perfect foresight and equilibrium selection in symmetric potential games the equilibrium selection approach of matsui and matsuyama j econ theory65 1995 415 434 which is based on rational players who maximize their discounted future payoff is analyzed for symmetric two player games with a potential function it is shown that the maximizer of the potential function is the unique state that is absorbing and globally accessible for small discount rates journal of economic literatureclassification number c72

aspiration adaptation in the ultimatum minigame abstract two agents recurrently play a 2 2 version of the ultimatum game each player sticks to his past action if it was satisfactory relative to an endogenous aspiration level and otherwise abandons it with positive probability this type of satisficing behavior is shown to yield efficiency in the limit it does not favor a specific distribution of surplus and can give an explanation for the incidence of equitable offers in practice numerical investigations link a player s character as captured by the model parameters to his average bargaining success results indicate that it is beneficial to be persistent and stubborn i e slow in adapting aspirations and switching actions in response to major dissatisfaction also it is an advantage to be capricious i e to experience large and frequent perturbations of aspiration level and to discriminate only little between minor and major dissatisfaction

factor proportions in israel s manufacturing trade 1965 1982 abstract this paper tries to explain changes in the foreign trade patterns of israel s manufacturing sector in terms of changes in relative factor use during the period 1965 1982 although the sector s comparative advantage lay in labor intensive goods in most of this period changes in net exports were correlated positively with changes in human and physical capital use and negatively with changes in labor use this was due to the expansion of capital intensive exports

determinants of bank growth choice abstract we study the determinants of bank growth in a two stage logistic regression model we first compare banks that branch bank acquire or product expand with banks that do not grow externally banks that are federally chartered in states with higher income growth and with higher labor prices are less likely to grow externally larger banks are more likely to grow externally in the second stage we study determinants of growth activity for banks that expand products branch or acquire other banks depending on the time period bank structure regulatory environment performance and balance sheet characteristics determine bank growth choices

an empirical investigation of changes in scale economies for the commercial banking firm 1979 1986 the period of the 1980s represents a particularly turbulent time for the banking industry a number of technological and regulatory changes have occurred including the elimination of regulation q which had limited the explicit interest payments that banks could pay on some types of deposits it would be expected that these changes would affect the structure of costs for banks the behavior of the cost function is studied over the 1979 1986 time period and in contrast to previous studies using earlier data increasing economies of scale are found in the later years for banks in both unit and branch banking states these results indicate that there may be increased cost pressure for smaller banks to become larger either through mergers and acquisitions or through internal growth this may lead to further consolidation pressures within the industry and reductions in the overall number of banking firms copyright 1991 by ohio state university press

cooperation through imitation abstract this paper characterizes long run outcomes for broad classes of symmetric games when players select actions on the basis of average historical performance received wisdom suggests that when agent s interests are partially opposed behavior is excessively competitive keeping up with the jones lowers everyones welfare here we study the long run consequences of imitative behavior when agents have sufficiently long memories and evaluate past actions in terms of weighted average payoff imitation robustly leads to cooperative outcomes with highest symmetric payoffs in the long run furthermore lengthening memory reinforces this effect this provides a rationale for example for collusive cartel like behavior without collusive intent

commercial bank offices and the mobilisation of private savings in selected sub saharan african countries the mobilisation of domestic savings has remained a thriving issue in discussions of ways and means of harnessing resources for development in africa this work attempts to examine the role of a deliberate policy of extending offices of banks to the rural areas in savings mobilisation efforts using ordinary least squares methods data from five african countries that have pursued this policy in recent times are examined to see if there is any significant relationship between the savings rate and their population per bank office ratio our results are consistent with the hypothesis that the extension of branch offices of banks to rural areas could help attenuate the poor savings performance in most african economies

unlimited liability as a barrier to entry many but not all firms have the freedom to choose liability rules in some countries service professions have unlimited liability rules imposed by government historically banks in some countries faced unlimited liability why do governments impose unlimited liability this is the question we address with a simple model we illustrate the agency conflicts in firms limited liability solves these conflicts efficiently unlimited liability raises the cost of capital inefficiently small firms result but under some conditions selectively applied unlimited liability rules protect rents we test several propositions with data on scottish banking and u s law firms

