03经济理论：博弈、讨价还价与契约综述

Economic Theory:Games,Bargaining and Contracts

Trinity Term2003—Some Reading Recommendations(Draft)

D AVID P.M YATT

D EPARTMENT OF

E CONOMICS,U NIVERSITY O

F O XFORD

https://www.360docs.net/doc/887857760.html,/dpm/

mailto:david.myatt@https://www.360docs.net/doc/887857760.html,

R EADING R ECOMMENDATIONS

The Department of Economics maintains a central reading list on its website at

https://www.360docs.net/doc/887857760.html,/,

and you should feel to use that.Alan Beggs,the option paper convenor,has put together a comprehensive set of readings.Here,however,I offer a few of my own reading recommen-dations.They will tend to overlap with those offered by the Department,although I will give some additional commentary on the role of the different references.

Most of the textbooks that I reference are available in a number of different libraries,including the Department of Economics and Nuf?eld College,as well as the Bodleian.If you wish to buy one or two textbooks,then I suggest that you consult with your tutor before going ahead.For the(relatively small)number of articles that I reference,you should try and use the electronic resources that are available.For instance,many journal articles are available from

https://www.360docs.net/doc/887857760.html,/,

or you could use the comprehensive list from the Bodleian site at

https://www.360docs.net/doc/887857760.html,/.

Finally,please note that this document is in draft form.Due to IT gremlins,many of my refer-ences for adverse selection and contract design,including applications to price discrimination, are missing from this document.I will post an update version to my webpage when feasible.

G AME T HEORY I–IV

Advice.My lectures Game Theory I and II are designed to explore some basic“static”con-cepts in game theory—or strategic form representations of strategic scenarios.Consideration of the(often economically useful)extensive form scenarios,corresponding to“dynamic”issues in games,are addressed in my lectures Game Theory III and IV.

You should focus on some basic objectives in your studies.Begin by trying to discover what game theory is about,and in particular its real world applications.Try to learn the language with which we describe strategic scenarios.You should consider very carefully the achieve-ments and pitfalls of the analysis and solution concepts that we use.This will allow you to

appreciate the strengths and limitations when you come to apply the tools.Finally,try and de-vote as much time as possible to practice at solving problems—you can use textbook problems, the ones that I supply,or problems assigned by your tutor for tutorial purposes. Fortunately,most of the useful reading can be drawn from a wealth of high quality textbooks that are available.For reading before and after the Game Theory I and II lectures,you should try to understand,and perhaps take notes on,the following concepts:

?De?nition of a game,

?normal and extensive form representations,

?actions and strategies—both pure and mixed,

?dominance,iterated dominance and rationalizability,

?Nash equilibrium and its justi?cations,

?Bayesian games(i.e.games of incomplete information)and Bayesian Nash equilibria,?puri?cation of mixed strategy equilibria,and

?evolutionary concepts in game theory.

Do this,however,while having in mind the problems that you wish to solve.Integrating your reading of the concepts with practice at solving problems would be a good way to do this.You might also?nd it helpful to have some questions in your mind.This will help you to take a “research”attitude to reading.

I turn now to recommend reading topics for before and after the Game Theory III and IV lectures.The lectures,and hopefully your reading,focus on the representation of games in extensive form.The extensive form explicitly considers the dynamic properties of a game,and hence may consider the play of a game over time,and incorporate responses to observed actions etc..Extensive form games often yield a degenerate strategic form in the sense of yielding tied payoffs.They require careful consideration.Your reading should include:

?the extensive form representation of a game,

?the distinction between perfect,imperfect,complete and incomplete information,

?behaviour strategies vs.mixed strategies in extensive form games,

?information sets,beliefs,and the use of Bayes’rule,

?backward induction and subgame perfection,including the relation to the iterated dele-tion of weakly-dominated strategies,

?problems with subgame perfection,including lack of applicability(e.g.games of incom-plete information)and apparent knowledge requirements(e.g.the centipede game),?further re?nements of Nash equilibria,including perfect Bayesian,sequential and trembling-hand perfect equilibria,and

?forward inductive concepts and the intuitive criterion.

