József Sákovics

Collective Versus Individual Sale of Television Rights in League Sports

In many countries, the collective sale of TV rights by sports leagues has been challenged by the antitrust authorities.In several cases, however, leagues won in court, on the ground that sport cannot be considered a standard good.In this paper, we investigate the conditions under which the sale of TV rights collectively by sports leagues, rather than individually by teams, is preferred from a social welfare viewpoint.We find that collective sale is socially preferable when leagues are small, relatively homogeneous in terms of clout and where teams get little performance-related revenues.

Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price

We extend the standard analysis of decentralized markets to allow for the possibility that traders interact simultaneously with more than one trader on the opposite side of the market. In contrast with the literature, we reconcile the Walrasian equilibrium with the outcome of decentralized strategic trade: we show that there exist generic matching technologies that determine local market conditions such that, as market frictions vanish, the equilibrium price is the one that would result in the static Walrasian market. Our analysis highlights the importance of local market conditions for the determination of equilibrium prices.

Speculating against an overconfident market

We distinguish two components of self-confidence in a financial market: private confidence measures the self-confidence level of speculators, while public confidence measures the confidence level they attribute to their competitors. We then study how independent changes in these components affect the equilibrium trading strategies. We conduct the analysis in a financial market with imperfect competition where investors submit limit orders We calculate the unique linear symmetric equilibrium as well as the major indicators of the market. In addition to providing a partial explanation for the excess volatility of asset prices as well as for trading volume unexplained by the arrival of new information, our model highlights the differences between the effects of public versus private confidence.

Hold-up problem

Hold-up arises when part of the return on an agents relationship-specific investments is ex post expropriable by his trading partner. The hold-up problem has played an important role as a foundation of modern contract and organization theory, as the associated inefficiencies have justified many prominent organizational and contractual practices. We formally describe the main inefficiency hypothesis and sketch out the remedies suggested, as well as the more recent re-examination of the relevance of these theories.

Olson vs. Coase: Coalitional worth in conflict

We analyze a model of conflict with endogenous choice of effort, where subsets of the contenders may force the resolution to be sequential: First the alliance fights it out with the rest and – in case they win – later they fight it out among themselves. For three-player games, we find that it will not be in the interest of any two of them to form an alliance. We obtain this result under two different scenarios: equidistant preferences with varying relative strengths, and varying vicinity of preferences with equal distribution of power. We conclude that the commonly made assumption of super-additive coalitional worth is suspect.

Delegated bargaining and renegotiation.

We examine the commitment effect of delegated bargaining when the delegation contract is renegotiable. We consider a seller who can either bargain face-to-face with a prospective buyer or delegate bargaining to an intermediary. The intermediary is able to interrupt negotiating with the buyer to renegotiate the delegation contract. We show that the time cost of renegotiation prevents a full elimination of the commitment effect of delegation. Indeed, there are always gains from delegation when the players are sufficiently patient. An extension to a search market environment shows that the gains from delegation are negatively related to the efficiency of search.

Mediation: incomplete information bargaining with filtered communication

Abstract We analyze a continuous-time bilateral double auction in the presence of two-sided incomplete information and a smallest money unit. A distinguishing feature of our model is that intermediate concessions are not observable by the adversary: they are only communicated to a passive auctioneer. An alternative interpretation is that of mediated bargaining. Perfect Bayesian Equilibria are characterized. We show that an equilibrium using only the extreme agreements always exists and display the necessary and sufficient condition for the existence of equilibra which yield intermediate agreements. For the symmetric case with uniform-type distribution we numerically calculate the equilibria. We find that the equilibrium which does not use compromise agreements is the least efficient, however the social welfare of the rest of the equilibria is decreasing in the number of compromise agreements used.

Endogenous bargaining power

We present a novel approach to N-person bargaining, based on the idea that the agreement reached in a negotiation is determined by how the direct conflict resulting from disagreement would be resolved. Our basic building block is the disagreement function, which maps each set of feasible outcomes into a disagreement point. Using this function and a weak axiom based on individual rationality we reach a unique solution: the agreement in the shadow of conflict, ASC. This agreement may be construed as the limit of a sequence of partial agreements, each of which is reached as a function of the parties’ relative power. We examine the connection between ASC and asymmetric Nash solutions. We show the connection between the power of the parties embodied in the ASC solution and the bias in the SWF that would select ASC as an asymmetric Nash solution.

GAMES OF INCOMPLETE INFORMATION WITHOUT COMMON KNOWLEDGE PRIORS

We relax the assumption that priors are common knowledge, in the standard model of games of incomplete information. We make the realistic assumption that the players are boundedly rational: they base their actions on finite-order belief hierarchies. When the different layers of beliefs are independent of each other, we can retain Harsányis type-space, and we can define straightforward generalizations of Bayesian Nash Equilibrium (BNE) and Rationalizability in our context. Since neither of these concepts is quite satisfactory, we propose a hybrid concept, Mirage Equilibrium, providing us with a practical tool to work with inconsistent belief hierarchies. When the different layers of beliefs are correlated, we must enlarge the type-space to include the parametric beliefs. This presents us with the difficulty of the inherent openness of finite belief subspaces. Appealing to bounded rationality once more, we posit that the players believe that their opponent holds a belief hierarchy one layer shorter than they do and we provide alternative generalizations of BNE and Rationalizability. Finally, we show that, when beliefs are degenerate point beliefs, the definition of Mirage Equilibrium coincides with that of the generalized BNE.

Spillovers of Equal Treatment in Wage Offers

We analyse a labour matching model with wage posting, where re flecting institutional constraints firms cannot differentiate their wage offers within certain subsets of workers. Inter alia, we find that the presence of impersonal wage offers leads to wage compression, which propagates to the wages for high productivity workers who receive personalised offers.