learning in games by random sampling abstract we study repeated interactions among a fixed set of low rationality players who have status quo actions randomly sample other actions and change their status quo if the sampled action yields a higher payoff this behavior generates a random process the better reply dynamics long run behavior leads to nash equilibrium in games with the weak finite improvement property including finite supermodular games and generic continuous two player quasi concave games if players make mistakes and if several players can sample at the same time the resulting better reply dynamics with simultaneous sampling converges to the pareto optimal nash equilibrium in common interest games journal of economic literature classification numbers c70 c72 c73

correspondent services and cost economies in commercial banking abstract prior bank cost function studies have ignored the fact that some banks obtain a substantial amount of services from their correspondents if these services are paid for with compensating deposit balances their cost to the purchasing bank is not reflected in standard expense reports this paper investigates whether explicit consideration of theese correspondent costs materially affects estimated bank returns to scale the results indicate that the level of banksoperating costs is underreported by as much as 15 while scale economy estimates for unit banks are not significantly affected by the addition of correspondent service costs prior studies have overestimated branch bank scale economies by a small but statistically significant amount

taxation of interest income deregulation and the banking industry removing interest rate ceilings on bank deposits or reducing the tax rate applicable to the interest earned on such deposits are alternative means of increasing the after tax return to depositors these alternatives however have differing impacts on the structure of a competitive banking industry this paper develops a model which focuses on a bank s choice between paying an explicit interest rate on its deposits and paying a return in the form of services the model allows banks to differ in their production technologies and depositors in their marginal tax rates and preferences for services the effects of tax rate changes and a ceiling on the explicit deposit interest rate are analyzed coinciding with the rise in market interest rates to levels significantly above regulation ceiling rates on bank and savings and loan deposits has been a move to reduce the level of taxation on interest income general proposals to reduce the tax on interest income seem to have gained support as a means of increasing after tax rates of return in order to increase aggregate savings while proposals to allow banks and savings and loans to offer tax free savings certificates are supported as a means of reducing the cost of funds for such thrift institutions for example the tax exempt all savers certificates were designed to yield higher after tax rates of return for some individuals while simultaneously lowering the cost of funds to the issuing institutions as a means of providing a higher return to depositors an obvious alternative to reducing the tax on interest income would be to speed the removal of interest rate ceilings which apply to deposits at banks and savings and loans tax changes and deregulation would both affect the banking industry by leading to changes in the after tax interest rate on deposits the composition of deposit return between explicit taxable interest payments and the provision at below cost of nontaxable services might also be affected along with the optimum level of deposits for an individual bank and the size of the banking industry unfortunately none of these implications all of which are relevant for analyzing recent tax and deregulation proposals have been studied within the framework of a model of the banking industry this paper develops a model which focuses on the bank s choice between paying an explicit interest rate on its deposits and paying a return in the form of services previous models have often ignored this choice assuming that only the total return and not its composition mattered to the bank kareken 11 klein

long run equilibria with dominated strategies abstract we show that the predictions of long run behavior under the evolutionary process are highly sensitive to the addition and elimination of strictly dominated strategies in particular for the best response dynamics cf kandori m rob r 1995 evolution of equilibria in the long run a general theory and applications j econ theory 65 2 383 414 we prove that for any symmetric normal form game any strict nash equilibrium can be selected as the unique long run equilibrium by appropriately adding only one single strategy which is strictly dominated by all original strategies moreover if we further assume instantaneous adjustment then any convex combination of strict nash equilibria with rational number weights can be realized as the long run distribution by appropriately adding strictly dominated strategies

rapid evolution under inertia abstract this paper demonstrates that inertia driven by switching costs leads to more rapid evolution in a class of games that includes m m pure coordination games under the best response dynamic and a fixed rate of mutation the expected waiting time to reach long run equilibrium is of lower order in the presence of switching costs due to the creation of new absorbing states that allow ellison s ellison g 2000 basins of attraction long run stochastic stability and the speed of step by step evolution rev econ stud 67 17 45 step by step evolution to occur

