Essays on Uncertainty in Public Economics and Cooperative Bargaining

• Main Author: Baris, Omer F
• Format: Others
• Published: Digital Archive @ GSU 2012
• Subjects: Bargaining; timing effect; linearity; bailouts; signaling; Samaritan's Dilemma
• Online Access: http://digitalarchive.gsu.edu/econ_diss/85; http://digitalarchive.gsu.edu/cgi/viewcontent.cgi?article=1086&context=econ_diss

This dissertation consists of two parts. The theme connecting the two parts is the role of uncertainty. The first part focuses on the role of uncertainty in cooperative bargaining and public decision making. I provide an axiomatic characterization of the normalized utilitarian solution to bargaining problems involving uncertainty. In addition to three basic axioms that are common in the bargaining literature, I propose the axiom of weak linearity to characterize the solution. In the second part I study uncertainty in non-cooperative games by designing a principal agent model of public bailouts. The first essay in this part sets up the model and shows that the moral hazard problem, namely the Samaritan's dilemma, exists without an altruistic principal. The second essay in this part builds upon the previous essay and focuses on the informational elements in a bailout game. Mainly, I show the existence of a separating equilibrium, where public bailouts serve as a mechanism to reveal essential information to outsiders and in which the good-type agents can benefit from rejecting a bailout offer.