We study coalition formation in "real time", a situation in which coalition formation is intertwined with the ongoing receipt of pay-offs. Agreements are assumed to be permanently binding: They can only be altered with the full consent of existing signatories. For characteristic function games we prove that equilibrium processes-whether or not these are history dependent-must converge to efficient absorbing states. For three-player games with externalities each player has enough veto power that a general efficiency result can be established. However, there exist four-player games in which all Markov equilibria are inefficient from every initial condition, despite the ability to write permanently binding agreements. Copyright 2007 The Review of Economic Studies Limited.
W e study the problem of a two-firm supply chain in which firms simultaneously choose a capacity before demand is realized. We focus on the role that private information about demand has on firms' ability to align their capacity decisions. When forecasts are private information, there are at most two equilibria: a complete coordination failure or a monotone equilibrium. The former equilibrium always exists, whereas the latter exists only when the marginal cost of capacity is sufficiently low. We also show that both truthful information sharing and preplay communication have an equilibrium with higher profits. We then test the model's predictions experimentally. Contrary to our theoretical predictions, we show that private demand forecasts do not have a consistently negative effect on firm profits, though capacities are more misaligned. We show that preplay communication may be more effective at increasing profits than truthful information sharing. Finally, we document that "honesty is the best policy" when communicating private information.
We study procrastination in the context of a field experiment involving students who must exert costly effort to complete certain tasks by a fixed deadline. Descriptively, we document a strong demand for commitment, in the form of self-imposed deadlines, which appear to be associated with students' self-reported psychological characteristics and cost of time. We structurally estimate students' present-bias and cost of time by fitting the experimental data to a stylized stopping time choice model. We find that present-bias is relatively widespread but that having multiple repeated tasks appears to activate effective internal self-control mechanisms. Finally, we also document an important form of partial naïveté on the part of students in anticipating their ability to self-control when setting deadlines.
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