the evolution of a free banking system the institutional features of models of unregulated monetary systems have often been arbitrarily and implausibly assumed this paper instead provides realistic grounding for important features by constructing a logical evolutionary account of free banking sophisticated and orderly arrangements are shown to emerge from competition and the pursuit of less costly methods of payment the emergence of standardized commodity money is followed by the development in turn of basic money transfer banking easily transferable bank liubilities and clearinghouses the features of an evolved free banking system differ from those assumed in recent models of competitive payments systems

survival at the center the stability of minimum differentiation abstract we model a hotelling market with multidimensional product differentiation in an evolutionary framework both evolutionary stability in the sense of schaffer 1989 and stochastic stability following kandori et al 1993 young 1993 are analyzed it is shown that firms move towards the center in product space i e a principle of minimum differentiation on all dimensions of the product space applies

popularity of reinforcement based and belief based learning models an evolutionary approach in an evolutionary model players from a given population meet randomly in pairs each instant to play a coordination game at each instant the learning model used is determined via some replicator dynamics that respects payoff fitness we allow for two such models a belief based best response model that uses a costly predictor and a costless reinforcement based one this generates dynamics over the choice of learning models and the consequent choices of endogenous variables we report conditions under which the long run outcomes are efficient or inefficient and they support the exclusive use of either of the models or their co existence

unfolding social hierarchies abstract consider a large population of finitely lived agents organized into n different hierarchical levels every period all those placed at each level are randomly matched to play a given symmetric game based on the resulting outcome a fraction of agents who within their own level attain the highest payoffs are promoted upwards on the other hand newcomers replacing those who die every period enter at the lowest level and choose irreversibly the strategy to be played for the rest of their life this choice is made with some noise by imitating one of the strategies adopted at the highest level in this setup the unique long run behavior of the system is fully characterized for the whole class of 2 2 coordination games and two alternative variations of the model the results crucially depend on the key institutional parameters and n in particular it is shown that inefficient behavior prevails in the long run even when risk dominated if promotion is only mildly selective high and the social system is quite hierarchical large n in a stylized manner these parameter conditions may be viewed as reflecting a sort of institutional deficiency that impairs economic performance journal of economic literature classification numbers c70 c72 c73 d72

scale and scope economies in the multi product banking firm abstract the multi product nature of the banking firm is examined utilizing the translog cost function this analysis indicates that contrary to conventional wisdom natural monopoly scale economies and product specific decreasing costs are not robust characterizations of the banking industry there is however evidence that the cost function is characterized by economies of scope the implications of these results are discussed and extensions of this approach suggested

imitating cooperation and the formation of long term relationships we propose that the option to maintain or to quit relationships can enforce cooperation in the prisoner s dilemma between boundedly rational agents in a large population if players imitate successful behavior and sometimes choose to experiment agents do not have the ability to follow history dependent strategies but have access to information about what behavior is on average the most successful one cooperative behavior in a homogenous population emerges if both the imitation and experimentation rate are suciently small in a heterogeneous population the same holds without a restriction on the imitation rate the results resemble eshel et al 1998 but the assumption of local interaction is substituted by the endogenous formation of relationships

scale economies in banking a restructuring and reassessment the issue of scale economies in banking has a rich history most earlier studies report modest operating cost scale economies for small institutions those with less than about 50 million of deposits in 1968 dollars but are unclear where these economies might end if at all unfortunately these studies are limited in four important respects first those that were well specified did not measure the total cost of banking operations but concentrated on estimating scale economies for individual banking functions e g demand deposits separately from commercial loans second an average cost curve that could take a u shape over the full range of banks was not fitted either because larger banks were not included or because of the functional form used cobb douglas consequently the optimum or minimum cost size of a bank or office could not be determined third the variables measuring the costs of branching were misspecified fourth the branch

scale economies and cost complementarities in commercial banks on and off balance sheet activities abstract bank off balance sheet obs activities have grown dramatically and have become significantly important especially at large banks we investigate whether failure to incorporate obs products may lead to a misspecification problem models that exclude deposits from the output specification suggest economies of scale which vanish when deposits are included we find that inclusion of obs products has little effect on the scale economies measures with only a few exceptions the results provide no evidence of cost complementarities in joint production the tremendous growth of bank obs activities in the 1980s may be explained by the very small approximately zero pecuniary cost of these activities

