on the robustness of equilibrium refinements abstract the philosophy of equilibrium refinements is that the analyst if he knows things about the structure of the game can reject some nash equilibria as unreasonable the word know in the preceding sentence deserves special emphasis if in a fixed game the analyst can reject a particular equilibrium outcome but he cannot do so for games arbitrarily close by then he may have second thoughts about rejecting the outcome we consider several notions of distance between games and we characterize their implications for the robustness of equilibrium refinements

the dual structure of incomplete demand systems integrability of incomplete demand systems is discussed the concepts of weak integrability quasi expenditure function quasi indirect utility function and quasi utility function are defined their relationships to the expenditure function indirect utility function and utility function are developed the dual structure of the quasi functions permits exact welfare analysis and reveals the conditional preference structure for the commodities of interest new results relating the uniqueness and exactness of consumer s surplus to the structure of the expenditure and indirect utility functions are obtained

investigation of stated and revealed preferences for an elk hunting raffle the charter forest experiment at the valles caldera national preserve vcnp in new mexico provides land managers policymakers and researchers a unique opportunity to examine an alternative public land management institution the vcnp mature bull elk permit lottery has been the largest revenue generating recreation program at the preserve since the program s inception in 2002 this paper uses stated and revealed preference ticket purchase data collected through an online survey to estimate a set of ticket demand equations for the purpose of assessing revenue generation access and the willingness to donate to this program

endogenous federal grants and crowd out of state government spending theory and evidence from the federal highway aid program contrary to simple theoretical predictions existing evidence suggests that federal grants do not crowd out state government spending a legislative bargaining model with endogenous grants documents a positive correlation between grant receipts and preferences for public goods this correlation has likely biased existing work against measuring crowd out to correct for such endogeneity the model motivates instruments based on the political power of state congressional delegations exploiting this exogenous variation in grants the instrumental variables estimator reports crowd out that is statistically and economically significant this endogeneity may explain the flypaper effect a nonequivalence between grant receipts and private income jel d70 h40 h77

annual fees and recreation choice models of recreation behavior have typically ignored the role of fixed annual fees such as the fee for a recreational license in determining choice and welfare we demonstrate how techniques from the literature on discrete continuous choice and two part tariffs can address a situation where fixed annual fees are essential to determining the choice of a recreation site we explore how accounting for value captured by fixed fees can influence the way resource changes are assessed

modeling recreation demand in a poisson system of equations an analysis of the impact of international exchange rates we extend count data travel cost modeling by developing a utility theoretic system of semilogarithmic recreation demand equations the restrictions required to make the system utility theoretic are applied during estimation the model is applied to individual wilderness recreation trips in a system of four canadian wilderness parks the resulting demand system is used to examine the impacts of changing u s canadian currency exchange rates on participation and welfare of u s recreationists

welfare estimation using aggregate and individual observation models a comparison using monte carlo techniques due to the weak behavioral foundations of aggregate demand models zonal travel cost models have been largely abandoned in favor of models based on individual observations however sample selection difficulties in individual observation models often require the use of distribution sensitive limited dependent variables estimators in this paper i use monte carlo simulations to investigate whether the bias from aggregation is worse than possible bias from these narrowly specified estimators somewhat surprisingly the results indicate that zonal models often outperform the individual observation models especially when using an aggregate model that incorporates intrazonal variance of the explanatory variables

intergovernmental grants as signals and the alignment effect theory and evidence this paper provides a simple political agency model to explain the effect of political alignment between different tiers of government on intergovernmental grants and election outcomes key features of the model are i rational voters interpret public good provision as a signal of incumbent competence and ii realistically grants are unobservable to voters in this setting the national government will use the grant as an instrument to manipulate the public good signal for the benefit of aligned local incumbents and challengers then aligned municipalities receive more grants with this effect being stronger before elections and the probability that the aligned local incumbent is re elected is higher these predictions are tested using a regression discontinuity design on a new data set on italian municipalities at a second empirical stage the national grant to municipalities is instrumented with an alignment indicator allowing estimation of a flypaper effect for italian municipalities

