minimum effort coordination games stochastic potential and logit equilibrium abstract this paper revisits the minimum effort coordination game with a continuum of pareto ranked nash equilibria noise is introduced via a logit probabilistic choice function the resulting logit equilibrium distribution of decisions is unique and maximizes a stochastic potential function in the limit as the noise vanishes the distribution converges to an outcome that is analogous to the risk dominant outcome for 2 2 games in accordance with experimental evidence logit equilibrium efforts decrease with increases in effort costs and the number of players even though these parameters do not affect the nash equilibria journal of economic literature classification numbers c72 c92

do too many cooks always spoil the stew an experimental analysis of rent seeking and the role of a strategic buyer laboratory methods are used to evaluate the effects of institutional arrangements and rent defending activity on rent seeking auction outcomes in part nash equilibrium predictions are a useful behavioral guide as predicted more rents are dissipated in perfectly discriminating auctions where the high bidder wins than in lotteries where relative bids determine the chance of winning also as predicted the introduction of a rent defending buyer reduces social costs nevertheless the social costs of rent seeking consistently exceed predicted levels moreover individual bidding especially by buyers deviates markedly from nash predictions

ten little treasures of game theory and ten intuitive contradictions this paper reports laboratory data for games that are played only once these games span the standard categories static and dynamic games with complete and incomplete information for each game the treasure is a treatment in which behavior conforms nicely to predictions of the nash equilibrium or relevant refinement in each case however a change in the payoff structure produces a large inconsistency between theoretical predictions and observed behavior these contradictions are generally consistent with simple intuition based on the interaction of payoff asymmetries and noisy introspection about others decisions

incomplete information and rent dissipation in deterministic contests abstract in a deterministic contest or all pay auction all rents are dissipated when information is complete and contestants are identical as one contestant becomes stronger that is values the prize more total expenditures are known to decrease monotonically thus asymmetry among contestants reduces competition and rent dissipation recently this result has been shown to hold for other non deterministic contest success functions as well thereby suggesting a certain robustness in this paper however the complete information assumption is shown to be crucial i examine a tractable incomplete information model for which the complete information model is a special case with incomplete information regardless of how little total expenditures in a deterministic two player contest increase when one contestant becomes marginally stronger starting from a symmetric contest in fact both contestants expend resources more aggressively with complete information neither of them do so thus there is a discontinuity in the information structure

all pay auctions an experimental study this paper reports the results of a repeated all pay auction game the auction form used is the simplest possible complete information perfect recall and common value our main findings are that in such an auction over bidding is quite drastic and the seller s revenue depends strongly on the number of bidders in early stages however after a few rounds of play this dependence completely disappears and the seller s revenue becomes independent of the number of participants the results are confronted with two solution concepts of economic theory the nash equilibrium and the symmetric logit equilibrium 2005 published by elsevier b v

literacy skills and welfare effects of participation in adult literacy programs abstractthis paper examines the effect of adult literacy program participation on household consumption in ghana the adult literacy programs in ghana are of special interest because they are more comprehensive than standard literacy programs and incorporate many additional topics we use community fixed effects combined with instrumental variables to account for possible endogenous program placement and self selection into program participation for households where none of the adults have completed any formal education we find a substantial positive and statistically significant effect on household consumption our preferred estimate of the effect of participation for households without education is equivalent to a 10 increase in consumption per adult equivalent the effects of participation on welfare for other households are smaller not statistically significant and become smaller the more educated the household is we find positive and statistically significant effects of participation on litera

education and contraceptive choice a conditional demand framework a multiperiod model of fertility and contraceptive choice which considers unobserved differential preferences for the timing of births is formulated conventional and conditional demand equations for contraceptives are derived from the model and the relationships in each between female education birth intentions and the level of contraceptive efficiency are compared demand equations derived from the model conditioned on birth intentions were shown to be superior to conventional demand equations in testing some of the assumptions pertaining to the technology of contraceptives embedded in the utility maximization framework a weak test of the hypothesis that education lowers the fixed costs of information associated with new technologies as exemplified by the oral contraceptive was shown to be obtainable only from consistent estimates of conditional contraceptive choice demand parameters as a consequence of the dual technological attributes of contraceptive methods if education affects both the costs of children and preference orderings over the spacing of births the education contraceptive use association conditional on the number of intended children cannot be used to make welfare comparisons across households the log linear model in which contraceptives were categorized on the basis of their cost characteristics and simulatenous equations techniques were used to obtain estimates of the conditional demand equations for contraceptives based on data from the national fertility survey 1970 estimates indicated that the education of the wife among households with identical fertility plans was significantly and positively associated with the adoption of the newer birth control methods in 1970 with quantitiative affects significantly greater than those indicated in reduced form and inconsistently estimated conditional equations appearing in a priori studies the results support the hypothesis that the relative magnitudes of fixed and variable contraceptive costs influence contraceptive decisions with the value of the wifes time an important component of the former and suggest that women with higher levels of education are more likely to use traditional contraceptive methods

