Sequential Equilibria in Bayesian Games with Communication

We study the effects of communication in Bayesian games when the players are sequentially rational but some combinations of types have zero probability. Not all communication equilibria can be implemented as sequential equilibria. We define the set of strong sequential equilibria (SSCE) and characterize it. SSCE differs from the concept of sequential communication equilibrium (SCE) defined by Myerson (1986) in that SCE allows the possibility of trembles by the mediator. We show that these two concepts coincide when there are three or more players, but the set of SSCE may be strictly smaller than the set of SCE for two-player games.Bayesian games, Communication, Communication equilibrium, Sequential communication equilibrium

Reforming local government in Pakistan

One year into the term of the new Pakistani government and promises to hold local government elections across the country have not fully materialised. Polling took place in Baluchistan in December 2013 but local elections scheduled to take place in Sindh and Punjab appear to have been deferred indefinitely. In this context, Ali Cheema, Adnan Khan and Roger Myerson analyse local democracy in Pakistan and recommend ways in which to strengthen the system

Focal Coordination and Language in Human Evolution

We study game-theoretic models of human evolution to analyze fundamentals of human nature. Rival-claimants games represent common situations in which animals can avoid conflict over valuable resources by mutually recognizing asymmetric claiming rights. Unlike social-dilemma games, rival-claimants games have multiple equilibria which create a rational role for communication, and so they may be good models for the role of language in human evolution. Many social animals avoid conflict by dominance rankings, but intelligence and language allow mutual recognition of more complex norms for determining political rank or economic ownership. Sophisticated forms of economic ownership could become more advantageous when bipedalism allowed adaptation of hands for manufacturing useful objects. Cultural norms for claiming rights could develop and persist across generations in communities where the young have an innate interest in learning from their elders about when one can appropriately claim desirable objects. Then competition across communities would favor cultures where claiming rights are earned by prosocial behavior, such as contributions to public goods. With the development of larger societies in which many local communities share a common culture, individuals would prefer to interact with strangers who identifiably share this culture, because shared cultural principles reduce risks of conflict in rival-claimants games

Local agency costs of political centralization

We analyze a model of moral hazard in local public services which could be efficiently managed by officials under local democratic accountability, but not by officials who are appointed by the ruler of a centralized autocracy. The ruler might prefer to retain an official who diverted resources from public services but contributed part to benefit the ruler. The autocratic ruler would value better public services only when residents reduce taxable investments which become unprofitable without good public services. For local government to benefit local residents, they must have some decentralized power to punish an official who serves them badly even while serving the ruler well

Comparison of Scoring Rules in Poisson Voting Games

Scoring rules are compared by the equilibria that they generate for simple elections with three candidates and voters drawn from large Poisson distributions. A calculus for comparing pivot probabilities in Poisson voting games is applied. For a symmetric Condorcet cycle, nonsymmetric discriminatory equilibria exist under best-rewarding scoring rules like plurality voting. A candidate who is universally disliked may still not be out of contention under worst-punishing scoring rules like negative-plurality voting. In elections where two of three candidates have the same position, symmetric equilibria coincide with majority rule only for scoring rules that are balanced between best-rewarding and worst-punishing. When voters also care about continuous functions of vote shares, equilibria may still depend on pivot probabilities.

Secret Contracts for Efficient Partnerships ∗

By allocating different information to team members, secret contracts can provide better incentives to perform with an intuitive organizational design. For instance, they may help to monitor monitors, and appoint secret principals. More generally, secret contracts highlight a rich duality between detection and enforcement with linear transfers. On the one hand, every disobedient deviation must be detectable to enforce an an outcome, but different behavior may be used to detect different deviations. On the other, every disobedient deviation must be attributable, i.e., some player can be identified as innocent after the deviation, to provide incentives with budget balance. JEL Classification: D21, D23, D82

Sequential Equilibria in Bayesian Games with Communication

We study the effects of communication in Bayesian games when the players are sequentially rational but some combinations of types have zero probability. Not all communication equilibria can be implemented as sequential equilibria. We define the set of strong sequential equilibria (SSCE) and characterize it. SSCE differs from the concept of sequential communication equilibrium (SCE) defined by Myerson (1986) in that SCE allows the possibility of trembles by the mediator. We show that these two concepts coincide when there are three or more players, but the set of SSCE may be strictly smaller than the set of SCE for two-player games