valuing cultural world heritage sites an application of the travel cost method to mont saint michel abstractthis article using the zonal version of the travel cost method ztcm provides the first economic valuation of recreational trips to mont saint michel msm the msm was designated as united nations educational scientific and cultural organization world heritage site in 1979 and is the most visited coastal site in france the potential effects on consumer surplus cs estimates of some aspects of the ztcm are considered namely the treatment of the multiple purpose destination mp d trips the inclusion of the opportunity cost of time oct in the recreation demand model and the heterogeneity in the preferences the heterogeneity in the preferences is examined through a random parameters poisson model rppm the rppm generalizes the standard poisson model spm by allowing coefficients of explanatory variables to vary randomly across geographical units rather than being fixed our results show that 1 substantial cs values are associated with the msm 2 excluding ignoring mp d trips resul

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

balanced budget redistribution as the outcome of political competition this paper models balanced budget redistribution between socio economic groups as the outcome of electoral competition between two political parties equilibrium is unique in the present model and a sufficient condition for existence is given requiring that there be enough stochastic heterogeneity with respect to party preferences in the electorate the validity of hotelling s principle of minimum differentiation and of director s law are examined under alternative hypotheses concerning administrative costs of redistributions and voter s possibilities both of abstaining from voting and of becoming campaign activists for one of the parties the policy strategy of expected plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality incomes are fixed and known so lump sum taxation is feasible however constraints on tax transfer differentiation between individuals are permitted in the analysis

redistributive politics and economic efficiency the political process often compensates the losers from technical change or international competition in an economically inefficient way namely by subsidizing or protecting declining industries instead of encouraging the movement of resources to other more productive uses we find that a dynamic inconsistency in the game of redistributive politics contributes to this outcome to achieve economically efficient outcomes it is necessary that those making economically inefficient choices not be given offsetting transfers but the political process distributes income on the basis of political characteristics which are in general different from the economic characteristics that are rewarded by the market we identify circumstances in which the inefficient choosers have desirable political characteristics and are therefore immune from threats of having to face the economic consequences of their choices

estimating social welfare using count data models an application to long run recreation demand under conditions of endogenous stratification and truncation this paper develops a negative binomial model of recreation demand that corrects for both truncation and endogenous stratification this approach recovers the demand associated with the general population not just the users of the site this model demonstrates the importance of the joint nature of the population s latent demand for trips and the consumer surplus associated with those trips the empirical results provide an estimate of the willingness to pay by washington state residents for hiking opportunities in the cascade mountain range these results are used to forecast total trips and willingness to pay over the next forty years copyright 1995 by mit press

towards a renaissance of economic theory in his penetrating essay theory and experiment vernon smith observes that subject behavior often diverges from game theoretic predictions and asserts that minor fudging with theory is unlikely to solve our problems because circumstances unknown to us are responsible for the explanatory failures of neoclassical economic theory i deal precisely with these issues in thebounds of reason 2009a my remarksheredrawupon several themes fromthis book relevant to specifying a refocused research agenda for the study of human strategic interaction the core of economic theory is the rational actor model which holds that individuals have preferences over outcomes beliefs called subjectivepriors linking choices to the relativeprobability of alternativeoutcomes and theymaximize their expected payoffs given these preferences and beliefs subject towhatevermaterial informational and other constraints they face many observers consider the experimental work of daniel kahneman and others kahneman et al 1982 gigerenzer and todd 1999 as destructive of the rational actormodel in fact however their research has considerably strengthened the rational actor model s explanatory power albeit at the expense of increasing its complexity gintis 2009a chs 1 and 12 most important these studies have shown the value of modeling using heuristics that conserve on information processing and of including the current state physiological temporal and ownership of the individual as an argument of the preference ordering in the 1980s the core of economic theory was extended to include game theory viewed as the theory of the strategic interaction of bayesian rational actors game theory has become a centerpiece of microeconomic theory alongside the traditional walrasian model of general market equilibrium it is important to note however that this exalted position is quite recent the textbooks that expound the received wisdom of today s practicing economists were written in the early years of the game theory revival between 1988 and 1995 these textbooks include misconceptions promulgated in the 1980s that have been transmitted to the current generation of economists as i shall show some of these misconceptions have been repaired in more recent contributions to game theory contemporary experimentalists however generally rely on the more traditional body of outdated theory i here rely on more recent theoretical contributions especially those of robert aumann and adam brandenburger and their coworkers to bring game theory up to date i then argue that despite their analytical power game theory and the rational actor model provide only part of the theoretical toolkit needed to explain human strategic interaction moreover because individuals bring much of the complexity of society into the controlled conditions of the laboratory game theory and the rational actor model are insufficient to explain experimental results concretely i suggest that a these analytical tools must be supplemented by what i term the psycho social theory of norms b the correlated equilibrium should replace