a note on cost structure and economies of scale in greek banking abstract this note studies the greek banking industry in 1980 1989 in order to estimate a representative cost structure functional form and search for economies of scale the constructed model uses a translogarithmic cost function that includes the size of assets capital labor and technological progress by using this model which has been used by benston et al 1982 hunter and timme 1986 and others we have been able to estimate for the first time an econometric form of the costs in greek banking and we have been able to investigate economies of scale in the greek banking industry although operating cost scale economies do exist total cost scale economies were not present this has been shown through the utilization of a large sample of pooled data of all greek banks for a period of ten years and the use of two other samples of large and small banks moreover by exploiting the properties of the model we shall be able to show whether technological progress has been a factor which lowers bank costs

the multibank holding company effect on cost efficiency in banking abstract this paper tests the hypothesis that differences in the organizational form embodied in independent banks one bank holding companies and multibank holding companies result in differences in operating cost efficiency the transaction and agency cost paradigms for analysis of organizational efficiency provide theoretical motivation for the hypothesis the effects of organizational form on bank operating expenses for individual banks are evaluated on subsamples divided into quartiles based on total revenue results indicate that for banks having revenues in the lowest quartile both one bank and multibank holding company affiliates are cost efficient relative to independent banks multibank holding company affiliates are cost efficient relative to both one bank affiliates and independent banks for banks in the interquartile range no significant differences in cost efficiency are noted banks in the highest revenue quartile relative efficiency at the organizational level is also evaluated results provide evidence of lower operating costs for banking operations of both multibank and one bank holding company organizations relative to independent banks taken as a whole the results imply that holding company affiliation conveys cost advantages to banking units below the 75th revenue percentile

interaction and imitation with heterogeneous agents a misleading evolutionary equilibrium abstract in a two population evolutionary game we analyze the interaction between individuals belonging to two populations with the same strategy set but different payoffs a game is played among individuals in the two populations they imitate agents belonging to the same and also the alternative population when a revising agent is matched with someone in the alternative population who plays differently his expected payoff and the observed payoff of his partner diverge hence he conjectures the payoff from switching to the other strategy by weighing what he expected and what he observes the evolutionary dynamics has a unique locally asymptotically stable fixed point which typically differs from the evolutionary stable equilibrium without inter population imitation for a collective action game we analyze to what extent the compliance rate and the social welfare differ from the nash equilibrium and how these gaps depend on the confidence that agents assign to what they see

binary games with state dependent stochastic choice this paper studies a stochastic equilibrium selection model for binary coordination games players switch strategies stochastically so that the mistake probabilities are fully dependent on the population states a probabilistic behavior is said to be aspiration imitation resp oriented if strategy switches are mainly driven by the aspiration imitation resp effect in general a strategy switch by one player generates externalities on others strategies in a coordination game can be classified according to the relative magnitude of their externality effects it is shown that the selection outcome for a linear coordination game is determined in a specific way by the balance of the risk dominance the aspiration imitation and the externality effects it is also shown that an aspiration imitation resp oriented behavior tends to select payoff dominant maxmin resp equilibrium and that risk dominant equilibrium is always selected if and only if the aspiration and the imitation effects exactly cancel each other out which in turn makes the selection process insensitive to externality effects journal of economic literature classification number c72

the robustness of output measures in property liability insurance efficiency studies abstract we empirically examine two methods for measuring output in property liability insurer efficiency studies the value added approach and the flow or financial intermediation approach the approaches are not mutually consistent the value added approach is closely related to traditional measures of firm performance but the flow approach is not in addition efficient value added approach firms are less likely to go insolvent while firms characterized as efficient by the flow approach are generally more likely to fail we also find that the theoretical concern regarding the value added approach s use of losses as a measure of output is not validated empirically

do people play nash equilibrium lessons from evolutionary game theory evolutionary game theory provides an answer to two of the central questions in economic modeling when is it reasonable to assume that people are rational and when is it reasonable to assume that behavior is part of a nash equilibrium and if it is reasonable which equilibrium the traditional answers are not compelling and much of evolutionary modeling is motivated by the need for a better answer evolutionary game theory suggests that in a range of settings agents do eventually play a nash equilibrium moreover evolutionary modeling has shed light on the relative plausibility of different nash equilibria

