"Sustainable Business Coordination: A Vedic Solution to the Endemic Crisis of Trust and Coordination" Free Download

SUDIP PATRA, Coventry University
NIVEDITA PAUL, St. Xavier’s College (Autonomous), Kolkata

Coordination failure has assumed great significance in both academic literature and real business world. The last global financial crisis can be perceived as a system wide failure of trust and ethics. From a general theoretical stand point this is a large scale failure of the highly cherished ‘invisible hand’ doctrine since Adam Smith. Though there has been considerable degree of study on welfare generating coordination among business players they have failed to generate sustainable solutions, since they are fundamentally based on neoclassical philosophy of selfish utility maximisation. Under information asymmetry, and various other market frictions selfish utility maximisation gives way to problems like moral hazard, this in the end is nothing but a problem of break down of trust and ethical coordination. In this paper we attempt to build a sustainable model of ethical coordination based on the sanatan philosophy of Vedanta, namely, ‘sarbang khalvedam brahma’, or since the same absolute truth embodies every one of us (which we have forgotten due to sheer ignorance or illusion of selfish utility maximisation dictum), we have the potential to exhibit absolute ethical coordination. In the world of business this can be translated as actions based on a more comprehensive utility formulation, which makes the players, incorporate their own pay offs as well as the pay off differences with the others. For manifesting the ideology we here develop a simple game theoretic model, where in a simple two-player game scenario starting with a more comprehensive utility formulation (after Fehr and Schimmt, 1999, and behavioural game theory in general) a sustainable ethical coordination will be achieved, which will be stable. The model developed here is practicable rather an abstract mathematical model, since the main aim is an easy implementation of the model in real life scenario. Overall the authors believe that this work in attempting to unify Vedic philosophy and mainstream economics will contribute to the literature of coordination in general, which is much needed, and also inspire a new strand of literature to come forth.

"Group Inefficiency and Dynamic Bargaining in Common Property Resource Games with Asymmetric Players" Free Download

JESÚS MAR?N SOLANO, University of Barcelona

The problem of aggregation of preferences of asymmetric players is addressed. Players are asymmetric in the sense that they have different instantaneous utilities and discount the future at different rates. If the joint preferences are represented by the sum of intertemporal utilities, they become time-inconsistent. In this paper it is shown how time-consistent solutions for this problem can have important drawbacks, being the most relevant that they can be strongly inefficient: the sum of payoffs can be higher if cooperation is forbidden than if it is allowed. In order to solve these problems, nonconstant weights are considered. These nonconstant weights can be obtained as the maximizers of a Nash welfare function, by introducing in this way the concept of dynamic Nash t-bargaining solution. These ideas are applied to the study of three common property resource games. Linear strategies are derived for appropriated weight functions including, in particular, those obtained from a dynamic Nash t-bargaining procedure.

"Reducing Free-Riding in Dynamic Contribution Games" Free Download

JAKSA CVITANIC, California Institute of Technology - Division of the Humanities and Social Sciences
GEORGE GEORGIADIS, Boston University - Department of Economics

We analyze a dynamic contribution game to a public project, in which a group of agents exert costly effort over time to make progress on a project. The project progresses gradually, and it is completed once a pre-specified amount of progress has been made, at which point it generates a lump sum payoff. A standard result in these games is that equilibrium efforts are inefficiently low due to the free-rider problem. We characterize a budget balanced mechanism which at every moment, induces each agent to exert the first best effort level as the outcome of a Markov Perfect Equilibrium. This mechanism specifies that each agent makes an upfront payment, as well as flow payments while the project is in progress. These payments are placed in a savings account that accumulates interest, and upon completion of the project, the agents receive the payoff generated by the project, plus the balance in the savings account up to a cap. As such, it is implementable if the agents have sufficient cash reserves at the outset of the game. We also characterize the socially optimal mechanism if the agents' cash reserves are below the threshold necessary to attain efficiency.

"The Formation of Rank Structure Through Self Interested Interactions" Free Download

SAISH VIJAY NEVREKAR, Indira Gandhi Institute of Development Research (IGIDR)

Agents in an economy are solely interested in their relative position in the economy. Mutually interacting with one another benefits each of the agents involved in the interaction to further their self interest. Such interactions lead to the formation of coalitions. The agents are constrained to being a part of just one coalition. The agreements between the agents are non-binding. Assuming complete information, the paper develops an algorithm for attaining equilibrium partition for Rank Stable economies. It is shown that for Non Rank Stable economies the rank structure will not be altered due to interactions between agents; it will be identical to the endowment rank structure.

"Evolution Processes Information – Linking the Theory of Evolution and Information Theory" Free Download

MARTIN HILBERT, University of California, Davis

The article reformulates evolutionary fitness as information processes. This changes our understanding of evolutionary change, as it allows its formal expression as a communication process between the evolving system and its environment. Similar to how a communication process reveals a communicated message among possible messages, evolution reveals the surviving fittest member of a population. The amount of uncertainty reduced by evolution is quantified by 'negentropy', which turns into relative entropy and mutual information in the general cases. Bits and bytes become a quantifiable ingredient of evolutionary growth. More information between the population and its environment implies greater fitness. Information also turns out to be the link between the distinct population types in space and the unfolding environmental patterns in time.


About this eJournal

This eJournal distributes working and accepted paper abstracts of empirical and theoretical papers on game theory, defined as the study of the strategic interaction among rational agents in competitive and cooperative environments, and bargaining theory, defined as a situation in which two or more players have a common interest to co-operate, but have conflicting interests over exactly how to co-operate. The topics in this eJournal include all of the subjects in Section C7 of the JEL classification system.

Editor: Victor Ricciardi, Goucher College


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