V. Bhaskar

Oligopsony and monopsonistic competition in labor markets

We argue that models of oligopsony or monopsonistic competition provide insights and explanation for many empirical phenomena in labor markets. Using a simple model with job differentiation and preference heterogeneity, we illustrate how such models can be employed to explain the existence of wage dispersion, the persistence of labor market discrimination, market failures in the provision of training and the anomalous employment effects of minimum wages.

Informational Constraints and the Overlapping Generations Model : Folk and Anti-Folk Theorems

This paper analyses the sustainability of inter-generational transfers in Samuelsons consumption-loan model when agents are imperfectly informed about past events. We find that with mild informational constraints, transfers cannot be supported by pure-strategy equilibria. Mixed strategies allow transfers to be sustained even if agents have little information, so that a version of the Folk theorem holds. However, these equilibria are not robust. If each agents utility function is subjected to a small random perturbation as in Harsanyi (1973), these mixed strategy equilibria unravel, and only the zero-transfer allocation survives as the unique rationalizable outcome. This result is an example of mixed strategy equilibrium of an extensive form game which cannot be purified.

Marriage as a Rat Race: Noisy Pre-Marital Investments with Assortative Matching

We study the efficiency of premarital investments when parents care about their child’s marriage prospects, in a large frictionless marriage market with nontransferable utility. Stochastic returns to investment ensure that equilibrium is unique. We find that, generically, investments exceed the Pareto-efficient level, unless the sexes are symmetric in all respects. Girls will invest more than boys if their quality shocks are less variable than shocks for boys or if they are the abundant sex. The unique equilibrium in our continuum agent model is the limit of the equilibria of finite models, as the number of agents tends to infinity.

Egalitarianism and Efficiency in Repeated Symmetric Games

Abstract We analyze the symmetric equilibria of repeated symmetric games where there is a conflict of interests over equilibria—the battle-of-the-sexes or the hawk–dove game are key examples. If one restricts attention to symmetric equilibria, efficient equilibria must be egalitarian. For finitely repeated games, and generic discount factors, there is a unique outcome path which ensures efficiency within the class of symmetric equilibria. This is also true for the infinitely repeated games if the players are sufficiently impatient. Journal of Economic Literature Classification Numbers: C72, C73.

Asynchronous Choice and Markov Equilibria

We provide a theoretical foundation for the use of Markov strategies in repeated games with asynchronous moves. If admissible strategies must display finite (arbitrarily long) memory and each player incurs a “complexity cost” which depends on the memory length required by her strategy, then every Nash equilibrium must be in Markovian strategies. If, in addition, admissible strategies have uniformly bounded memory, every rationalizable strategy must be Markovian. These results are robust to considerations of perfection and also yield interesting implications for equilibrium selection in simple contexts.

Can Observers Predict Trustworthiness

We investigate whether experimental subjects can predict behavior in a prisoners dilemma played on a TV show. Subjects report probabilistic beliefs that a player cooperates, before and after the players communicate. Subjects correctly predict that women and players who make a voluntary promise are more likely to cooperate. They are able to distinguish truth from lies when a player is asked about her intentions by the host. Subjects are to some extent able to predict behavior; their beliefs are 7~percentage points higher for cooperators than for defectors. We also study their Bayesian updating. Beliefs do not satisfy the martingale property and display mean reversion.

Beauty and the sources of discrimination

We analyze discrimination against less attractive people on a TV game show with high stakes. The game has a rich structure that allows us to disentangle the relationship between attractiveness and the determinants of a players earnings. Unattractive players perform no worse than attractive ones, and are equally cooperative in the prisoners dilemma stage of the game. Nevertheless, they are substantially more likely to be eliminated by their peers, even though this is costly. We investigate third party perceptions of discrimination by asking subjects to predict elimination decisions. Subjects implicitly assign a role for attractiveness but underestimate its magnitude.

Partial Privatization and Yardstick Competition: Evidence from Employment Dynamics in Bangladesh

We analyse the dynamics of public and private sector employment in Bangladesh, using the natural experiment provided by the partial privatization of the jute industry. The public sector had substantial excess employment of workers initially, but this excess was substantially eroded by the end of the period we studied. The extent of erosion differs between white-collar and manual worker categories, with excess employment persisting only in the former. Our findings suggest that partial privatization increases the efficacy of yardstick competition in the regulation of public firms, because heterogeneous ownership undermines collusion between public sector managers, and also makes excess employment more transparent to the general public.

Quick responses in duopoly ensure monopoly pricing

If firms in a homogeneous duopoly game can respond with negligible delay to their rivals price changes, equilibrium is unique at the monopoly price.

Is Perfect Price Discrimination Really Efficient? An Analysis of Free Entry Equilibria

We analyze models of product differentiation with perfect price discrimination and free entry. Although perfect price discrimination ensures efficient output decisions given product characteristics, coordination failures may prevent efficiency in the choice of product characteristics. More fundamentally, even if we have efficient product choices for a fixed number of firms, one always has excessive entry in free entry equilibrium. Our results apply to a large class of models of product differentiation including location models as well as representative consumer models of the demand for variety. These results also apply to models of common agency or lobbying with free entry and imply that one has excessive entry into the ranks of lobbyists.