boundedly rational nash equilibrium a probabilistic choice approach we propose an equilibrium for n person finite games based on bounded rationality using the legit model of discrete choice theory at equilibrium each player uses appropriate choice probabilities given those used by the others rationality is parameterized on a continuum from complete rationality to uniform random choice results on the existence of equilibrium and on convergence to nash as rationality becomes perfect are similar to results due to mckelvey and palfrey we identify conditions such that for a given rationality parameter range the path of choices over time when the players use fictitious play converges to equilibrium c 1997 academic press

a theoretical analysis of altruism and decision error in public goods games abstract we formalize an equilibrium model in which altruism and decision error parameters determine the distribution of contributions for linear and quadratic public goods games the equilibrium density is exponential for linear games and normal for quadratic games our model implies i contributions increase with the marginal value of the public good ii total contributions increase with the number of participants iii mean contributions lie between the nash prediction and half the endowment these predictions which are not implied by a nash analysis are consistent with laboratory data maximum likelihood estimates of altruism and error parameters are significant and plausible

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

the effect of asymmetric entry costs on bertrand competition abstract by permitting firms to have different entry costs i generalize two previously studied models of two stage entry and pricing amongst bertrand competitors i find that the existing results depend critically on the symmetry assumption for example if firms entry decisions are observed before price setting occurs then total welfare can increase following the introduction of a potential entrant in contrast to the unambiguous welfare reduction found in the symmetric setting if firms entry decisions are unobserved before price setting occurs then the expected price typically decreases or remains unchanged following the introduction of a potential entrant in contrast to the unambiguous price increase found in the symmetric setting in both price setting environments competition increases following the introduction of potential entrants with sufficiently low entry costs a finding that is obscured by focusing on the symmetric models

incentives and careers in academia theory and empirical analysis we study career concerns in italian academia we mould our empirical analysis on the standard model of contests formalised in the multi unit all pay auction the number of posts the number of app

price competition when three are few and four are many abstract i examine price competition in a market for a homogeneous good when consumers observe prices subject to a random shock perception error when firms have symmetric costs there exists a unique equilibrium in pure strategies which is symmetric when there are up to three sellers in the market the sellers extract the entire consumer surplus however with at least four firms assuming that the marginal cost is sufficiently low relative to consumers valuation both consumers and producers may enjoy a positive surplus the marginal cost pricing is never observed in an equilibrium with finitely many firms potential policy implications are discussed

impact of government subsidies on household biogas use in rural china abstract in this paper we evaluate empirically the impact of biogas subsidies on household biogas energy use in rural china special attention was given to the problem of sample selection bias in assessing the impact of subsidies on biogas energy use because biogas subsidies often change the propensity for installing biogas digesters using data from a large scale household survey the results indicate that biogas subsidies did promote the construction of biogas digesters the results suggest that a 10 percentage point increase in subsidy cost ratio would lead to a 3 increase in digester installations we also found that biogas subsidies correlated negatively with average time of digester use a 10 percentage point increase in the subsidy cost ratio would result in a 4 3 reduction in the average working time of digesters these results suggest that the net effect of the current subsidy policy on rural household biogas use was near negligible indeed a 10 percentage point increase in the subsidy cost ratio resulted in a mere 1 15 increase in biogas use these findings indicate that biogas subsidies have possibly not been targeted effectively at households that would actually prefer to use biogas energy

