In any voluntary cooperative agreement, the potential gain from deviation should determine the minimum influence required over common decision-making. This paper begins by observing that a highly asymmetrical distribution of power between two partners is not sustainable if the choice variables are strategic substitutes. It then studies a simple general-equilibrium model of a monetary union and shows that a small economy will not take part in the agreement unless it can secure influence that is more than proportional to its size and a transfer of seigniorage revenues in its favor.

In any voluntary cooperative agreement, the potential gain from deviation should determine the minimum influence required over common decision-making. This paper begins by observing that a highly asymmetric distribution of power between two partners is not sustainable if the choice variables are strategic substitutes. It then studies a simple general-equilibrium model of a monetary union and shows that a small economy will not take part in the agreement unless it can secure influence that is more than proportional to its size and a transfer of seigniorage revenues in its favor. Copyright 1992 by American Economic Association.

Historical evidence indicates that hyperinflations can disrupt individuals' normal trading patterns and impede the orderly functioning of markets. To explore these issues, we construct a theoretical model of hyperinflation that focuses on individuals and their process of economic exchange. In our model buyers must carry cash while shopping, and some transactions take place in a decentralized setting in which buyer and seller negotiate over the terms of trade of an indivisible good. Since buyers face the constant threat of incoming younger (hence richer) customers, their bargaining position is weakened by inflation, allowing sellers to extract a higher real price. However, we show that higher inflation also reduces buyers' search, increasing sellers' wait for customers. As a result, the volume of transactions concluded in the decentralized sector falls. At high enough rates of inflation, all agents suffer a welfare loss.

Historical evidence indicates that hyperinflations can disrupt individuals' normal trading patterns and impede the orderly functioning of markets. To explore these issues, we construct a theoretical model of hyperinflation that focuses on individuals and their process of economic exchange. In our model buyers must carry cash while shopping, and some transactions take place in a decentralized setting in which buyer and seller negotiate over the terms of trade of an indivisible good. Since buyers face the constant threat of incoming younger (hence richer) customers, their bargaining position is weakened by inflation, allowing sellers to extract a higher real price. However, we show that higher inflation also reduces buyers' search, increasing sellers' wait for customers. As a result, the volume of transactions concluded in the decentralized sector falls. At high enough rates of inflation, all agents suffer a welfare loss.

We develop a framework to study the dynamics of vote trading over multiple binary issues. We prove that there always exists a stable allocation of votes that is reachable in a finite number of trades, for any number of voters and issues, any separable preference profile, and any restrictions on the coalitions that may form. If at every step all blocking trades are chosen with positive probability, convergence to a stable allocation occurs in finite time with probability 1. If coalitions are unrestricted, the outcome of vote trading must be Pareto optimal, but unless there are three voters or two issues, it need not correspond to the Condorcet winner.

Personal connections can function as privileged channels of information and trust. When the reliability of information is particularly important applying for a job, needing capital for a new enterprise, moving to a new country their role often becomes crucial. Hence the ethnic enclaves, both residential and professional, in New York City; the economic weight of the Overseas Chinese in their countries of residence; the success of Medieval networks of merchants, organized along ethnic or religious lines. Personal networks are often very successful, but they are by their nature discriminatory and thus tend to generate resentment and opposition among those excluded. Economists and sociologists debate whether networks can be replicated artificially. Not surprisingly, economists tend to be more optimistic, believing that appropriate market mechanisms, encouraged and supported by policy where necessary, can substitute for the missing personal channels. Sociologists on the other hand, see the personal, spontaneous link as the essence of the relation, and thus as something that by its nature cannot be replicated at will (e.g. Marta Tienda and Rebeca Raijman (2001), discussing James E. Rauch (2001)). We address this question in a simple model of labor markets where workers differ in their unobservable productivity. We ask how signaling the possibility of engaging

We develop a competitive equilibrium theory of a market for votes. Before voting on a binary issue, individuals may buy and sell their votes with each other. We define the concept of ex ante vote-trading equilibrium and show by construction that an equilibrium exists. The equilibrium we characterize always results in dictatorship if there is any trade, and the market for votes generates welfare losses, relative to simple majority voting, if the committee is large enough or the distribution of values is not very skewed. We test the theoretical implications in the laboratory using a continuous open-book multiunit double auction.