We analyse a market where (i) trade proceeds by random and anonymous pairwise meetings with bargaining; (ii) agents are asymmetrically informed about the value of the traded good; and (iii) no new entrants are allowed once the market is open. We show that information revelation and efficiency never obtain in equilibrium, even as discounting is removed. This holds whether the asymmetry is two-sided or one-sided. In some cases there exist equilibria where a substantial amount goes untraded. This contrasts with the earlier literature, which was based on the steadystate equilibria of a model where agents enter the market every period.
This paper deals with trade volume and distribution of surplus in markets subject to adverse selection. In a model where two qualities of a good exist, I show that if trade is decentralized (i.e. conducted via random pairwise meetings of agents), then all units of the good are traded, and all agents have positive ex-ante expected payoffs. This feature is present regardless of the quality distribution, and persists in the limit as discounting is made negligible. This offers a sharp contrast to models of centralized trade with adverse selection (Akerlof, Wilson). Copyright Springer-Verlag Berlin Heidelberg 2003Keywords and Phrases:Adverse selection, Lemons, Pairwise meetings, Decentralized trading., JEL Classification Numbers:C73, D82.,
We thank Joost de Laat, Claude Fluet and Elena Panova for comments on earlier drafts. This research was financed by grants from SSHRC (Canada) and FQRSC (Quebec).
Abstract:We examine the effects of famine relief efforts (food aid) in regions undergoing civil war. In our model, warlords seize a fraction of all aid and use it to feed soldiers. They hire their troops within a population of farmers heterogeneous in skills. We determine the equilibrium distribution of labor in this environment and study how the existence and allocation strategies of a benevolent food aid agency affect this equilibrium. Our model allows us to precisely predict who will fight and who will work in every circumstance.
The authors examine the effects that famine relief efforts (food aid) can have in regions undergoing civil war. In the model, warlords seize a fraction of all aid entering the region. How much they can loot affects their choice of army size; therefore the manner in which aid is delivered influences warfare. The authors identify a delivery plan for aid that minimizes total recruitment in equilibrium.
This paper presents a theoretical model of conflict between two players, with intervention by a peacekeeping force. Peacekeepers are treated as a military contingent, capable of taking sides, acting as a third (independent) side in the war or remaining inactive, depending on circumstances. This departs from previous models, in which peacekeeping was no more than a parameter affecting players' fighting costs. The main result is an optimal deployment strategy by peacekeepers, detailing the nature and level of intervention required under different circumstances; this strategy results in the lowest possible level of warfare between the two antagonists. The credible threat of force (rather than mere intervention) is the strategy's key component.
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