Nejat Anbarci

Comparing Bargaining Solutions in the Shadow of Conflict: How Norms against Threats Can Have Real Effects

In many economic environments agents make costly and irreversible investments that may enhance their respective threat payoffs but also shrink the utility possibilities set. In such settings, with variable threats and a variable utility possibilities set, it becomes possible to rank different bargaining solutions in terms of efficiency. We compare bargaining solutions within a class in which the influence of the threat point on the bargaining outcome varies across solutions.

Traffic Fatalities and Public Sector Corruption

Traffic accidents result in 1 million deaths annually worldwide, though the burden is disproportionately felt in poorer countries. Typically, fatality rates from disease and accidents fall as countries develop. Traffic deaths, however, regularly increase with income, at least up to a threshold level, before declining. While we confirm this by analyzing 1,356 country-year observations between 1982 and 2000, our purpose is to consider the role played by public sector corruption in determining traffic fatalities. We find that such corruption, independent of income, plays a significant role in the epidemics of traffic fatalities that are common in relatively poor countries.

Noncooperative Foundations of the Area Monotonic Solution

Given a finite set of alternatives, players alternate making offers. Player 1 offers some alternative that 2 can accept or veto. If 2 accepts, it is enforced, and the game ends. Otherwise, 2 makes a counteroffer among the remaining alternatives, and so on. If all alternatives are vetoed, a disagreement alternative is enforced. First, we characterize the unique outcome of any subgame perfect equilibrium of this game. Then, we show that this outcome converges to the Area Monotonie Solution if the alternatives are uniformly distributed over the bargaining set, and as the number of alternatives tends to infinity.

The area monotonic solution to the cooperative bargaining problem

Abstract A new solution is proposed to Nashs cooperative bargaining problem. Nashs independence of irrelevant alternatives axiom is replaced with a new axiom, area monotonicity (AM). The unique solution satisfying AM, symmetry, weak Pareto optimality, and independence of equivalent utility representations is characterized. It is the utility allocation at the intersection of the Pareto frontier and the line which departs from the disagreement point and divides the utility possibility set in half. Alternatively, the solution is characterized by strong Pareto optimality and AM.

Inter-firm complementarities in R&D: a re-examination of the relative performance of joint ventures

We compare duopoly outcomes between two alternative modes of research and development (RD the reverse holds for high spillovers. When RJVs yield higher technological improvement, they also yield higher industry profit and social welfare.

The Ill Effects of Public Sector Corruption in the Water and Sanitation Sector

In general, given a particular set of institutions, the greater a county’s per capita income, the more extensive will be its provision of goods and services that require concerted public action. We contend that one of the most important aspects of institutions in this regard is public sector corruption. We test this contention by analyzing 85 countries observed in 1990, 1995, 2000, and 2004—the only years for which data on improved drinking water and adequate sanitation are available. The models point to statistically significant, negative relations between corruption and access to both improved drinking water and adequate sanitation. (JEL D31, H41, P16)

Traffic Fatalities: Does Income Inequality Create an Externality?

Responsible for 20 million severe injuries and/or deaths annually, few epidemics receive less attention than traffic accidents. Going beyond confirming an inverted U-shaped relationship between mean income and fatalities, we show theoretically that income inequality can positively affect fatalities in two ways. Each operates through heterogeneity between road users, and while the direct effect can be expected to evaporate with rising income, the indirect effect may prove to be an externality in that the relationship remains regardless of the level of income. Our model is supported by evidence from 79 countries between 1970 and 2000.

Robustness of intermediate agreements and bargaining solutions

Most real-life bargaining is resolved gradually. During this process parties reach intermediate agreements. These intermediate agreements serve as disagreement points in subsequent rounds. We identify robustness criteria which are satisfied by three prominent bargaining solutions, the Nash, Proportional (and as a special case to the Egalitarian solution) and Discrete Raiffa solutions. We show that the “robustness of intermediate agreements” plus additional well-known and plausible axioms, provide novel axiomatizations of the above-mentioned solutions. Hence, we provide a unified framework for comparing these solutionsʼ bargaining theories.

Nash demand game and the Kalai–Smorodinsky solution

We introduce two new variations on the Nash demand game. One, like all known Nash-like demand games so far, has the Nash solution outcome as its equilibrium outcome. In the other, the range of solutions depends on an exogenous breakdown probability; surprisingly, the Kalai-Smorodinsky outcome proves to be the most robust equilibrium outcome. While the Kalai- Smorodinsky solution always finishes on top, there is no possible general ranking among the remaining solution concepts considered; in fact, the rest of the solution concepts take their turns at the bottom at various bargaining problems, depending on the specifics of the bargaining setup.

Divide-the-Dollar Game Revisited

In the Divide-the-Dollar (DD) game, two players simultaneously make demands to divide a dollar. Each player receives his demand if the sum of the demands does not exceed one, a payoff of zero otherwise. Note that, in the latter case, both parties are punished severely. A major setback of DD is that each division of the dollar is a Nash equilibrium outcome. Observe that, when the sum of the two demands x and y exceeds one, it is as if Player 1s demand x (or his offer (1−x) to Player 2) suggests that Player 2 agrees to λx < 1 times his demand y so that Player 1s demand and Player 2s modified demand add up to exactly one; similarly, Player 2s demand y (or his offer (1−y) to Player 1) suggests that Player 1 agrees to λyx so that λyx+y = 1. Considering this fact, we change DDs payoff assignment rule when the sum of the demands exceeds one; here in this case, each players payoff becomes his demand times his λ; i.e., each player has to make the sacrifice that he asks his opponent to make. We show that this modified version of DD has an iterated strict dominant strategy equilibrium in which each player makes the egalitarian demand 1/2. We also provide a natural N-person generalization of this procedure.