Recent research papers by Roger B. Myerson

FOUNDATIONS OF THE STATE IN THEORY AND PRACTICE: READING BREMER AND THE COUNTERINSURGENCY FIELD MANUAL (Oct 2007)
Abstract. Paul Bremer's book about Iraq and the US Army's Counterinsurgency Field Manual express theories about the foundations of the state. Bremer emphasizes the primary importance of a national constitution. The Field Manual emphasizes local security operations and effective governance to establish the government's legitimacy. From economic problems of agency, I argue that the foundations of the state depend critically on political leaders' reputations for rewarding and judging government officials. This perspective suggests that the chances for successful democracy are increased when there are more opportunities for different political leaders to develop reputations for responsible governance and effective use of patronage. [notes]

LEARNING FROM SCHELLING'S 'STRATEGY OF CONFLICT' (Aug 2007)
Abstract. Thomas Schelling's Strategy of Conflict (1960) is a masterpiece which should be recognized as one of the most important and influential books in social theory. This paper reviews some of the important ideas in Strategy of Conflict and considers some of the broader impact that this book has had on game theory, economics, and social theory. By his emphasis on the critical importance of information and commitment in strategic dynamics, Schelling played a vital role in stimulating the development of noncooperative game theory. More broadly, Schelling's analysis of games with multiple equilibria has redefined the scope of economics and its place in the social sciences.  [notes]

FORCE AND RESTRAINT IN STRATEGIC DETERRENCE: A GAME THEORIST'S PERSPECTIVE (July 2007)
Abstract. A successful deterrent strategy requires a balance between resolve and restraint, and this balance must be recognized and understood by adversaries. So for forceful actions to have their intended deterrent effect, they should be framed by a process of communication with potential adversaries that establishes mutually recognized limits and rules about when force will be used and when it will not be used. Simple game models are used to develop the basic logic of effective credible deterrent strategies. [notes]

THE AUTOCRAT'S CREDIBILITY PROBLEM AND FOUNDATIONS OF THE CONSTITUTIONAL STATE (revised May 2007) [former title: "Leadership, trust, and constitutions"]
Abstract: A political leader's temptation to deny costly debts to past supporters is a central moral-hazard problem in politics. This paper analyzes a simple model to probe the consequences of this moral-hazard problem for leaders who compete to establish political regimes. In contests for power, absolute leaders who are not subject to third-party judgments can credibly recruit only limited support. A leader can do better by organizing supporters into a court which could cause his downfall. In global negotiation-proof equilibria, leaders cannot recruit any supporters without such constitutional checks. Egalitarian norms make recruiting costlier in oligarchies, which become weaker than monarchies. The ruler's power and limitations on entry of new leaders are derived from focal-point effects in games with multiple equilibria. The relationships of trust between leaders and their supporters are personal constitutions which underlie all other political constitutions. [notes]

FUNDAMENTAL THEORY OF INSTITUTIONS: a lecture in honor of Leo Hurwicz (revised Mar 2008)
Abstract: We follow Hurwicz in considering fundamental questions about social institutions. Hurwicz's concept of incentive compatibility may help clarify old debates about socialism, where such questions arose. Moral-hazard models show disadvantages of socialism, while adverse-selection models may delimit its advantages. We review Hurwicz's general theory of how institutions can be enforced in larger games, suggesting curb sets as an alternative enforcement theory that admits focal-point effects. Finally, we consider specific problems of leadership and trust in establishing sovereign political institutions, where high officials can be deterred from abuse of power only by promises of large future rewards, which a leader must be credibly committed to fulfill. (Presented at the 2006 North American summer meetings of the Econometric Society). [notes]