threshold effects of financial status on the cost frontiers of financial institutions in nondynamic panels this article applies hansen s 1999 2000 threshold regression model to estimate translog cost frontiers in the hope of shedding light on the banking industry s production processes and the extent of its technical efficiency te the threshold technique allows for the existence of multiple technologies of production distinguished by an exogenous threshold variable strong evidence of multiple technologies is found in the industry irrespective of which financial indicator as constructed by factor analysis defines the threshold variable cost savings and scale economies among the various underlying technologies are compared herein we also highlight the differences between the threshold results and the conventional cost frontier

nash equilibrium and the evolution of preferences abstract a population of players is randomly matched to play a normal form game g the payoffs in this game represent the fitness associated with the various outcomes each individual has preferences over the outcomes of the game and chooses an optimal action with respect to those preferences however these preferences need not coincide with the fitness payoffs when evolution selects individuals on the basis of the fitness of the actions they take the distribution of aggregate play must be a nash equilibrium of g weak additional assumptions on the evolutionary process imply perfect equilibrium journal of economic literature classification number c72

evolution of preferences1 we endogenize preferences using the indirect evolutionary approach individuals are randomly matched to play a two person game individual subjective preferences determine their behaviour and may differ from the actual objective pay offs that determine fitness matched individuals may observe the opponents preferences perfectly not at all or with some in between probability when preferences are observable a stable outcome must be efficient when they are not observable a stable outcome must be a nash equilibrium and all strict equilibria are stable we show that for pure strategy outcomes these conclusions are robust to allowing almost perfect and almost no observability with the notable exception that inefficient strict equilibria may fail to be stable with any arbitrarily small degree of observability despite being stable with no observability

constrained mobility and the evolution of efficient outcomes we study an evolutionary model akin to the one studied in anwar 2002 where a set of agents use myopic best response learning to i determine their action in a 2 2 coordination game and ii to choose on which of multiple islands to interact we focus on the case where the number of agents maximally allowed on each islands is constrained we extend anwar s original analysis by considering the case when there may be more than two islands we find that if the constraints are such that one island may be empty universal coordination on the payoff dominant action is possible in the long run if the constraints are such that all islands will be full then for relatively mild constraints and apart from special cases the coexistence of conventions will occur with one island coordinating on the risk dominant action and all remaining islands coordinating on the payoff dominant action for relatively stringent constraints all agents will play the risk dominant action

branching scale economies and banking costs abstract in this paper we develop and estimate a model of bank costs based on a theory of the branch cost function first we show that convenient branch location is important to banking customers and implies that banks do not necessarily operate branches at minimum average cost this theoretical result provides a rationale for including branch variables in the bank cost function second we estimate a statistical cost equation derived explicitly from assumptions about the branch cost function and including branch output variables our empirical results suggest substantial economies of scale at the branch level but no economies from expansion by branching finally we show that the resulting cost structure of the banking industry does not imply that a highly concentrated banking structure is necessary for efficiency thus economies of scale would not be expected to force small banks out of the market even if current restrictions on interstate banking are liberalized

economies of scale in the us savings and loan industry 1973 83 the question addressed in this research is whether or not there exist economies of scale in the us savings and loan sl b that from 1979 to 1983 the minimum efficient scale for associations declined c that a substantial change has occurred in operating costs and the estimated augmented elasticity

evolution of preferences we endogenize preferences using the indirect evolutionary approach individuals are randomly matched to play a two person game individual subjective preferences determine their behaviour and may differ from the actual objective pay offs that determine fitness matched individuals may observe the opponents preferences perfectly not at all or with some in between probability when preferences are observable a stable outcome must be efficient when they are not observable a stable outcome must be a nash equilibrium and all strict equilibria are stable we show that for pure strategy outcomes these conclusions are robust to allowing almost perfect and almost no observability with the notable exception that inefficient strict equilibria may fail to be stable with any arbitrarily small degree of observability despite being stable with no observability

