Shlomo Weber

Strong tiebout equilibrium under restricted preferences domain

Abstract We investigate the existence and give a partial characterization of a “strong Tiebout equilibrium” which consists of an endogenously formed partition of the individuals into disjoint jurisdictions with each jurisdiction producing and financing its own public goods, and moreover, there exists no group of individuals who can all benefit by establishing their own community. In particular, no single individual finds it desirable to migrate from his equilibrium jurisdiction. The existence proof makes use of the notion of “consecutive games” which we introduce and show that for such games there always exists a partition with a nonempty core.

Strongly balanced cooperative games

Kaneko/Wooders (1982) derived a list of necessary and sufficient conditions for a partitioning game to have a nonempty core regardless of the payoff functions of its effective coalitions. The main purpose of our paper is to provide a graph-theoretical characterization of this family of games whose associated hypergraphs we callstrongly balanced: we show that the strong balancedness condition is equivalent to thenormality of the hypergraph, which is a type ofcoloring property (Lovasz (1972)). We also study interesting economic examples ofcommunication andassignment games and provide direct proofs that their associated hypergraphs are strongly balanced.

Disenfranchisement in Linguistically Diverse Societies: The Case of the European Union

We consider a linguistically diversified society that has to select a set of languages to be used for official purposes. We examine the notion of language disenfranchisement that is created when one or more languages fail to be included in the list of the official ones, implying that some individuals are denied full access to the documents and to the political process in their native tongues. To derive one of our disenfranchisement indices, we use the Dyen percentage cognate matrix of linguistic distances between languages. We then apply survey and population data on language proficiency in the European Union, calculate disenfranchisement indices and determine optimal sets of official languages that depend on two parameters, societys sensitivity against disenfranchisement and comprehensiveness of the language regime adopted. We also discuss the language situation in the European Union after its enlargement in May 2004.

Limit Qualities and Entry Deterrence

In this article, we investigate how the interplay of competition among incumbents and the magnitude of a potential entrants setup cost determines the configuration of the array of products to be offered in a perfect Nash equilibrium. We show that incumbents can use limit qualities to deter entry. We also demonstrate that rivalry among incumbents may lead to excessive entry deterrence. Our analysis generates predictions about the correlation between the degree of product differentiation and the size of the entrants setup costs.

Vertical product differentiation with entry

Abstract This paper examines the non-cooperative behaviour of established firms that compete in product quality and prices while foreseeing the effects of their rivalry on the decisions made by the later entrants. We prove an existence and uniqueness of the equilibrium and show that the dominant firms engage in maximal product differentiation, i.e., select the highest and lowest technologically feasible qualities. Later entrant, however, always selects an intermediate quality. Moreover, we show that the equilibrium configuration is identical to that generated by perfect foresight equilibrium in a model of sequential entry. Furthermore, the profits earned by each firm are ranked in the same order as the qualities, implifying that the later entrant, despite being the last mover, ends up with higher profits and larger market share than one of the incumbents.

The Stability and Breakup of Nations: A Quantitative Analysis

This paper quantitatively analyzes the stability and breakup of nations. The tradeoff between increasing returns in the provision of public goods and the costs of greater cultural heterogeneity mediates agents’ preferences over different geographical configurations, thus determining the likelihood of secessions and unions. After calibrating the model to Europe, we identify the regions prone to secession and the countries most likely to merge. We then estimate the implied monetary gains from EU membership. As a test of the theory, we show that the model can account for the breakup of Yugoslavia and the dynamics of its disintegration. We find that economic differences between the Yugoslav republics determined the order of disintegration, but cultural differences, though small, were key to the country’s instability. The paper also provides empirical support for the use of genetic distances as a proxy for cultural heterogeneity.

Endogenous trade policy under foreign direct investment

Abstract Using Bernheim and Whinston (1986) common agency game, we endogenize trade policy in a duopoly composed of a domestic firm and a foreign firm, where both firms influence the domestic governments trade policy via their contributions. The foreign firm can jump over trade restrictions by undertaking foreign direct investment (FDI) in the domestic market. The government prefers a voluntary export restraint (VER) to a tariff for two reasons. First, a VER leads to higher contributions from the foreign firm than a tariff. Second, a VER provides a higher level of protection to the domestic firm without generating FDI by the foreign firm.

Bilingualism and Communicative Benefits

We examine patterns of acquiring non-native languages in a model with two languages and two populations with heterogeneous learning skills, where every individual faces a binary choice of learning the foreign language or refraining from doing so. We show that both interior and corner linguistic equilibria can emerge in our framework, and that the fraction of learners of the foreign language is higher in the country with a higher gross cost adjusted communicative benefit. It turns out that this observation is consistent with the data on language proficiency in bilingual countries such as Belgium and Canada. We also point out that linguistic equilibria can exhibit insufficient learning which opens the door for government policies that are beneficial for both populations.

Voluntary Formation of Communities for the Provision of Public Projects

Abstract In this paper we examine a group formation problem, where heterogeneous individuals partitioned themselves into communities, each choosing its own public project from the given space of feasible projects. The model is that of “horizontal product differentiation” where individuals display distinct preferences over the policy space. We consider the notion of “efficient” configuration that minimizes the total project-related costs and aggregate personalized costs of all individuals, and “sustainable” configurations, those are immune against breakaways by subgroups of individuals. Our main result is that, with a unidimensional project space and single-peaked personalized costs, every efficient partition is sustainable.

Multiparty equilibria under proportional representation

The purpose of this article is to define and to prove formally the existence of an equilibrium under proportional representation, as well as partially to characterize it. Specifically, let m be the quota that represents the minimal number of voters necessary for a candidate to be elected. We show that there is a set of elected candidates, each choosing an alternative and each receiving at least m votes, such that no otherpotential candidate, by offering an additional alternative, can secure at least m votesfor himself. We then investigate the structure, at equilibrium, of the set of individuals who support a given candidate, as well as study stability properties of the equilibrium. We also provide necessary and sufficient conditions for the equilibrium to consist of a single candidate, thus generalizing Blacks medianvoter result.