Essays on trade and cooperation

Abstract

In this dissertation, we study two questions of strategic behavior. One is related to the trade in strategic market games. The paper studies strategic market games with wash sales. This class of games posses best response correspondences that in turn generate non-uniqueness of pure strategy equilibria. We introduce a mixed strategy equilibrium that resolves the aforementioned indeterminacy, therefore, results into a unique equilibrium. Finally we provide an example that illustrates our equilibrium concept. Another paper offers non-cooperative mechanism for coalition formation. It includes a special non-cooperative game and a self-financed enforcement. Enforcement is performed by an external central planner. The enforcement operates as a reallocation between all players in the game. In order to support stability of the induced coalition partition the central planner distorts payoffs in an equilibrium ("a carrot") and outside the equilibrium ("a stick"). Induced cores of the distorted game can not exist without the enforcement. If the enforcement exists, then the corresponding induced equilibrium has the properties of a strong Nash equilibrium. Credibility of the enforcement is supported by the balance of used resources from one side and reallocations and punishments from another.