distributional preferences in probabilistic and share contests we analyze nash equilibria of probabilistic and share contests where players have distributional preferences if players are sufficiently similar distributional preferences create multiple equilibria for the case of only mildly heterogeneous players equilibrium effort can be lower as well as higher than effort exerted by players with selfish preferences these findings can explain the following three anomalies observed in empirical tests of probabilistic and share contests the large variance of effort levels overspreading individual spending that exceeds the nash equilibrium prediction overspending and aggregate spending that exceeds the value of the prize overdissipation if players are sufficiently heterogeneous the game has a unique equilibrium that is more egalitarian than the selfish nash equilibrium it turns out that the less talented competitor may win the larger share of the prize if his inequality aversion is sufficiently strong we analyze how the equilibria evolve if the number of players becomes larger and how sequential moves influence behavior two new insights follow from the analysis of the sequential move game first sequential moves act as a coordination device in case of multiple simultaneous equilibria and second inequality aversion of the more egalitarian player can be used as a commitment device for low effort this effect can reverse the conventional wisdom that the underdog should lead

an economic analysis of expenditures on agricultural experiment station research experiment station research expenditures are responsive to economic and institutional forces a four equation model of resources allocation to state agricultural experiment station research consisting of demand and supply equations for research an equation allocating state governmental revenues to station research and an expenditure identity is presented a reduced form expenditure equation derived from this model is fitted to cross sectional data for forty eight u s states pooled together for 1960 1965 and 1970 a large share of the variance in per capita expenditures of state agricultural experiment stations is explained by the variables included in the model

school supply constraints and children s educational outcomes in rural ghana abstract studies of school attainment often fail to acknowledge the possibility that prices for all schooling levels affect the decision to attend any one schooling level in developing countries the assumption that schooling costs are constant throughout the education cycle is manifestly untrue this paper concentrates on the empirical implications of introducing schooling costs that increase with schooling level the results suggest that the cost of advanced levels of education influences decisions at the primary school level the relative magnitude of the cross price elasticities suggests that cross price effects should not be ignored when designing educational user fees

gordon tullock and experimental economics gordon tullock s research has substantially influenced the development of economic science in general and experimental economics in particular we present the first comprehensive survey of this significant achievement we show how tullock s research in bioeconomics influenced later developments in neuroeconomics and how his pioneering work on rent seeking generated a literature of laboratory tests of his hypothesis we also describe tullock s own experiments and draw attention to his early insights on trust games

determinants and policy implications for household electricity saving behaviour evidence from beijing china this research sets out to explore the possibilities for further saving in household electricity consumption through a study of the residents willingness and behavioural characteristics in electricity saving as applied within a chinese context based on an extensive literature review the authors argue that economic benefits policy and social norms and past experience may have a positive correlation with household electricity saving behaviour while the discomfort caused by electricity saving activities may exert a negative effect on it through a sample of 816 randomly selected residents in beijing the propositions are examined using logit regression analysis the conclusions support the ideas concerning both the positive influence of economic benefits policy and social norms and past experience as they affect broader electricity saving behaviour and the negative influence of the discomfort caused by electricity saving activities finally some inferences are drawn and suggestions are offered for policy makers and further studies

dissipation of contestable rents by small numbers of contenders the theory of rent seeking with its origins in the observations of gordon tullock 1967 or to use jagdish bhagwati s 1982 proposed term the theory of directly unproductive profit seeking activities is concerned with the potentially adverse effects on resource allocation of incentives to cap ture and defend artificially contrived rents and transfers the scope for so cial loss proposed by the theory derives from the relation between the value of a contestable prize and the value of the resources attracted into the con test to determine the beneficiary of the prize underlying this social loss is a specification of how rational behavior by optimizing agents links the value of the prize sought to the resources expended it has been traditional to assume competitive behavior in describing the activities of lobbying and influence seeking then if some further condi tions are satisfied l the total value of the resources expended precisely equals the value of the prize sought so dissipation is complete 2 conse quently the social cost associated with contestability of a rent can be in ferred from the value of the rent itself and the detailed and hard to come by information on individual outlays made in the course of the contest be comes unnecessary by basing their analyses on competitive dissipation contributors to the rent seeking literature see the review by robert tollison 1982 have been able to presume that the observed value of a contested rent is an exact measure of the associated social cost of monopoly power or regu lation similarly in the trade theoretic literature where the rights contested are to quota premia or revenues from trade taxes krueger 1974 bhagwati

a quantal response equilibrium model of order statistic games abstract this paper applies mckelvey and palfrey s games econ behav 10 1995 6 notion of quantal response equilibrium to a class of order statistic coordination games closely related to those studied by van huyck et al am econ rev 80 1990 234 quart j econ 106 1991 885 and van huyck et al evidence on learning in coordination games manuscript texas a m university 1996 and those recently analyzed by anderson et al games econ behav 34 2001 177 with quadratic effort costs the limiting qre as the noise goes to zero in their games is the most efficient equilibrium this result contrasts with anderson et al s conclusion for order statistic games with linear effort costs and allows a fuller assessment of the qre s success in describing the limiting outcomes in van huyck et al s experiments