LEADERSHIP, TRUST, AND POWER: DYNAMIC MORAL HAZARD IN HIGH OFFICE (revised Apr 2008)
Abstract: We consider a model of governors serving a sovereign prince, who wants to deter them from corruption and rebellion. Governors must be penalized when they cause observable crises, but a governor's expected benefits must never go below the rebellion payoff, which itself is better than what any candidate could pay for the office. Governors can trust the prince's promises only up to a given credit bound. In the optimal incentive plan, compensation is deferred until the governor's credit reaches this bound. Each crisis reduces credit by a fixed penalty. When a governor's credit is less than one penalty from the rebellion payoff, the governor must be called to court for a trial in which the probability of dismissal is less than 1. Other governors must monitor the trial because the prince would prefer to dismiss and resell the office. A high credit bound benefits the prince ex ante, but in the long run it generates entrenched governors with large claims on the state. Low credit bounds can cause the prince to apply soft budget constraints, forgiving losses and tolerating corruption for low-credit governors. [notes]

CAPITAL AND GROWTH WITH OLIGARCHIC PROPERTY RIGHTS and APPENDIX (revised Jan 2007)
coauthored with Serguey Braguinsky.
Abstract:  To analyze effects of imperfect property rights on economic growth, we consider economies where some fraction of capital can be owned only by local oligarchs, whose status is subject to political risk. Political risk decreases local capital and wages. Risk-averse oligarchs acquire safe foreign assets for insurance, thus increasing wages in other countries that protect outside investors. Reforms to decrease political risk or to protect more outsiders' investments can decrease local oligarchs' welfare by increasing wages. A severe depression occurs when a closed country opens to let its oligarchs invest abroad without protecting outside investors, as in 1990s Russia. [computational model] [notes].

SEQUENTIAL EQUILIBRIUM IN BAYESIAN GAMES WITH COMMUNICATION (Dec 2005)
coauthored with Dino Gerardi.
Abstract. We study the effects of communication in Bayesian games when some players are sequentially rational but some combinations of types have zero probability. Not all communication equilibria can be implemented as sequential equilibria. We define the set of strong sequential equilibria (SSCE) and characterize it. SSCE differs from the concept of sequential communication equilibrium (SCE) defined by Myerson (1986) in that SCE allows the possibility of trembles by the mediator. We show that these two concepts coincide when there are three or more players, but SSCE may be strictly smaller than SCE for two-player games.

FEDERALISM AND INCENTIVES FOR SUCCESS OF DEMOCRACY (revised Aug 2005)
Abstract: Success and failure of democracy are interpreted as different equilibria of a dynamic political game with costs of changing leadership and with incomplete information about politicians' virtue. Unitary democracy can be frustrated when voters do not replace corrupt leaders, because any new leader would probably also govern corruptly. But federal democracy cannot be consistently frustrated at both national and provincial levels, because provincial leaders who govern responsibly could build reputations to become contenders for higher national office. Similarly, democracy cannot be consistently frustrated in a democratization process that begins with decentralized provincial democracy and only later introduces nationally elected leadership. [notes]

BIPOLAR MULTICANDIDATE ELECTIONS WITH CORRUPTION (Aug 2005)
Abstract. The goals of democratic competition are not only to give implement a majority's preference on policy questions, but also to provide a deterrent against corrupt abuse of power by political leaders. We consider a simple model of multicandidate elections in which different electoral systems can be compared according to these two criteria. Among a wide class of single-winner scoring rules, only approval voting is found to be satisfy both effectiveness against corruption and majoritarianism for this model.

GAME-THEORETIC CONSISTENCY AND INTERNATIONAL RELATIONS (July 2005)
Abstract. De Figueiredo, Rakove, and Weingast have argued that, to model the American Revolution, game-theoretic consistency assumptions should be relaxed. In response, we review the methodological rationale for such consistency assumptions, and we find a possible exception in international relations. Any inconsistent theory of games would be invalidated by rational players who are intelligent enough to understand it. Furthermore, within any society, culturally defined principles of justice and legitimate authority serve to generate consistent expectations in games, and these coordinating principles are strengthened by socially constructing them as corollaries of universal natural law. Such universalization of local justice and authority, although a force for local consistency, is a force for inconsistency of beliefs in international relations. In new situations that transcend the recognized domain of international boundaries, people in each society may systematically underestimate the extent to which other societies hold different views of legitimate justice.

