Macromodeling, Default, and Money

Mainstream macromodels have assumed away financial frictions, in particular default. The minimum addition in order to introduce financial intermediaries, money, and liquidity into such models is the possibility of default. This, in turn, requires that institutions and price formation mechanisms become a modeled part of the process, or a “playable game.” Financial systems are not static, nor are they necessarily reverting to an unchanging equilibrium, but they are evolving processes, subject to institutional control mechanisms, which themselves are subject to sociopolitical development. Process-oriented models of strategic market games can be translated into consistent stochastic models incorporating default and boundary constraints.

Strategic Vote Trading in Power Sharing Systems

This paper studies decentralized vote trading in a power sharing system that follows the rules of strategic market games. In particular, we study a two-party election in which prior to the voting stage, voters are free to trade votes for money. Voters hold private information about both their ordinal and cardinal preferences, whereas their utilities are proportionally increasing in the vote share of their favorite party. In this framework, we prove generic existence of a unique full trade equilibrium (an equilibrium in which nobody refrains from vote trading). Moreover, we argue that vote trading in such systems unambiguously improves voters' welfare. (JEL C72, D71, D72, D82)

The Guidance of an Enterprise Economy

This book is devoted to the study of the guidance, control and coordination problems of an enterprise economy. Our basic approach requires an understanding of the roles of money and financial institutions. Our viewpoint differs from most current approaches in stressing together specifically game theory, methods of physics and experimental gaming; together with and more generally a broader evolutionary approach from the biological and other behavioural sciences. Our intended audiences are economists, physicists, experimental gamers, accounting theorists , legal scholars and other behavioural scientists willing to explore beyond their own specialist disciplines. Our biases run primarily to an exposition most congenial to economists, experimental gamers and physicists, but we aim to have all basic concepts understandable regardless of technical background. A mathematically precise unification of Walrasian general equilibrium with macroeconomic dynamics and Schumpeterian innovation is provided utilizing strategic market games.

A survey of strategic market games

The Strategic Market Game (SMG) is the general equilibrium mechanism of strategic reallocation of resources. It was suggested by Shapley and Shubik in a series of papers in the 70s and it is one of the fundamentals of contemporary monetary macroeconomics with endogenous demand for money. This survey highlights features of the SMG and some of the most important current applications of SMGs, especially for monetary macroeconomic analysis.