bank regulation and monetary policy the depository institutions deregulation and monetary control act 1980 and the garn st germain depository institutions act 1982 are the two most significant pieces of bank legislation since the 193os their significance stems from the fact that they have sought to roll back a number of the regulations and restrictions imposed on bank activity and competition in the 1933 80 period among the important provisions of these acts are a gradual elimination of regulation q ceilings on time and savings deposits by march 1986 the amelioration of state imposed usury ceilings on loans the nationwide provision of interest bearing transaction type accounts negotiable order of withdrawal now and super now accounts permission for thritts to expand into bank like products such as commercial and industrial loans consumer loans and credit cards and the development of new types of savings accounts such as mmdas l in addition to legislative deregulation we have also witnessed homemade deregulation as banks have sought to exploit often with great success loopholes in the bank holding

match choice and ghettoization in evolutionary games abstract i study how having a choice about who to play affects the conventions that arise in a population playing a 2 2 common interest game match choice allows agents playing fragile but efficient strategies to isolate themselves raising their returns but making it harder for outsiders to duplicate their success when agents are myopic the second effect dominates long run play can shift toward either the risk dominant equilibrium with common interests in matching or toward the inefficient equilibrium with opposing interests in matching in contrast when agents are patient supra nash payoffs can be sustained

mergers and technical efficiency in spanish savings banks a stochastic distance function approach abstract the aim of this paper is to test the temporal variation of technical efficiency of spanish savings banks during the period 1985 1998 furthermore we test whether merged and non merged firms have different levels and temporal patterns of technical efficiency a stochastic output distance function r w shephard theory of cost and production functions princeton university press princeton nj is employed to accommodate multiple output technology the distance function provides the advantage that it does not need information about prices so it can accommodate the multi product nature of the financial sector only using the quantities as data an important point when the assumptions about perfectly competitive markets are unlikely to be met the temporal variation of efficiency is modeled extending the battese and coelli journal of productivity analysis 3 1992 153 169 approach in two ways relaxing the monotonicity of the temporal variation pattern of the efficiency term and allowing for different patterns of efficiency change between merged and non merged firms

evolution and game theory introduced by john von neumann and oskar morgenstern 1944 energized by the addition of john nash s 1950 equilibrium concept and popularized by the strategic revolution of the 1980s noncooperative game theory has become a standard tool in economics in the process attention has increasingly been focused on game theory s conceptual foundations two questions have taken center stage should we expect nash equilibrium play that is should we expect the choice of each player to be a best response to the choices of the other players if so which of the multiple nash equilibria that arise in many games should we expect in the 1980s game theorists addressed these questions with models based on the assumptions that players are perfectly rational and have common knowledge of this rationality in the 1990s however emphasis has shifted away from rationalitybased to evolutionary models one reason for this shift was frustration with the limitations of rationality based models these models readily motivated one of the requirements of nash equilibrium that players choose best responses to their beliefs about others behavior but less readily provided the second requirement that these beliefs be correct simultaneously rationality based criteria for choosing among nash equilibria produced alternative equilibrium refinements strengthenings of the nash equilibrium concept designed to exclude implausible nash equilibria with sufficient abandon as to prompt despair at the thought of ever choosing one as the right concept a second reason for the shift away from rationality based game theory was a change in the underlying view of what games represent it was once typical to interpret a game as a literal description of an idealized interaction in which an assumption of perfect rationality appeared quite

a dynamic model of equilibrium selection in signaling markets in his work on signaling spence proposed a dynamic model of a market in which a buyer revises prices in light of experience and in which sellers with private information about their types choose utility maximizing signals given these prices we follow spence s suggestion of introducing perturbations into the resulting dynamic process in a broad class of markets our model selects a separating equilibrium outcome if and only if the equilibrium outcome satisfies a version of the undefeated equilibrium concept whereas a pooling equilibrium outcome is selected if and only if the equilibrium outcome is both undefeated and satisfiesd1

evolution to equilibrium in an asymmetric oligopoly with differentiated goods abstract we present results on finite population evolutionarily stable strategies esss and stochastically stable states for a model of evolution with an imitative rule of strategy choice in an asymmetric oligopoly with differentiated goods and two groups of firms one group of low cost firms and one of high cost firms the firms play price setting and quantity setting oligopoly games under linear demand functions we will show that the stochastically stable state in a price setting oligopoly and that in a quantity setting oligopoly coincide