Many economic examples are extensive form in nature.An important class of such games involves signalling in models with asymmetric information.In many situations,economic agents will make decisions contingent on what they believe.Other economic agents will often be

affected by such decisions,and also have superior information.They may have an incentive to reveal this information in order to in?uence the decision.If the information released is not veri?able,then they must?nd some way of indicating what they know.This leads to the idea of signalling—agents engage in an activity to prove who they are or what they know. Alternatively,they may wish to hide their information.Relevant topics include:?adverse selection and market failure in the presence of asymmetric information,

?Akerlof’s model of the“Market for Lemons,”

?signalling games,such as the Kreps“Beer-Quiche”game,

?market signalling,such as the Spence model of education,

?market screening,such as the Rothschild-Stiglitz model of insurance,

?separating and pooling equilibria,

?equilibrium re?nements including the“intuitive criterion,”and

?the application of signalling to limit pricing.

A more subtle case,in contrast to signalling,is signal jamming.This is when an economic agent cannot signal directly,but rather can in?uence the realization of an otherwise-present signal.I will point to the relevant literature in my discussion of moral hazard problems.

Reading Sources.For my game theory lectures,most of my recommendations are drawn from textbooks,although I have a couple of articles that are worth highlighting.An excellent core source for your reading on game theory is Gibbons(1992).Chapters1and3cover static games, or games in strategic form,and correspond very closely to my lectures Game Theory I and II. Chapter2deals deals with extensive form games with complete and perfect information,in-cluding material on repeated games,and corresponds to my lecture Game Theory III.Finally, Chapter4considers games with imperfect information in extensive form,which include sig-nalling and signal-jamming games,and is related to my lecture Game Theory IV.Gibbons (1992)really is a great book,containing some easy examples to motivate the material.It is reasonable for any serious student of game theory to master this entire book through basic study.

A second option,pitched at a similar level,is Rasmusen(1994).This book has one key ad-vantage:It is concerned with asymmetric information problems as well as game theory.This means that it is a good source for the extensive form representation of signalling problems—see,for instance,Chapter10—and it may be used for general problems in moral hazard,ad-verse selection and contract design.At much the same level,another textbook to consult is Binmore(1992),although it is sometimes dif?cult to pin down the material that you need.

A more advanced option would be Osborne and Rubinstein(1994).This is slightly harder(core graduate level),but again a good book.Watch out—the discussion of rationalizable actions can be confusing,and there are actually a few errors in the propositions as stated.Stepping up once more,and for a very advanced reference source only,you could look at Fudenberg and Tirole(1991).This is quite mathematical,and very dry,but at least it’s a backup.Furthermore, it at least has formal de?nitions of many of the concepts that we use.Try to use a later edition

if possible,since I believe that there are errors(but not critical ones)in the earliest edition.If you are feeling particularly masochistic,you could even look at the original von Neumann and Morgenstern(1967,originally1944),but I hesitate to recommend it.

Of course,you may prefer an easier treatment of the material.Whereas Gibbons(1992)is very accessible,there is a very effective(and yet easier)undergraduate-level textbook available by Dixit and Skeath(1999).Despite its ease,it does cover a lot of ground,and is particularly well-written.It also motivates quite well.Indeed,if you are interested in the motivation behind game theory,it may well be worthwhile taking a look at some“bedtime reading”sources. For an easy read,try Dixit and Nalebuff(1991).For a rather different,and earlier source,and especially if you like thinking about the game theory of international relations,you could also go back to Schelling(1960).

Many of the textbooks described above take the same approach to game-theoretic problems. David Kreps employs a treatment of game theory that highlights the problems with the various concepts within the core exposition.He synthesizes both strategic form and extensive form games,and it is perhaps better approaching this work from an extensive form perspective. Kreps(1990a)covers the basics.Alternatively,Chapter3of the Clarendon lectures book Kreps (1990b)contains the right material.Of course,if you like using a microeconomics text for game theory,then the graduate-level leader,again integrating game theory,is Mas-Colell,Whinston, and Green(1995).You may prefer this to Kreps(1990a),as the style is less chatty.

Most game theory texts(certainly those cited here)include a selection of problems.In contrast, the book by Gintis(2000)is takes a complete problem-focused approach.It’s a great resource, collecting together many“folk”problems from the oral tradition of game theory.Some of the commentary is debateable,but the problems and solutions are ideal practice.

Whereas research articles on game theory itself are not discussed here,the following references allow you to access some classics in the development of game theory.First,you can?nd some classic articles in the collection edited by Kuhn(1997).Second,for a friendly article about games and solution concepts,see Gibbons(1997).Third,if you want to know why the Nobel laureates got their awards for game theory,read Gul(1997).

