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This award funds research on topics at the intersection of dynamic game theory and institutional issues in political economy. The goal is to help us understand the economic institutions that help foster cooperation among individuals. These institutions range from formal law enforcement to on-line information sharing systems, to word of mouth social networks, and even to the use of money. In order to understand how these institutions help support the cooperation that is necessary for economic growth, the PI plans to work in two steps. First, what kinds of cooperative behavior could emerge in the absence of such institutions? Second, what new kinds of behavior can emerge when a particular institutions is introduced? The research will develop foundational results in game theory. It will also help us understand the value of information sharing institutions, centralized vs decentralized enforcement institutions, and the ways in which wealth can be employed in society. The award also funds new curriculum development in game theory and political economy for graduate students and undergraduates.
The project includes several interrelated research projects on dynamic games and institutions, divided into three parts: game-theoretic foundations of enforcement institutions, foundational research on repeated games, and dynamic models of political power, wealth, and status. The PI will develop a model of the foundations of enforcement institutions to compare the roles of private-order (eg decentralized) and public-order (eg, centralized) enforcement. Community enforcement models are a special case of repeated games with private monitoring; the PI plans to develop a new type of recursive characterization of (or bound on) equilibrium payoffs in games of this type. Finally, game theory results on coalition formation will be used along with public finance ideas on optimal fiscal policy without commitment to develop a new model of dynamic fiscal policy under political constraints.