english auctions with resale an experimental study i design and test a simple english auction and two english auctions with resale but with different informational backgrounds all three treatments theoretically have the same equilibrium i find however that the possibility of resale alters behavior significantly in the two treatments with resale subjects deviated from both the nash prediction and the common results about bidding behavior in english auctions subjects tend to overbid when they are certain they can reap the whole surplus in the resale market i employ different models like qre and levels of reasoning and conclude that overbidding can be explained as a rational response to the noisy environment in markets with human participants that is as rational decision making when anticipating others to make errors when the outcome of the resale market is not certain there is significant signaling behavior and auction prices tend to be lower than the nash prediction

the logit equilibrium a perspective on intuitive behavioural anomalies costs associated with deviations from the nash equilibrium these payoff asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function in the resulting logit equilibrium behavior is characterized by a probability distribution that satisfies a rational expectations consistency condition the beliefs that determine players expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs we prove existence of a unique symmetric logit equilibrium and derive comparative statics results the paper provides a unified perspective on many recent laboratory studies of games in which nash equilibrium predictions are inconsistent with both intuition and experimental evidence

the impact of piped water provision on infant mortality in brazil a quantile panel data approach abstract we examine the impact of piped water on the under 1 infant mortality rate imr in brazil using a recently developed econometric procedure for the estimation of quantile treatment effects with panel data the provision of piped water in brazil is highly correlated with other observable and unobservable determinants of imr the latter leading to an important source of bias instruments for piped water provision are not readily available and fixed effects to control for time invariant correlated unobservables are invalid in the simple quantile regression framework using the quantile panel data procedure in chen and khan chen s khan s semiparametric estimation of non stationary censored panel model data models with time varying factor econometric theory 2007 forthcoming our estimates indicate that the provision of piped water reduces infant mortality by significantly more at the higher conditional quantiles of the imr distribution than at the lower conditional quantiles except for cases of extreme underdevelopment these results imply that targeting piped water intervention toward areas in the upper quantiles of the conditional imr distribution when accompanied by other basic public health inputs can achieve significantly greater reductions in infant mortality

price dispersion in the lab and on the internet theory and evidence price dispersion is ubiquitous in settings that closely approximate textbook bertrand competition we show that only a little bounded rationality among sellers is needed to rationalize such dispersion a variety of statistical tests based on datasets from two independent laboratory experiments and structural estimates of the parameters of our models suggest that bounded rationality based theories of price dispersion organize the data remarkably well evidence is also presented to suggest that the models are consistent with data from a leading internet price comparison site

economic science an experimental approach for teaching and research economics experiments have been used to study theories and policies that are often difficult to evaluate with data from naturally occurring markets this paper is a selective summary of my work in the main areas of experimental economics markets individual decisions games and public choice the discussion pertains both to scientific discoveries and teaching innovations

fuelwood consumption and forest degradation a household model for domestic energy substitution in rural india this paper disusses domestic en ergy supply and demand in rural india links be tween forest scarcity and household fuel collec tion are analyzed in a non separable household model focusing on substitution of non commer cial fuels from the commons and the private do main based on data from villages bordering a protected area a novel maximum entropy ap proach is used for estimation it is found that households respond to forest scarcity and in creased fuelwood collection time by substituting fuels from private sources for forest fuelwood however the magnitude of the response appears insufficient to prevent current fuelwood collection practices from causing serious forest degrada tion jel q24

quantal response methods for equilibrium selection in 2 2 coordination games abstract the notion of quantal response equilibrium qre introduced by mckelvey and palfrey 1995 has been widely used to explain experimental data in this paper we use quantal response equilibrium as a homotopy method for equilibrium selection and study this in detail for 2 2 bimatrix coordination games we show that the risk dominant equilibrium need not be selected in the logarithmic game the limiting qre is the nash equilibrium with the larger sum of square root payoffs finally we apply the quantal response methods to the mini public goods game with punishment a cooperative equilibrium can be selected if punishment is strong enough