Of course,for the application of game theory to problems such as signalling,it will be worth-while to examine some relevant articles.I point to a small number here.For“classic”read-ing on the adverse selection problem,the original by Akerlof(1970)describes the market for lemons.The classic insurance paper is by Rothschild and Stiglitz(1976).For the application to limit pricing,see Milgrom and Roberts(1982),or for a simpler version Chapter9of Tirole (1988,pp.361–383).For an application of Sender-Receiver games to monetary policy,see Vickers(1986).

B ARGAINING

Advice.The bargaining lecture considers an application of the game theoretic techniques ex-plored in earlier lectures to the topic of bargaining.Some of the models and concepts that

the lecture touches upon,and that you should pursue in greater detail in your private study, include:

?The Nash“Simultaneous Demand”game,

?the Rubinstein-Stahl alternating-offer bargaining model,

?the Nash(cooperative)bargaining solution,

?the relationship between leading noncooperative models(e.g.Rubinstein and the Nash demand game)and cooperatuve solution concepts(e.g.the Nash bargaining solution),?bargaining with asymmetric information,

?bargaining with an outside option,and

?bargaining as a concession game.

The Nash“simultaneous demands”game requires an understanding of simultaneous-move strategic-form games.The Rubinstein model is an extensive form game,and employs the subgame-perfect solution concept.The Nash Bargaining Solution(NBS)is a cooperative so-lution concept—this is very different from non-cooperative game theory.However,it is a “benchmark”for the outcomes that we might expect.The remaining models are extensive form games with incomplete(or imperfect)information.They use the sequential equilibrium (or,equivalently,perfect Bayesian equilibrium)solution concept.Although I don’t mention them in the lecture,you should de?nitely read about the Kalai-Smordinsky bargaining solu-tion,and the Shapley value for cooperative games.

Reading Sources.For your reading,textbooks contain the basics.My main recommendations are slightly different than those offered for the game theory lectures.For instance,Rasmusen (1994,Ch.11,pp.93–119)is probably your?rst reference,where he offers a great textbook treatment of bargaining,rather than Gibbons(1992).Rasmusen(1994)covers both the coop-erative Nash and noncooperative Rubinstein bargaining models and solutions.Perhaps more importantly,he also offers a section on bargaining with incomplete information.

A second good textbook treatment of bargaining is Chapter5of Binmore(1992,pp.167–216). Try to read the whole of it—although it tends to mess about with mathematics too much at the beginning.The Nash demand game(not to be confused with Nash’s bargaining solution!) is in Chapter7.Chapter5of Kreps(1990b,pp.91–132)discusses bargaining models,as part of a wider assessment of the problems of game theory.Reading this chapter following your study of game theory is a great idea,since it discusses some of the equilibrium re?nement problems that you will have studied.A more critical treatment is also given in Kreps(1990a, pp.556–571).A brief description of the introduction of incomplete information into bargain-ing problems is also given there.Since one of the main bargaining games is the Rubinstein model,Chapter7of Osborne and Rubinstein(1994,117–131)is very good.It tends to be a little more advanced in its presentation.For more detail by these authors,there is a whole book on bargaining issues—see Osborne and Rubinstein(1990).

I would very much like you to read some articles on bargaining.Proceed as follows.First, check out the classic articles by Nash(1950,1953),especially the?rst of these.Next,move on

to the Rubinstein(1982)paper.If you have problems,then concentrate on the textbook treat-ments.You then need to check out bargaining with incomplete information.After reading the Rasmusen(1994)treatment,read Fudenberg and Tirole(1983)and Sobel and Takahashi(1983). You should also read about bargaining with outside options;the classic article is Shaked and Sutton(1984).I also think that it is also important to read some empirical experiments on bar-gaining.Al Roth is the key player here and I follow Kreps’recommendations of his work—Roth(1983),Roth and Schoumaker(1983)and Ochs and Roth(1989)

In the lecture,I also touch very brie?y on three additional topics:(a)bargaining and invest-ment,(b)bargaining and?rm structure and(c)adaptive learning and bargaining.

A whole literature examines the theory of the?rm and patterns of asset ownership.Typically, future allocations cannot be contracted for,and hence a bargaining problem arises.Anticipat-ing this,agents bias their investment(or other)decisions to in?uence the disagreement point or outside option.This has implications for optimal asset ownership structure.For more on this,you might care to read a general treatment of the theory of the?rm,such as Holmstr¨om and Tirole(1989)or Hart(1995).Alternatively,the classic articles include Grossman and Hart (1986)and Hart and Moore(1988,1990)

Stole and Zwiebel(1996b,1996a)have an elegant model of intra-?rm bargaining.The shape of a?rm’s technology can in?uence the structure of wage bargaining,and hence a?rm’s pref-erences over technology choice.The Shapley value pops out of their model.

