In this note, we consider how to allocate property rights to scarce resources when agents have bu... more In this note, we consider how to allocate property rights to scarce resources when agents have budget constraints. Each individual’s wealth level is often observable to the state, although the individual subjective valuation for the resource is hardly known to the state. Under this situation, we mainly compare the efficiency of allocations under two assignment mechanisms; (i) the random assignment with resale and (ii) priority assignment to the poorest with resale. We show that the latter is more efficient than the former. If the mass of goods to be allocated is large enough, the latter can achieve social optimum.
We develop a model of cheap talk with two senders in the presence of network externalities, such ... more We develop a model of cheap talk with two senders in the presence of network externalities, such that their utility functions are increasing in the network size. We first show that, if there is no noise in the private information received by each sender, the full information is revealed by the harshest cross-checking strategies, that is, strategies to punish the senders unless their messages exactly coincide. Then, we prove that, even with a small noise, cross-checking strategies cannot induce full revelation if the utility functions of senders are linear in the network size, whereas full revelation is possible if utility functions are strictly concave. Finally, we show that a CARA (constant absolute risk aversion) utility function of senders is the necessary and sufficient condition for the existence of a fully revealing equilibrium, which is supported by the cross-checking strategy with a positive confidence interval independent of each sender’s private information.
This paper examines the effect of prioritization on competing CPs’ incentives to invest to improv... more This paper examines the effect of prioritization on competing CPs’ incentives to invest to improve their quality of service (QoS). We show that in the single-homing case, no CP makes a positive amount of investment under net neutrality because the effect of reducing delay is shared by both CPs, while the prioritized CP does not invest to improve QoS in the M/M/1 queuing model in which the effect is shared by the unprioritized CP and both CPs invest for QoS in the bandwidth subdivision model in which the effect is not shared. In the multi-homing case, however, CPs invest for QoS even under net neutrality, because CPs do not virtually compete against each other.
In an information society, people acquire information by forming a network or joining in associat... more In an information society, people acquire information by forming a network or joining in associations. A set of associations is called a hypergraph. It is a generalization of a graph (or a network) in graph theory. While a link in a network directly connects only a pair of nodes, an association in a hypergraph connects any number of nodes. While a link in a network can be formed by the joint decision of two players, an association in a hypergraph can be formed by the joint decision of any number of players more than one. Despite many advantages, forming a network has a disadvantage of exponentially increasing connection costs as the number of society members grow. Alternatively, founding associations has an advantage of saving the cost relevant to the size notwithstanding a high initial setup cost. Once it is established, all members who join in the association can share all the information among the members. In this paper, I examine the conditions for efficiency and stability of a network and a hypergraph, and compare the efficiency between a network and a hypergraph. The main difference is that the possibility of overconnectivity does not occur in a hypergraph, while it occurs in a network. The possibility of overconnectivity in network formation is due to the possible coordination failure. Since coordination by more than two people is allowed in a hypergraph, a hypergraph is never overconnected.
In this article, we extend the model of Newman, H., and D. Wright. 1990. “Strict Liability in a P... more In this article, we extend the model of Newman, H., and D. Wright. 1990. “Strict Liability in a Principal-Agent Model.” International Review of Law and Economics 10: 219–231 and strengthens their result that the strict liability can attain social optimum in a principal-agent relation to the situation in which the court appreciates any contractual terms regarding apportionment of damages between an employer and an employee under vicarious liability rule. Our model also generalizes and extends vicarious liability to the negligence-based liability rule.
We formulate a pretrial negotiation problem as an infinite-horizon bargaining model with one-side... more We formulate a pretrial negotiation problem as an infinite-horizon bargaining model with one-sided uncertainty and alternating offers, with the informed party having an outside option. The plaintiff has private information and also has an outside option of "going to court." The defendant moves first. We show that there exists a unique sequential equilibrium. In equilibrium, when the defendant makes an offer, all the plaintiffs whose net recovery from litigation is greater (smaller) than the offer, reject it (accept it) and go to court next period. Hence, along the equilibrium path, the game lasts at most two periods. Copyright 1994 by Oxford University Press.
