Hulya Eraslan

Uniqueness of Stationary Equilibrium Payoffs in the Baron–Ferejohn Model

An artificial substrate consisting of a 2-alkanoylamino-4-nitrophenyl phosphorylcholine hydroxide is used for determining the sphingomyelinase activity in an extract of human cells or tissues by incubating the substrate together with the extract, whereby sphingomyelinase-catalyzed hydrolysis of the substrate into the corresponding 2-alkanoylamino-4-nitrophenol and phosphorylcholine takes place in an amount proportional to the sphingomyelinase activity in the extract. Alkalinization of the 2-alkanoylamino-4-nitrophenol thereby produced to convert it into the alkali salt results in the development of a bright yellow color whose intensity is proportional to the amount of the substrate that has been hydrolyzed. Measurement of the intensity of the yellow color, for example, by means of a simple colorimeter or photometer, provides an accurate indication of the sphingomyelinase activity in the extract.

Majority Rule in a Stochastic Model of Bargaining

In this paper we consider multilateral stochastic bargaining models with general agreement rules. For n-player games where in each period a player is randomly selected to allocate a stochastic level of surplus and q (less than or equal to n) players have to agree on a proposal to induce its acceptance, we characterize the set of stationary subgame perfect equilibrium payoffs and establish their existence. We show that for agreement rules other than the unanimity rule, the equilibrium payoffs need not be unique. Furthermore, even when the equilibrium is unique, it need not be efficient.

Mandatory Versus Discretionary Spending: The Status Quo Effect

Do mandatory spending programs such as Medicare improve efficiency? We analyze a model with two parties allocating a fixed budget to a public good and private transfers each period over an infinite horizon. We compare two institutions that differ in whether public good spending is discretionary or mandatory. We model mandatory spending as an endogenous status quo since it is enacted by law and remains in effect until changed. Mandatory programs result in higher public good spending; furthermore, they ex ante Pareto dominate discretionary programs when parties are patient, persistence of power is low, and polarization is low.

Uniqueness of Stationary Equilibrium Payoffs in Coalitional Bargaining

We study a model of sequential bargaining in which, in each period before an agreement is reached, the proposerʼs identity is randomly determined, the proposer suggests a division of a pie of size one, each other agent either approves or rejects the proposal, and the proposal is implemented if the set of approving agents is a winning coalition for the proposer. The theory of the fixed point index is used to show that stationary equilibrium expected payoffs of this coalitional bargaining game are unique. This generalizes Eraslan [34] insofar as: (a) there are no restrictions on the structure of sets of winning coalitions; (b) different proposers may have different sets of winning coalitions; (c) there may be a positive probability that no proposer is selected.

Coalition Governments and Comparative Constitutional Design

In this paper we present a structural approach to the study of government formation in multi party parliamentary democracies. The approach is based on the estimation of a stochastic bargaining model which we use to investigate the effects of specific institutional features of parliamentary democracy on the formation and dissolution of coalition governments. We illustrate our methodology by presenting the results of two (counterfactual) experiments of comparative constitutional design.

Bicameralism and Government Formation

In this paper we present a structural approach to the study of government formation in multi-party parliamentary democracies. The approach is based on the estimation of a stochastic bargaining model which we use to investigate the effects of specific institutional features of parliamentary democracy on the formation and stability of coalition governments. We then apply our methodology to estimate the effects of governmental bicameralism. Our main findings are that eliminating bicameralism does not affect government durability, but does have a significant effect on the composition of governments leading to smaller coalitions. These results are due to an equilibrium replacement effect: removing bicameralism affects the relative durability of coalitions of different sizes which in turn induces changes in the coalitions that are chosen in equilibrium.

Corporate Bankruptcy Reorganizations: Estimates from a Bargaining Model

This article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in Chapter 11 negotiations. I estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set. I find that the liquidation values are higher when the industry conditions are more favorable, and the real interest rates are higher. I use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations.

Information-based trade

We study the possibility of trade for purely informational reasons. We depart from previous analyses (e.g. Grossman and Stiglitz (1980) [22] and Milgrom and Stokey (1982) [32]) by allowing the final payoff of the asset being traded to depend on an action taken by its eventual owner. We characterize conditions under which equilibria with trade exist.

The Effects of Constitutions on Coalition Governments in Parliamentary Democracies

In this article we present an overview of our recent research on the effects of constitutions on coalition governments in parliamentary democracies. Our approach is based on the solution and estimation of a multilateral bargaining model which we use to investigate the consequences of constitutional features of parliamentary democracy for the formation and stability of coalition governments.

Efficiency of flexible budgetary institutions

Which budgetary institutions result in efficient provision of public goods? We analyze a model with two parties bargaining over the allocation to a public good each period. Parties place different values on the public good, and these values may change over time. We focus on budgetary institutions that determine the rules governing feasible allocations to mandatory and discretionary spending programs. Mandatory spending is enacted by law and remains in effect until changed, and thus induces an endogenous status quo, whereas discretionary spending is a periodic appropriation that is not allocated if no new agreement is reached. We show that discretionary only and mandatory only institutions typically lead to dynamic inefficiency and that mandatory only institutions can even lead to static inefficiency. By introducing appropriate flexibility in mandatory programs, we obtain static and dynamic efficiency. An endogenous choice of mandatory and discretionary programs, sunset provisions and state-contingent mandatory programs can provide this flexibility in increasingly complex environments.