to raise prices. The search-cum-diagnosis costs and the accuracy of diagnoses play a clear role in the determination of the markets form of organization: when the former are low and the latter is high, the market is more likely to be organized in a way whereby experts provide binding estimates in advance and consumers search; otherwise the more likely organization is that customers are billed after the service was performed and experts are disciplined by reputation.

Decentralized Trading, Strategic Behaviour and the Walrasian Outcome

For a market with a finite number of agents, pairwise matching and bargaining, it is shown that, even when the market is frictionless, the equilibrium is not necessarily competitive. It depends on the amount of information agents use. If their behaviour is conditioned only on the sets of agents present and the time, the competitive solution is the unique subgame perfect equilibrium. If agents have full information and condition their behaviour on some of it, there are also noncompetitive equilibria in which behaviour depends on specific information such as the identity of the trading partner and past events.

Information Revelation in a Market with Pairwise Meetings

A model of a market with pairwise meetings is developed in which traders have asymmetric information about the true state of the world. The focus is on information transmission. The main questions concern the extent to which the information is revealed to uninformed agents through the trade process and, in particular, whether nearly frictionless versions of this market give rise to full revelation results, as obtained by the literature on rational expectations for centralized and competitive markets. It turns out that, in equilibrium, the information is not fully revealed to uninformed agents, even when the market is approximately frictionless. Copyright 1990 by The Econometric Society.

Vote Buying: General Elections

We examine the consequences of vote buying, assuming this practice were allowed and free of stigma. Two parties compete in a binary election and may purchase votes in a sequential bidding game via up‐front binding payments and/or campaign promises (platforms) that are contingent on the outcome of the election. We analyze the role of the parties’ and voters’ preferences in determining the winner and the payments to voters.

Matching, search, and bargaining

Abstract First, the paper incorporates search for alternative opportunities into a model of strategic bargaining. Second, this search and bargaining model is embedded in a market matching model. The solutions are presented in a manner that clarifies the role of the search abilities and the details of the bargaining procedure in the determination of the outcomes. The predictions of the model are contrasted with the related literature. The main accomplishment is the attainment of a manageable model which is still rich enough to grasp important differences between environments which are not captured by the standard matching models.

Eliciting Information From Multiple Experts

A decision maker has to elicit information from informed experts regarding the desirability of a certain action from experts who share similar preferences which differ significantly from those of the decision maker. The question is how much information the decision maker can elicit, despite the difference in interests. The focus here is on ways in which the decision maker can take advantage of the multiplicity of experts. if the decision maker cannot commit to a mechanism and there is no communication among the experts, then no useful information is elicited from the experts in the equilibrium. If the experts can be partitioned into groups such that the members of each group can communicate with each other before they report their information to the decision maker, then more information can be elicited. Obviously, if all experts are allowed to communicate, they can be induced to reveal the relevant information, at least, when their aggregate information makes it desirable for them to undertake the project. The more interesting observation is that, if communication among the experts can be restricted to certain subsets, then even more information can be elicited. Finally, if the decision maker can commit to a mechanism, the information elicited in some cases is sufficient to implement the decision makers best outcome in all but one state. All these observation make straightforward use of the idea that experts choose their report with the understanding that it matters only when they are pivotal.

On the logic of "agreeing to disagree" type results

Abstract The analysis of the “agreeing to disagree” type results is unified by considering functions which assign to each set of states of nature the value “True” or “False”. We identify properties of such functions, being preserved under union, under disjoint union and under difference. The property of being preserved by disjoint union is used to generalize Aumanns, Milgrom and Stokeys and other results. Another proposition refers to all of these properties and implies Samets generalization of Aumanns result to non-partitional information structures. The two generalizations are used for proving some additional “agreeing to disagree” type results.

Learning about variable demand in the long run

This paper studies the problem of a monopoly who is uncertain about the demand it faces and learns about it over time through its pricing experience. The demand curve facing the monopoly is not constant - it changes over time in a Markovian fashion. We characterize the monopolys optimal policy and inquire how it differs from an informed monopolys policy. It turns out that, even when the rate at which the demand varies is negligible, the stationary probability with which the monopolys policy deviates from its informed counterpart is non-negligible, as long as the discount factor is below 1.