The authors develop a model of cheap talk with multiple speakers in the presence of network exter... more The authors develop a model of cheap talk with multiple speakers in the presence of network externalities so that their utility functions are increasing in the network size. They first show that if there is no noise in private information that each sender receives, the full information is revealed by the harshest cross-checking strategies, that is, strategies to punish the senders unless their messages exactly coincide. Then, the authors show that with even a small noise cross-checking strategies cannot induce full revelation if utility functions of senders are linear in the network size, while full revelation is possible if utility functions are strictly concave. They find a sufficient condition for the existence of a fully revealing equilibrium which is supported by the cross-checking strategy with a positive confidence interval independent of each sender's private information.
In an influential paper, Choi and Kim (2010) established the invariance result that given a fixed... more In an influential paper, Choi and Kim (2010) established the invariance result that given a fixed network capacity, the average waiting times are identical regardless of net neutrality. In this paper, we argue that their result relies on the assumption that the distribution for content requests per end user is the same regardless of net neutrality. However, if the distribution is determined by the underlying utility maximization problem of users, users expect the contents they request to be transmitted faster if the contents have priority, implying that the request rate for prioritized contents is higher than the request rate for unprioritized contents under net neutrality. If the content request rates per user differ across the two regimes (net neutrality vs. no net neutrality), the invariance result may not be valid. We also discuss social welfare and the investment incentive of the Internet service provider in an extended model with variable content request rates.
This paper considers two alternative procedures for multi-issue bargaining, so-called sectoral ap... more This paper considers two alternative procedures for multi-issue bargaining, so-called sectoral approach (issue-by-issue bargaining) and single-undertaking (single package bargaining), and compares the outcomes under the alternative procedures. It is asserted that if early agreement in an issue is particularly important to a bargaining party so that it makes his overall delay costs too high, he may strictly prefer to bargain the issue separately rather than bargain both issues at once.
In this note, we consider how to allocate property rights to scarce resources when agents have bu... more In this note, we consider how to allocate property rights to scarce resources when agents have budget constraints. Each individual’s wealth level is often observable to the state, although the individual subjective valuation for the resource is hardly known to the state. Under this situation, we mainly compare the efficiency of allocations under two assignment mechanisms; (i) the random assignment with resale and (ii) priority assignment to the poorest with resale. We show that the latter is more efficient than the former. If the mass of goods to be allocated is large enough, the latter can achieve social optimum.
We develop a model of cheap talk with two senders in the presence of network externalities, such ... more We develop a model of cheap talk with two senders in the presence of network externalities, such that their utility functions are increasing in the network size. We first show that, if there is no noise in the private information received by each sender, the full information is revealed by the harshest cross-checking strategies, that is, strategies to punish the senders unless their messages exactly coincide. Then, we prove that, even with a small noise, cross-checking strategies cannot induce full revelation if the utility functions of senders are linear in the network size, whereas full revelation is possible if utility functions are strictly concave. Finally, we show that a CARA (constant absolute risk aversion) utility function of senders is the necessary and sufficient condition for the existence of a fully revealing equilibrium, which is supported by the cross-checking strategy with a positive confidence interval independent of each sender’s private information.
This paper examines the effect of prioritization on competing CPs’ incentives to invest to improv... more This paper examines the effect of prioritization on competing CPs’ incentives to invest to improve their quality of service (QoS). We show that in the single-homing case, no CP makes a positive amount of investment under net neutrality because the effect of reducing delay is shared by both CPs, while the prioritized CP does not invest to improve QoS in the M/M/1 queuing model in which the effect is shared by the unprioritized CP and both CPs invest for QoS in the bandwidth subdivision model in which the effect is not shared. In the multi-homing case, however, CPs invest for QoS even under net neutrality, because CPs do not virtually compete against each other.
