The Case for Reforming Euro Area Entry Criteria

The global economic and financial crisis has raised further concerns about the euro-entry criteria, in addition to other factors, such as the effective tightening of the criteria due to the enlargement of the EU from 12 to 27 members, the highly unfavourable property of business cycle dependence, the internal inconsistency of the criteria due to the structural price level convergence of Central and Eastern European countries, and the continuous violation of the criteria by euro-area members. The interest rate criterion became a highly volatile measure. Many US metropolitan areas would fail to qualify to be members of the US monetary union by applying the currently used inflation criterion to the US. It is time to reform the criteria and to strengthen their economic rationale within the legal framework of the EU treaty. A good solution would be to relate all criteria to the average of the euro area and simultaneously to extend the compliance period from the currently considered one year to a longer period.

Lexicographic allocations and extreme core payoffs: the case of assignment games

We consider various lexicographic allocation procedures for coalitional games with transferable utility where the payoffs are computed in an externally given order of the players. The common feature of the methods is that if the allocation is in the core, it is an extreme point of the core. We first investigate the general relationship between these allocations and obtain two hierarchies on the class of balanced games. Secondly, we focus on assignment games and sharpen some of these general relationship. Our main result is the coincidence of the sets of lemarals (vectors of lexicographic maxima over the set of dual coalitionally rational payoff vectors), lemacols (vectors of lexicographic maxima over the core) and extreme core points. As byproducts, we show that, similarly to the core and the coalitionally rational payoff set, also the dual coalitionally rational payoff set of an assignment game is determined by the individual and mixed-pair coalitions, and present an efficient and elementary way to compute these basic dual coalitional values. This provides a way to compute the Alexia value (the average of all lemacols) with no need to obtain the whole coalitional function of the dual assignment game.