overbidding and overspreading in rent seeking experiments cost structure and prize allocation rules we study experimentally the effects of cost structure and prize allocation rules on the performance of rent seeking contests most previous studies use a lottery prize rule and linear cost and find both overbidding relative to the nash equilibrium prediction and significant variation of efforts which we term overspreading we investigate the effects of allocating the prize by a lottery versus sharing it proportionally and of convex versus linear costs of effort while holding fixed the nash equilibrium prediction for effort we find the share rule results in average effort closer to the nash prediction and lower variation of effort combining the share rule with a convex cost function further enhances these results we can explain a significant amount of non equilibrium behavior by features of the experimental design these results contribute towards design guidelines for contests based on behavioral principles that take into account implementation features of a contest

waiting line auctions if prizes are to be awarded simultaneously at a specified time on a first come first served basis then individuals who queue for them will choose different waiting times through their arrivals at the queue this choice of arrival time at a queue is similar to the choice of a sealed tender in an auction an equilibrium for this waiting line auction is obtained here using methods for analyzing sealed tender auctions when individuals are risk neutral it is shown that several alternative waiting line allocation procedures result in the same transactions cost associated with waiting in line

noisy directional learning and the logit equilibrium we specify a dynamic model in which agents adjust their decisions toward higher payoffs subject to normal error this process generates a probability distribution of players decisions that evolves over time according to the fokker planck equation the dynamic process is stable for all potential games a class of payoff structures that includes several widely studied games in equilibrium the distributions that determine expected payoffs correspond to the distributions that arise from the logit function applied to those expected payoffs this logit equilibrium forms a stochastic generalization of the nash equilibrium and provides a possible explanation of anomalous laboratory data

rural household energy consumption and its impacts on eco environment in tibet taking taktse county as an example abstract rural energy consumption causes tremendous damage to eco environment and leads to aberration from a socio economic point of view in many developing countries due to its unique physical features there is a high potential of renewable energies in tibet and traditional biomass energies such as cattle dung firewood and crop residues play very important roles in local household energy usage this special consumption structure do harm not only to eco environment but to rural residents themselves as well basing on the field study and household questionnaires in june 2006 in taktse the article analyzed the rural household energy supply and consumption structure and its impacts on eco environment health and social aspects of 2005 in this case study county results show that traditional biomass energy takes up to almost 70 which leads to a series of serious eco environment problems such as deforestation soil erosion grassland degradation desertification and some other problems such as human beings diseases and loss of time for education and recreation besides natural backgrounds cultural tradition population growth economy reason and policy guidance are other main driving forces of the input output flow of energy environment relationship in rural tibet at last a multilevel policy suggestion of making less use of traditional biomass and invest more resources in solar energy and biogas are put forward

rent seeking with regretful agents theory and experiment abstract we investigate both theoretically and experimentally the role that information disclosure has on behavior in all pay environments in which all agents must exert costly effort but only the winner is rewarded through the lens of all pay auctions we show that bidders who have regret concerns when they lose an auction may alter their bids whether or not information about the winning bid is disclosed all losing bidders regret not bidding 0 however when feedback on the winning bid is provided those bidders who lost at an affordable price may regret not bidding more we show that the former effect causes bidders to lower their bids while the latter effect causes bidders to raise their bids our experimental results indicate overbidding whether or not the winning bid is disclosed to losing bidders however disclosing the winning bid leads to even more aggressive bidding increases revenues decreases the frequency of dropouts and also leads to more efficient allocations thus our results show that information disclosure is a powerful tool that mechanism designers may wish to exploit to extract more rents in all pay environments

less fighting than expected experiments with wars of attrition and all pay auctions while all pay auctions are well researched experimentally we do not have much laboratory evidence on wars of attrition this paper tries to fill this gap technically there are only a few differences between wars of attrition and all pay auctions behaviorally however we find striking differences as many studies our experiment finds overbidding in all pay auctions in contrast in wars of attrition we observe systematic underbidding

classroom games rent seeking and the inefficiency of non market allocations economics is often taught at a level of abstraction that can hinder some students from gaining basic intuition however lecture and textbook presentations can be complemented with classroom exercises in which students make decisions and interact the approach can increase interest in and decrease skepticism about economic theory this feature offers short descriptions of classroom exercises for a variety of economics courses with something of an emphasis on the more popular undergraduate courses suggestions for future columns and comments on past ones should be sent to charles holt c o journal of economic perspectives department of economics university of virginia charlottesville virginia 22903 3288

