Essays on topics in economic theory

In Chapter I, we study the optimality of allocations obtained in an economy in which agents are not coordinated by a single consistent system like Walrasian auctioneer. When market structure itself does not guarantee a full coordination, people must find a way to coordinate themselves beyond the limitation set by the incomplete market structure. One way is to have some people serving as intermediaries. To serve effectively as intermediaries they must hold enough number of goods (medium of exchange) to be used to connect structurally separated markets. This result generalizes the previous work of Goldman and Starr (1982). Chapter I is an outcome of joint work with Lawrence Benveniste.;Chapter II investigates why workers sometimes form a joint union and sometimes form separate unions. We explain this phenomenon by the heterogeneity of workers. We construct a bargaining model where workers consist of two groups which are distinguished by different productivities, and examine the unique subgame perfect equilibrium. The equilibrium outcome depends on the relative size and productivity of the two groups. The workers form a joint union when the sizes or productivities of the groups are similar. In the first case, there is wage differential which is more (less) than proportional to the productivity difference if the size of the more productive is smaller (larger) than that of the less productive. In the second case, there is no wage differential.;In conducting the analysis in Chapter II, we assumed that workers of equal productivity receive equal wages. This presupposes a particular sharing rule within the union. It is not clear how this particular rule is established. Chapter III partly provides an explanation. We consider a non-cooperative 3-person bargaining problem. The current non-cooperative bargaining theory requires some additional structure to generate a unique outcome when bargaining involves more than two players. One way is to introduce the possibility of binding contracts. In Chapter III, we introduce a simple form of contract into a 3-person bargaining model and study the perfect equilibrium outcomes. It is shown that the model generates a unique outcome which converges to an asymmetric Nash bargaining solution as the time interval between successive offers approaches 0.