BIOGRAPHICAL ARTICLE ON JOHN C. HARSANYI (Mar 2005)
Draft article for the New Palgrave Dictionary of Economics.  (See also a recent review of Harsanyi's great three-part paper on Bayesian games with incomplete information, for the 50th anniversary of Management Science.) Also for the New Palgrave: articles on mechanism design and the revelation principle.

VIRTUAL UTILITY AND THE CORE FOR GAMES WITH INCOMPLETE INFORMATION (Feb 2005)
Abstract: The core is extended to games with incomplete information. The feasible set is characterized by incentive-compatible mechanisms. Blocking is organized at the interim stage by an incentive-compatible mediation plan. Membership of the blocking coalition itself may be determined randomly by the blocking mediator. Nonemptiness of an interim fine core is proven for games with a balanced structure, independent types, and sidepayments. An offer of severance payments may be needed to inhibit blocking. Core allocations are characterized in terms of virtual utility scales that generalize the weighted-utility scales of the inner core. Mechanisms that achieve core allocations are coalitionally durable. [notes]

JUSTICE, INSTITUTIONS, AND MULTIPLE EQUILIBRIA (revised Jan 2004).
Abstract: Schelling's concept of the focal-point effect in games with multiple equilibria is among the most important ideas in social theory. When justice is recognized as a criterion for identifying focal equilibria, we see how justice can affect the rational behavior of selfish economic actors. The foundations of political institutions can be understood in terms of focal equilibrium selection in a more fundamental game. This paper probes these ideas with some simple game-theoretic examples. Multiple equilibria are analyzed in a rival-claimants game, and this coordination game is extended to simple models of property rights, political institutions, boundaries, and economic investment. [notes]

FUNDAMENTALS OF SOCIAL CHOICE THEORY (Sept 1996).
Abstract:  This paper offers a short introduction to some of the fundamental results of social choice theory. Topices include: Nash implementability and the Muller-Satterthwaite impossibility theorem, anonymous and neutral social choice correspondences, two-party competition in tournaments, binary agendas and the top cycle, and median voter theorems. The paper begins with a simple example to illustrate the importance of multiple equilibria in game-theoretic models of political institutions.

DECISIVENESS OF CONTRIBUTORS' PERCEPTIONS IN ELECTIONS (Dec 1992)
coauthored with Rebecca Morton.
Abstract:  We consider a model of two-candidate elections where spending on campaign advertisements can directly influence voters' preferences, and contributors give the money for campaign spending in exchange for promised services if the candidate wins.  We find that the winner of the election depends crucially on the contributors' beliefs about who is likely to win, and the contribution market tends towards nonsymmetric equilibria in which one of the two candidates has no chance of winning.  If the voters are only weakly influenced by advertising or if permissible campaign spending is small, then the candidates choose policies close to the median voter's ideal point, but the contributors still determine the winner. Uncertainty about the Condorcet-winning point (or its nonexistence) can change these results and generate equilibria in which both candidates have substantial probabilities of winning.

Research notes:
  rough notes for a short course on political economics from 7/2007 (and from 7/2005),
  2007 prize lecture and biography,
  a model of capitalist liberalization,
  talk at Harvard following Jeffrey Sachs 4/2008,
  Stony Brook talk on foundations of political institutions 7/2006,
  overview of political economics for a conference at Northwestern U. 5/2005,
  notes on virtual utility,
  comparison of electoral systems,
  an interview on game theory,
  political economics and the Weimar disaster,
  history of Nash equilibrium.

Research spreadsheets: pekingu.xls, crawfsob.xls, ybar.xls, oligarx.xls, prague.xls, desoto.xls, vcore.xls, prince.xls, caplib.xls

Also available here: a thesis on psycholinguistics of reading by Rosemarie F. Myerson.

All papers here are in Adobe PDF format.

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