conspicuous consumption dynamics abstract we formalize veblen s idea of conspicuous consumption as two alternative forms of interdependent preferences dubbed envy and pride agents adjust consumption patterns gradually in the direction of increasing utility from an arbitrary initial state the distribution of consumption among agents with identical preferences converges to a unique equilibrium distribution when pride is stronger the equilibrium distribution has a right skewed density when envy is stronger the equilibrium is concentrated at a single point and the adjustment dynamics involve a shock wave that can be interpreted as a growing moving homogeneous middle class

a test of stability in a linear altruism model linear altruism predicts the estimated preferences to be independent of the subject s position in the game if the role allocation is randomly determined because subjects in each role have the same preferences ex ante we test and reject this hypothesis

the determinants of household energy demand in rural beijing can environmentally friendly technologies be effective with the recent rapid economic growth total energy demand in rural china has increased dramatically and the energy structure is in the transition from non commercial to commercial sources simultaneously it is expected that households in rural areas will face energy shortages and additional environmental problems unless they have more access to renewable energy technologies however little is known about i the transition of energy use patterns and ii whether introduced technologies have been effective to analyze these issues we estimated the energy demands of rural households by using survey data taken from beijing s ten suburban districts the data contain information on both non commercial and commercial energy use key characteristics of the households and several renewable energy technologies our empirical analysis yielded three main results first the per capita income is a key factor in the per capita energy consumption more specifically the marginal increase or marginal change in per capita coal consumption strongly diminishes or declines as per capita income increases second coal and liquefied petroleum gas lpg prices do not exhibit substitution effects but an increase in these prices has strong negative effects on the use of these energy resources third renewable energy technologies are identified to reduce coal consumption and to improve energy efficiency overall these findings suggest a positive perspective if the chinese government were to design appropriate policies associated with renewable energy technologies and related energy prices then coal consumption can be reduced in the near future and the substitution to cleaner energy use will accelerate therefore a smooth energy transition in rural china could be made in a more environmentally sustainable manner

rewards experience and decision costs in first price auctions consistent with a model of asymmetric risk aversion subjects in first price auctions consistently bid above the risk neutral nash prediction it has been argued that this is due to low opportunity cost of deviating from the risk neutral bid we increase opportunity cost and payoff levels by factors of 0 1 5 10 and 20 from the normal levels generating payoffs up to 250 for risk neutral subjects and observe an insignificant increase in the slope of individual bid functions the rmse of bids declines significantly this is consistent with a reward decision cost model of bidding behavior

rising wages and energy consumption transition in rural china abstract residential energy consumption in rural china is undergoing a transition from traditional biomass energy to modern commercial energy this paper examines the impact of rising wage rates on energy consumption mix in rural china using a unique panel data set from our two round surveys of 409 rural households in 4 provinces the results show that the wage rate at the village level has a significant negative impact on traditional biomass energy consumption and significant positive effects on consumption of electricity and new renewable energy in rural china as traditional biomass energy is mainly collected with family labor and is relatively labor intensive an increase in rural wage rates would enhance the opportunity costs of traditional biomass energy leading to a reduction in biomass energy consumption continuously rising rural wage rates could accelerate the transition from biomass energy to electricity in rural areas these findings could have important policy implications not only for indoor air quality and environmental and health issues in rural areas but also for greater security in rural energy supply and policies to incentive farmers to better utilize biomass resource after harvest

multi dimensional procurement auction under uncertain and asymmetric information abstract this paper addresses two important issues in public procurement ex ante uncertainty about the participating agents qualities and costs and their strategic behaviour we present a novel multi dimensional auction that incentivises agents to make a partial inquiry into the procured task and to honestly report quality cost probabilistic estimates based on which the principal can choose the agent that offers the best value for money the mechanism extends second score auction design to settings where the quality is uncertain and it provides incentives to both collect information and deliver desired qualities

governmental interventions and household behavior in a developing country anticipating the unanticipated consequences of social programs abstract estimates of the joint effects of governmental health education and family planning programs as well as sources of water on fertility child mortality and schooling are obtained from combined district level and household level data from rural india the estimates are used both to test the implications of a model of household decision making and to assess the effectiveness of the joint public provision of such services in shifting resources from increasing family size to augmenting human capital per person the results appear consistent with household optimizing behavior and suggest that reductions in the costs of medical services contraceptives and schooling and the improvement of water sources are mutually reinforcing alternatives for implementing the joint policy goals of reduced population growth and increased human capital formation