In an information society, people acquire information by forming a network or joining in associat... more In an information society, people acquire information by forming a network or joining in associations. A set of associations is called a hypergraph. It is a generalization of a graph (or a network) in graph theory. While a link in a network directly connects only a pair of nodes, an association in a hypergraph connects any number of nodes. While a link in a network can be formed by the joint decision of two players, an association in a hypergraph can be formed by the joint decision of any number of players more than one. Despite many advantages, forming a network has a disadvantage of exponentially increasing connection costs as the number of society members grow. Alternatively, founding associations has an advantage of saving the cost relevant to the size notwithstanding a high initial setup cost. Once it is established, all members who join in the association can share all the information among the members. In this paper, I examine the conditions for efficiency and stability of a network and a hypergraph, and compare the efficiency between a network and a hypergraph. The main difference is that the possibility of overconnectivity does not occur in a hypergraph, while it occurs in a network. The possibility of overconnectivity in network formation is due to the possible coordination failure. Since coordination by more than two people is allowed in a hypergraph, a hypergraph is never overconnected.
In this article, we extend the model of Newman, H., and D. Wright. 1990. “Strict Liability in a P... more In this article, we extend the model of Newman, H., and D. Wright. 1990. “Strict Liability in a Principal-Agent Model.” International Review of Law and Economics 10: 219–231 and strengthens their result that the strict liability can attain social optimum in a principal-agent relation to the situation in which the court appreciates any contractual terms regarding apportionment of damages between an employer and an employee under vicarious liability rule. Our model also generalizes and extends vicarious liability to the negligence-based liability rule.
We formulate a pretrial negotiation problem as an infinite-horizon bargaining model with one-side... more We formulate a pretrial negotiation problem as an infinite-horizon bargaining model with one-sided uncertainty and alternating offers, with the informed party having an outside option. The plaintiff has private information and also has an outside option of "going to court." The defendant moves first. We show that there exists a unique sequential equilibrium. In equilibrium, when the defendant makes an offer, all the plaintiffs whose net recovery from litigation is greater (smaller) than the offer, reject it (accept it) and go to court next period. Hence, along the equilibrium path, the game lasts at most two periods. Copyright 1994 by Oxford University Press.
The authors develop a model of cheap talk with multiple speakers in the presence of network exter... more The authors develop a model of cheap talk with multiple speakers in the presence of network externalities so that their utility functions are increasing in the network size. They first show that if there is no noise in private information that each sender receives, the full information is revealed by the harshest cross-checking strategies, that is, strategies to punish the senders unless their messages exactly coincide. Then, the authors show that with even a small noise cross-checking strategies cannot induce full revelation if utility functions of senders are linear in the network size, while full revelation is possible if utility functions are strictly concave. They find a sufficient condition for the existence of a fully revealing equilibrium which is supported by the cross-checking strategy with a positive confidence interval independent of each sender's private information.
In an influential paper, Choi and Kim (2010) established the invariance result that given a fixed... more In an influential paper, Choi and Kim (2010) established the invariance result that given a fixed network capacity, the average waiting times are identical regardless of net neutrality. In this paper, we argue that their result relies on the assumption that the distribution for content requests per end user is the same regardless of net neutrality. However, if the distribution is determined by the underlying utility maximization problem of users, users expect the contents they request to be transmitted faster if the contents have priority, implying that the request rate for prioritized contents is higher than the request rate for unprioritized contents under net neutrality. If the content request rates per user differ across the two regimes (net neutrality vs. no net neutrality), the invariance result may not be valid. We also discuss social welfare and the investment incentive of the Internet service provider in an extended model with variable content request rates.
This paper considers two alternative procedures for multi-issue bargaining, so-called sectoral ap... more This paper considers two alternative procedures for multi-issue bargaining, so-called sectoral approach (issue-by-issue bargaining) and single-undertaking (single package bargaining), and compares the outcomes under the alternative procedures. It is asserted that if early agreement in an issue is particularly important to a bargaining party so that it makes his overall delay costs too high, he may strictly prefer to bargain the issue separately rather than bargain both issues at once.
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