Finally,Young(1998)has a nice adaptive learning model,in which he shows that boundedly rational agents repeatedly playing the Nash demand game can lead rather neatly to the Nash Bargaining Solution.

M ORAL H AZARD

Advice.Our investigations of asymmetric information will involve the study of contract the-ory.One of my lectures concerns moral hazard.This is when an agent must take an action that is unobserved by another party.This other party(a principal)must create incentives to ensure that the“right”action is taken.Moral hazard is thus often associated with hidden actions, but actually they are subtly distinct.To begin with,I’d like you to read and understand the following concepts:

?Asymmetric information,

?the distinction between moral hazard,adverse selection,hidden actions and hidden information,

?examples of these scenarios,

?de?nitions of a“Principal”and“Agent,”

?Constructing an optimal incentive contract with moral hazard.

?“incentive compatibility”and“individual rationality”constraints,and

?constraints that bind and constraints that do not.

In addition,you need to understand additional details of incentive contracts with moral hazard—i.e.,what they actually look like.The aspects that you need include:

?the basic tradeoff between risk and incentives,

?often,the irrelevance of who designs the contract,

?yarstick or performance comparisons,

?multi-task models,

?properties and characteristics of fully optimal contracts,

?Mirrlees“shoot the agent”contracts and their problems,

?providing incentives when signals are observable but not contractible,and

?why simple contracts(e.g.monotonic and linear)may be better.

Reading Sources.To being your reading,I think that the best simple textbook reading is Chapters7–10of Rasmusen(1994).I also highly recommend the lecture notes of Lars Stole. You can(hopefully)still?nd them on the web,at:

https://www.360docs.net/doc/887857760.html,/Lars Stole.html

Look at both his lecture notes,and also at the bottom of his web page the un?nished mono-graph“Lectures on Contracts and Organizations.”

Turning to microeconomics textbooks,often at a higher level,Kreps(1990a,pp.463–498)is rea-sonably good.Chapter14of Mas-Colell,Whinston,and Green(1995),however,is very good for the properties of optimal contracts,including the use of likelihood ratios and suf?cient statistics.

There are,of course,more specialized textbooks.For instance,Salanie(1997)contains all of the contracting material that you need to know.In contrast,Lazear(1995)studies more general personnel economics problems,and moves beyond the standard principal-agent framework to consider tournaments and other devices.More comprehensively,a very recent textbook by Laffont and Martimort(2002)looks like it will be good,although I have yet to see the?nal version.Also,a survey of contract theory is provided by two of the main contract theory researchers—Hart and Holmstr¨om(1987)

You should also read some articles.Holmstr¨om(1979)for the properties of optimal contracts. Holmstr¨om and Milgrom(1991)and Holmstrom(1982)look at problems with multiple agents and multiple tasks.Holmstrom and Milgrom(1987)(a technical paper)attempts to justify the use of linear contracts.

Finally,one last collection of reading is related to the“signal jamming”section of my lecture Game Theory IV.See Holmstr¨om(1999,originally1982)for the economics of career concerns, and subsequent papers by Gibbons and Murphy(1992)and Meyer and Vickers(1997).

R EFERENCES

A KERLOF,G.A.(1970):“The Market for“Lemons”:Quality Uncertainty and the Market Mechanism,”Quarterly Journal of Economics,84(3),488–500.

B INMORE,K.G.(1992):Fun and Games.Heath,Lexington,MA.

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F UDENBERG,D.,AND J.T IROLE(1983):“Sequential Bargaining with Incomplete Information,”Review of Economic Studies,50,221–247.

F UDENBERG,D.,AND J.T IROLE(1991):Game Theory.MIT Press,Cambridge,MA.

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(1997):“An Introduction to Applicable Game Theory,”Journal of Economic Perspectives, 11(1),127–149.

G IBBONS,R.,AND K.J.M URPHY(1992):“Optimal Incentive Contracts in the Presence of Career Concerns:Theory and Evidence,”Journal of Political Economy,100(3),468–505.

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(1996b):“Organizational Design and Technology Choice under Intra?rm Bargaining,”American Economic Review,86(1),195–222.

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