Kunal Sengupta

A Noncooperative Theory of Coalitional Bargaining

We explore a sequential offers model of n-person coalitional bargaining with transferable utility and with time discounting. Our focus is on the efficiency properties of stationary equilibria of strictly superadditive games, when the discount factor δ is sufficiently large; we do, however, consider examples of other games where subgame perfectness alone is employed. It is shown that delay and the formation of inefficient subcoalitions can occur in equilibrium, the latter for some or all orders of proposer. However, efficient stationary equilibrium payoffs converge to a point in the core, as δ → 1. Strict convexity is a sufficient condition for there to exist an efficient stationary equilibrium payoff vector for sufficiently high δ. This vector converges as δ → 1 to the egalitarian allocation of Dutta and Ray (1989).

Sunk Investment, Bargaining and Choice of Capital Structure

This paper shows how a firm might optimally choose debt to affect the outcome of bilateral bargaining with workers or other input suppliers. It is shown that debt may alleviate the well-known underinvestment problem associated. with the inability to write precommitment contracts. Also, in such circumstances, debt could be Pareto improving over complete equity financing. The relationship between the optimal level of debt and asset specificity of investmen t and bargaining power of the firm vis-a-vis the workers is explored. The Williamson conjecture that higher asset specificity will lead to less debt is shown not to be valid in general. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

A consistent bargaining set

Abstract Both the core and the bargaining set fail to satisfy a natural requirement of consistency. In excluding imputations to which there exist objections, the core does not assess the “credibility” of such objections. The bargaining set goes a step further. Only objections which have no counterobjections are considered justified. However, the credibility of counterobjections is not similarly assessed. We formulate a notion of a consistent bargaining set in which each objection in a “chain” of objections is tested in precisely the same way as its predecessor. Various properties of the consistent bargaining set are also analyzed.

Limited liability, moral hazard and share tenancy

Abstract This paper contributes to the literature on share tenancy by reexamining a framework developed in Basu (1992). It is shown that limited liability and moral hazard in effort provides a richer theory of share contracts when the tenant also has discretion in the choice of projects.

Revealed Preference Axioms for Rational Choice

This paper provides a simple axiomatic foundation of rational choice when the indifference relation is not necessarily transitive. Utilizing a notion of revealed preference relation, which says that an alternative x is revealed preferred to an alternative y whenever x is chosen while y is available, this paper establishes that the requirement that a rejected alternative of a set A can never be revealed preferred to some chosen element of A (resp. some element of A) is equivalent to quasi-transitive (resp. acyclic) rationalization; i.e., is a necessary and sufficient condition for the existence of a strict partial order (resp. a suborder); while the requirement that at least one of the chosen elements of a set A is always strictly revealed preferred to every rejected alternative of A is equivalent to pseudotransitive rationalization i.e., is a necessary and sufficient condition for the existence of an interval order. Copyright 1991 by Royal Economic Society.

Characterization of Generalized Weak Orders and Revealed Preference

SummaryThis short paper provides an alternative framework to axiomatize various binary preference relations such as semiorder, weak semiorder etc. A set of simple axioms is presented in terms of revealed-preferred and revealed-inferior alternatives which makes the connection between various binary preference relations transparent; and every single axiom is necessary and sufficient for the existence of a binary preference relation of a specified type.

A Hotelling-Downs model of electoral competition with the option to quit

We study a variant of the multi-candidate Hotelling-Downs model that recognizes that politicians, even after declaring candidacy, have the option of withdrawing from the electoral contest before the election date and saving the cost of continuing campaign. We find that this natural variant significantly alters equilibrium predictions. We give conditions for the existence of an equilibrium for an arbitrary finite number of candidates and an arbitrary distribution of single-peaked preferences of voters. We also provide a partial characterization of the equilibrium outcomes that addresses whether policy convergence can be a feature of equilibrium outcomes when more than two candidates enter the electoral contest.

Optimal regulation of MNEs and government revenues

The paper analyses the optimal regulation of multinational enterprises (MNEs) by a host government interested in maximizing tax revenues, when the MNE has private information about its benefits of controlling the enterprise. It is shown that the optimal mechanism involves restricting the MNEs ownership of the enterprise, and setting a ceiling on the transfer price of an input that the MNE provides that is above the known production cost of the input. For low realizations of the benefits of control, the MNE transfers control to a domestic partner, while for high realizations, it retains control.

Rational Choice and von Neumann– Morgenstern’s Stable Set: The Case of Path-dependent Procedures

Describing a procedure in which choice proceeds in a sequence, we propose two alternative ways of resolving the decision problem whenever the outcome is sequence sensitive. One way yields a rationalizable choice set, and the other way produces a weakly rationalizable choice set that is equivalent to von Neumann–Morgenstern’s stable set. It is shown that for quasi-transitive rationalization, the maximal set must coincide with its stable set.

Intransitive indifference and rationalizability of choice functions on general domains

Abstract This paper examines various intransitive preferences in terms of a behavior of a chooser in the general-domain framework, where a choice function may not be defined over all possible subsets of the fixed universe of alternatives. In characterizing the quasi-transitive rationalization of a choice function, the results of this paper show the trade off between the assumption on the domain of a choice function and the requirement that the choice set is single-valued or multi-valued.