branching restrictions and banking costs abstract previous research of banking costs has been limited by the choice of the functional form irregularities in the estimated cost functions and a failure to rigorously examine the difference between banks in branching states and banks in unit banking states this paper addresses these shortcomings banks are modelled as three input three output cost minimizing firms a three equation system is estimated using 1985 functional cost analysis data the findings indicate that banks in unit banking states experience diseconomies of scale banks in branching states experience diseconomies of scale at the bank level but economies of scale at the branch level we also find evidence of economies of scope for branch state banks but not for unit state banks

the evolution of strategic behaviour this paper is a selective survey of recent work on evolutionary models of games it is shown how evolution in a literal biological sense may have generated the attitudes to risk that are the basis of strategic behavior such attitudes to risk may or may not conform to the expected utility theorem although strategic behavior itself is bound to be importantly influenced by nongenetic mechanisms these mechanisms may remain analogous to biological inheritance at least in special cases the theory of evolutionary games derived in this way is sketched and applications to various coordination games are discussed

cost structures in multinational and domestic banking abstract prior research on international banking has proposed many reasons for the multinationalization of u s banks but provided little empirical support for its propositions using a pooled time series data set from 1987 to 1990 this study analyzes the ray and expansion path scale economies and expansion path subadditivity of u s based multinational banks mnbs both at the firm and the plant levels it also measures and analyzes inefficiencies for these banks inefficiencies are measured relative to a thick frontier cost function a similar analysis is conducted for domestic banks dbs for comparison purposes no support is found for the prior belief that similar cost structures exist for mnbs and dbs in general we find that mnbs are able to fully exploit economies of scale and face lesser diseconomies from joint production and lower inefficiencies than dbs

evolution in games with endogenous mistake probabilities abstract j bergin and b lipman econometrica 64 1996 943 956 show that the selection effect from the random mutations in the adaptive population dynamics in m kandori g mailath and r rob econometrica 61 1993 29 56 and p young econometrica 61 1993 57 84 is due to restrictions on how these mutation rates vary across population states we here model mutation rates as endogenously determined mistake probabilities by assuming that players with some effort can control the probability of implementing the intended strategy this is shown to corroborate the results in kandori mailath rob 1993 and under certain regularity conditions those in young 1993 journal of economic literature classification number c72

the social costs of unit banking restrictions abstract many u s commercial banks are prohibited from establishing more than one full service office location in the absence of free entry to the banking industry this constraint may force unit banks to operate with a socially inefficient combination of inputs moreover entry to the industry in unit banking states may be more difficult than in branching states where market entrants need not necessarily acquire a new charter if so existing unit banks could price their output above marginal social cost earning excess profits and imposing allocational inefficiencies this paper demonstrates empirically that unit banking restrictions in the united states impose statistically and economically significant deadweight social costs

social norms and economic incentives in firms abstract this paper studies the interplay between economic incentives and social norms in firms we introduce a general framework to model social norms arguing that norms stem from agents desire for or peer pressure towards social efficiency in a simple model of team production we examine the interplay of three types of contracts with social norms we show that one and the same norm can be output increasing neutral or output decreasing depending on the contract multiplicity of equilibria and crowding out effects of steeper incentives can arise

rule evolution and equilibrium selection abstract this paper studies rule evolution and its effect on selection between strict equilibria two rules are investigated the myopic best response and naive imitation if agents cannot change rules equilibrium selection is determined by the relative frequency of agents using the two rules when agents can only change rules through mutation the efficient equilibrium weakly dominates the risk dominant one if agents can change rules by updating then the efficient equilibrium strictly dominates the risk dominant one journal of economic literature classification numbers c72 c73 d81

efficient equilibrium selection in evolutionary games with random matching abstract this paper investigates the sensitivity of recent evolutionary models of learning to the specification of the matching mechanism we study a literally random matching mechanism combined with a process of strategy adjustment based on the realized average performance of each strategy in the key class of symmetric 2 2 coordination games the pareto efficient equilibrium per se is selected rather than the risk dominant equilibrium as the probability of experimentation or mutation goes to zero furthermore convergence to the equilibrium is relatively fast we extend these results for example to games of common interest journal of economic literature classification numbers c72 c73