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

specification of driving costs in models of recreation demand existing recreation demand models have paid much attention to the heterogeneous nature of the opportunity cost of time but generally stipulate constant per mile costs in access price specifications this study proposes two alternative approaches to introduce user specific driving costs into recreation demand models the first approach is based on a refined measurement of driving costs based on engineering considerations the second strategy estimates perceived per mile cost as a function of vehicle attributes in an empirical framework we find strong evidence that driving costs are a visitor specific concept and that prescribed and perceived costs differ substantially however welfare measures generated by these alternative specifications are not statistically different from those produced by the standard model in our application of jet skiing in the lake tahoe region

recreation nonparticipation as choice behavior rather than statistical outcome in recreation demand models nonparticipation is usually estimated as the probability mass on zero demand given a positive level of expected demand and a discrete distribution of demand outcomes researchers have attempted to improve predictions of nonparticipation by modifying the parameters of the demand distribution this study departs from previous approaches by explicitly incorporating nonparticipation into the behavioral model the choice to participate is described by a distribution of preferences combined with a choke price on individual demands to distinguish participants from nonparticipants the model is found to accurately predict nonparticipation and the size of the user group copyright 2008 oxford university press

election goals and income redistribution recent evidence from albania this paper examines the impact of political competition on block grants from federal to sub federal levels of government we model the extent and direction of income redistribution as determined proximately by the political agendas of central decision makers and at a deeper level by the institutions within which they nd themselves operating we contrast two political objective functions that yield di erent empirical predictions of the ways in which politics should a ect scal policy lessons learned here may prove important in understanding limits on the types of redistribution possible via block grants given the institutional framework in both developing and developed countries 2001 elsevier science b v all rights reserved jel classixcation h1 h7 o1

bureaucrats or politicians part i a single policy task this paper investigates the normative criteria that guide the allocation of a policy task to an elected politician versus an independent bureaucrat the bureaucrat is preferable for technical tasks for which ability is more important than effort or if there is great uncertainty about whether the policymaker has the required abilities the optimal allocation of redistributive tasks is ambiguous and depends on how the bureaucrat can be instructed but irrespective of the normative conclusion the politician prefers not to delegate redistributive policies

a latent class approach to modeling endogenous spatial sorting in zonal recreation demand models a method for incorporating unobserved heterogeneity into aggregate count data frameworks is presented and used to control for endogenous spatial sorting in zonal recreation models the method is based on latent class analysis which has become a popular tool for analyzing heterogeneous preferences with individual data but has not yet been applied to aggregate count data the method is tested using data on backcountry hikers for a southern california study site and performs well for relatively small numbers of classes the latent class model produces substantially smaller welfare estimates compared to a constrained version that assumes homogeneity throughout the population

