I’ve found an interesting post by Harold James on how the EU stands against the crisis. As far as I understands, one of his claims is that though many argue to move towards keynesian-like solutions to overcome the economic crisis, according to him the European institutions and sharing of fiscal authority between national states and Brussels simply does not allow much keynesian policies. Especially not if the EU doesn’t one to build a “wrong regianlisation” where leading countries misuse their powers.

I think it definitely worth reading.

As an introduction see the “cover post” about my “week with Prof. Myerson” project.

The past days were tougher than thought! I’ve read “Mechanism Design by an Informed Principal,” Econometrica 51, no. 6 (November 1983): 1767-1797, doi:10.2307/1912116, and “Two-Person Bargaining Problems with Incomplete Information,” Econometrica 52, no. 2 (Március 1984): 461-487, doi:10.2307/1911499, but I needed three days for these two articles!

Actually, I needed two and a half days to be able to move forward after Holmstrom and Myerson, “Efficient and Durable Decision Rules with Incomplete Information”, the article I’ve read the day before, and to read the first of the previous two. The nice thing about these struggles is that I probably would not understand the “Two-Person Bargaining Problems with Incomplete Information,” without the informed principal story, but on the other hand, the bargaining article helped me a lot to better understand the concepts and the proofs of the informed principal case. Probably, I’ll go back to the informed principal article later, as my time permits, given that it seems to be deeper than I initially understood.

But let’s speak rather about the bargaining article! This is a rather easy reading, and I’ve found it really nice. Especially, as it helps to structure ones thoughts on Nash bargaining, the only problematic equation I’ve mentioned in my first post in the series, the relationship between the informed principal idea and bargaining, why strong optimal decisions (or in the context of the informed principal story strong solutions) are important. Unfortunately, the axiomatisation becomes rather restrictive, as far as I understand mainly from this last requirement of strong optimal decisions, but I nevertheless learned a lot, and enjoyed the article a lot.

As an introduction see the “cover post” about my “week with Prof. Myerson” project.

The day is not over yet, but I’m sure I won’t read two papers today! The only one I managed today was Bengt Holmstrom és Roger B. Myerson, “Efficient and Durable Decision Rules with Incomplete Information,” Econometrica 51, no. 6 (November 1983): 1799-1819, doi:10.2307/1912117.

First I went to the hairdresser, and then met Myerson in a café at Esquirol. He started by comparing full information and private information optimisation problems, the need for incentive compatibility, and the different possible interpretations of efficiency (ex-ante, interim, ex-post). It all started very well, in the meantime I was enjoying the sunshine heating up my skin through the windows. It was really great!

I especially loved a footnote, where he basically stood up against Rawls’ idea about the “Veil of ignorance by noting that “our assumption that individuals can commit themselves to a decision rule at the interim stage (without possibility of recontracting ex post) might at first seem inconsistent with our assumption that the individuals cannot commit themselves to a decision rule ex ante, before they learn their types. But recall that, we are assuming that the individuals already have their private information about their preferences and endowments when they meet to make their economic plans and decisions. That is, we are studying economies in which the ex ante stage, in which no individual has learned any private information, has already passed (if it ever indeed existed) so that “ex ante” commitments are impossible.” I really like the subtle expression if it ever indeed existed!

Otherwise, from a theoretical point of view I think the articles contribution are supposed to be the last chapters on durable decision rules. Something similar in nature to renegotiation proofness, as far as I understand. (Actually, I can’t see any difference.) It was interesting to realise, that I’ve never met this expression before. But I’m not sure about the difference.

As an introduction see the “cover post” about my “week with Prof. Myerson” project.

The first day was a lot of fun!

I especially enjoyed the first article (Roger B. Myerson, “Incentive Compatibility and the Bargaining Problem,” Econometrica 47, no. 1 (Január 1979): 61-73, doi:10.2307/1912346.). He described in a brilliantly straigthforward way why the solution set of a discrete type optimal control problem is necessarily convex.

This came especially well for me, as the last week I was thinking about overwriting one of my ideas in an optimal control way, so every info in this domain is welcome, and this fits very well my needs.

The other article (David P. Baron és Roger B. Myerson, “Regulating a Monopolist with Unknown Costs,” Econometrica 50, no. 4 (Július 1982): 911-930, doi:10.2307/1912769.) was nice as well, but probably its ideas are already too well known to be surprising at all. While the last section does not contain full results, it was especially interesting, as it tries to cover linearly non-separable optimisation problems, and claims some nice results and difficulties involved.

All in all, both articles were really easy to read, and I was surprised how many things presented at class were present already in these papers. I’m looking forward to the next artciles!

Questions

Despite the previous general feelings, I’ve had a couple of questions, more original thoughts as well.

First, I could not give an economic interpretation to the generalised Nash product at equation 18 in the first article. Probably, I should read Harsanyi and Selten for this.

Second, after reading these articles I was wondering how would more “advanced” models fit these results. Especially, as I am working with standard setting and informational asymetries, Lerner and Tirole’s Forum Shopping came to my mind. There the firms can’t earn an informational rent, as they don’t own any private information, but they should be able to extract some rents, if only the users remain uninformed. I think.

Following some nice stories about Roger Myerson and his papers by David Martimort, I’ve decided to spend some long days with his ideas in person, and read some if his most famous articles with a strong desire of understanding.

At first I made a quick search on JSTOR, and downloaded the articles that I either remembered from my studies as being more famous or found interesting after reading two lines and the abstract.

1. Roger B. Myerson, “Incentive Compatibility and the Bargaining Problem,” Econometrica 47, no. 1 (Január 1979): 61-73, doi:10.2307/1912346.
2. David P. Baron és Roger B. Myerson, “Regulating a Monopolist with Unknown Costs,” Econometrica 50, no. 4 (Július 1982): 911-930, doi:10.2307/1912769.
3. Bengt Holmstrom és Roger B. Myerson, “Efficient and Durable Decision Rules with Incomplete Information,” Econometrica 51, no. 6 (November 1983): 1799-1819, doi:10.2307/1912117.
4. Roger B. Myerson, “Mechanism Design by an Informed Principal,” Econometrica 51, no. 6 (November 1983): 1767-1797, doi:10.2307/1912116.
5. Roger B. Myerson, “Two-Person Bargaining Problems with Incomplete Information,” Econometrica 52, no. 2 (Március 1984): 461-487, doi:10.2307/1911499.
6. Roy Radner, Roger Myerson, és Eric Maskin, “An Example of a Repeated Partnership Game with Discounting and with Uniformly Inefficient Equilibria,” The Review of Economic Studies 53, no. 1 (Január 1986): 59-69, doi:10.2307/2297591.
7. Roger B. Myerson, “Multistage Games with Communication,” Econometrica 54, no. 2 (Március 1986): 323-358, doi:10.2307/1913154.
8. Roger B. Myerson, “Nash Equilibrium and the History of Economic Theory,” Journal of Economic Literature 37, no. 3 (Szeptember 1999): 1067-1082, doi:10.2307/2564872.

Then put all of them to my e-book reader, and decided to read them in the order they appeared. The week to come is still ahead of me, but I expect it to be fun and demanding. I will try to post some insights, first impressions after reading each of them, so stay tuned, if you like the topic!

Do you have any articles that you would definitely recommend to read? A paper — as Martimort had put it — “that wouldn’t be changed at all by the authors if (s)he would write it today”.