Cooperation in Capital Deposits

CentER Discussion Paper Series No. 1999-31

Posted: 1 Jul 1999

See all articles by Peter Borm

Peter Borm

Tilburg University - Center for Economic Research (CentER); Tilburg University - Department of Econometrics & Operations Research

Anja De Waegenaere

Tilburg University - Department of Econometrics & OR, Netspar, and CentER

Carles Rafels

University of Barcelona - Department of Actuarial, Financial and Economic Mathematics

Date Written: 1999

Abstract

The rate of return earned on a deposit can depend on its term, the amount of money invested in it, or both. Most banks, for example, offer a higher interest rate for longer term deposits. This implies that if one individual has capital available for investment now, but needs it in the next period, whereas the opposite holds for another individual, then they can both benefit from cooperation since it allows them to invest in a longer term deposit. A similar situation arises when the rate of return on a deposit depends on the amount of capital invested in it. Although the benefits of such cooperative behavior may seem obvious to all individuals, the actual participation of an individual depends on what part of the revenues he eventually receives. The allocation of the jointly earned benefits to the investors thus plays an important part in the stability of the cooperation. This paper provides a game theoretical analysis of this allocation problem. Several classes of corresponding deposit games are introduced. For each class, necessary conditions for a nonempty core are provided, and allocation rules that yield core-allocations are examined.

JEL Classification: G21

Suggested Citation

Borm, Peter E. M. and De Waegenaere, Anja M.B. and Rafels Pallarola, Carles, Cooperation in Capital Deposits (1999). CentER Discussion Paper Series No. 1999-31. Available at SSRN: https://ssrn.com/abstract=166495

Peter E. M. Borm (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Department of Econometrics & Operations Research

Tilburg, 5000 LE
Netherlands

Anja M.B. De Waegenaere

Tilburg University - Department of Econometrics & OR, Netspar, and CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Carles Rafels Pallarola

University of Barcelona - Department of Actuarial, Financial and Economic Mathematics ( email )

Avda. Diagonal 690
Barcelona, 08034
Spain

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