using count data models in travel cost analysis with aggregate data estimators of recreational demand models frequently use continuous functional forms such as ordinary least squares ols on log transformed variables e g ziemer musser and hill however the nature of trip demand introduces complicating factors first trips occur in nonnegative quantities failure to control for this censoring will lead to biased estimation second because trips are available only in integer quantities the usual demand models which correlate marginal quantity with marginal price may be inapplicable in light of these factors a natural alternative is to use statistical models that explicitly recognize the count nature of trip demand several recent papers e g shaw smith grogger and carson creel and loomis have applied count models to the travel cost model these works largely have focused on truncated data sets based on choice based samples in this study the focus is on the older problem where zero demanders are included in particular the application of several robust estimators of count models to aggregated data will be considered the poisson distribution forms the foundation for the count models examined in this study although the poisson is a convenient distribution to work with it imposes some stringent constraints on the demand distribution in particular the poisson distribution assumes the variance of trip demand is equal to the expected value of trip demand to loosen these constraints a generalization of the poisson the negative binomial is discussed robust estimation procedures that permit further loosening of a priori assumptions are then reviewed permit data from the boundary waters canoe area are used to examine the effects of these count models on consumer surplus estimates and on coefficient variability

on the aggregate value of recreational activities a nested price index approach using poisson demand systems an important consideration in the development ofregulations and policies that administer naturalresources in an area is the value of the non marketactivities supported by those lands little attentionhas been paid to the aggregate value of largegeographic areas this analysis builds autility theoretic price index and utilizes this indexto estimate an aggregate poisson demand to valuebackcountry recreational hiking opportunities innorthern california

common belief and the theory of games with perfect information abstract the statement it is common belief that player i is bayesian rational where bayesian rational means an expected utility maximizer is defined for two person games with perfect information it is shown that in most such games it is not possible for a theory so postulate the bayesian rationality of all players and to be common belief this bears directly upon the salience of standard solution concepts such as subgame perfect and sequential equilibria as well as upon the extensive form rationalizability theories of d bernheim econometrica 52 1984 1009 1028 and d pearce econometrica 52 1984 1029 1050 which rely heavily on the common belief of bayesian rationality journal of economic literature classification number c72

addressing aggregation bias in zonal recreation models abstract models of recreation demand are often based on zonal data results from such models are susceptible to aggregation bias we propose a zonal model of recreation that captures some of the underlying heterogeneity of individual visitors by incorporating distributional information on per capita income from census sources into the aggregate demand function this adjustment eliminates the unrealistic constraint of constant income across zonal residents and thus reduces the risk of aggregation bias in estimated parameters in addition the corrected aggregate specification reinstates the applicability of generalized maximum likelihood methods and increases model efficiency

rational cooperation in the finitely repeated prisoner s dilemma experimental evidence this paper presents experiments designed to examine the sequential equilibrium reputation hypothesis in the finitely repeated prisoner s dilemma the authors test the hypothesis by controlling the subjects ability to build reputations and by manipulating their beliefs that their opponent is irrational or altruistic the responses of subjects strongly support the sequential equilibrium prediction the results also suggest an important role for homemade altruism that is a natural tendency to cooperate that subjects bring to the experiment from the outside the authors find that there may be no difference between the beliefs that an opponent is altruistic and the actual chance it is so copyright 1993 by royal economic society

rationality nash equilibrium and backwards induction in perfect information games we say that a player is certain of an event a if she assigns probability 1 to a there is common certainty cc of a if the event a occurred each player is certain of a each player is certain that every other player is certain of a and so forth it is shown that in a generic perfect information game the set of outcomes that are consistent with common certainty of rationality ccr at the beginning of the game coincides with the set of outcomes that survive one deletion of weakly dominated strategies and then iterative deletion of strongly dominated strategies thus the backward induction outcome is not the only outcome that is consistent with ccr in particular cooperation in rosenthal s 1981 centipede game and fighting in selten s 1978 chainstore game are consistent with ccr at the beginning of the game next it is shown that if in addition to ccr there is cc that each player assigns a positive probability to the true strategies and beliefs of the other players and if there is cc of the support of the beliefs of each player then the outcome of the game is a nash equilibrium outcome