anomalous behavior in a traveler s dilemma the notion of a nash equilibrium has joined supply and demand as one of the two or three techniques that economists instinctively try to use first in the analysis of economic interactions moreover the nash equilibrium and closely related game theoretic concepts are being widely applied in other social sciences and even in biology where evolutionary stability often selects a subset of the nash equilibria many people are uneasy about the stark predictions of the nash equilibrium in some contexts where the extreme rationality assumptions seem implausible kaushik basu s 1994 traveler s dilemma is a particularly convincing example of a case where the unrelenting logic of game theory is at odds with intuitive notions about human behavior the story associated with the dilemma is that two travelers purchase identical antiques while on a tropical vacation their luggage is lost on the return trip and the airline asks them to make independent claims for compensation in anticipation of excessive claims the airline representative announces

competitive burnout theory and experimental evidence abstract we examine equilibrium selection in a two stage sequential elimination contest in which contestants compete for a single prize this game has a continuum of equilibria only one of which satisfies the coalition proof nash equilibrium cpne refinement that equilibrium involves burning out by using all of one s resources in the first stage it is pareto dominated by many other equilibria we find that cpne predicts well when four people compete but not when eight people compete for two second stage spots using a cognitive hierarchy ch framework we show that when the number of players and the mean number of thinking steps are large the ch prediction involves burning out this provides a partial explanation of our results we also develop a formal argument as to why cpne logic is more compelling with more players we conclude that more competition leads to higher bids and that burning out is indeed a competitive phenomenon

a game theoretic model for the role of reputation feedback systems in peer to peer commerce abstract we propose a dynamic game theoretic model to study how a reputation feedback system affects a peer to peer p2p trading platform continuums of buyers and sellers with bounded rationalities are paired to trade periodically sellers have private knowledge on their own types that encode tendencies to cheat their reputation scores are on the other hand visible to all and periodically updated by their trading partners a buyer can use a seller s score to assess the latter s characters and decide whether to trade using a continuity based fixed point theorem we first establish the existence of equilibria that convey information on traders behaviors as well as the type score composition on the market we then look into a special case which for model tractability includes two types of sellers with two score levels besides the proportion of prone to cheating sellers it indicates that how much sellers value their future payoffs also plays a major role in determining the prevalence of online frauds therefore reputation feedback systems are especially beneficial under high trading volumes which can in turn for instance be facilitated by attracting more buyers to the online marketplace

mixed strategy play in single stage first price all pay auctions with symmetric players abstract we consider sealed bid first price all pay auctions with complete information discrete strategy space budget constraint and symmetric players and then construct the equilibrium solution in mixed strategies for both fixed and variable prizes the equilibrium solution yields predictions concerning the effects of group size and value of the prize that are tested experimentally the experimental results support equilibrium play on the aggregate but not individual level adaptive learning on the individual level accounts for the major trends in the aggregate expenditures over time

modeling bounded rationality in capacity allocation games with the quantal response equilibrium we consider a supply chain with a single supplier and two retailers the retailers choose their orders strategically and if their orders exceed the supplier s capacity quantities are allocated proportionally to the orders we experimentally study the capacity allocation game using subjects motivated by financial incentives we find that the nash equilibrium which assumes that players are perfectly rational substantially exaggerates retailers tendency to strategically order more than they need we propose a model of bounded rationality based on the quantal response equilibrium in which players are not perfect optimizers and they face uncertainty in their opponents actions we structurally estimate model parameters using the maximum likelihood method our results confirm that retailers exhibit bounded rationality become more rational through repeated game play but may not converge to perfect rationality as assumed by the nash equilibrium finally we consider several alternative behavioral theories and show that they do not explain our experimental data as well as our bounded rationality model this paper was accepted by loana popescu guest editor operations management

energy consumption in rural china a household model for three villages in jiangxi province abstract in china fuelwood and coal are the most important energy sources for rural households in poor areas along with population and economic growth excessive fuelwood collection is a major cause of deforestation burning coal contributes to environmental problems such as air pollution acid rain and greenhouse gas emissions the purpose of this article is to analyze factors determining choice of energy source and labor input into fuelwood collection in poor forest rich regions and to provide policy recommendations on ways to affect these choices to this end a nonseparable household model reflecting choices in labor allocation and energy demand of rural households is estimated from available data for three villages in a poor forest rich region in jiangxi province southeast china innovative aspects of this article are the analyses of factors driving household substitution between forest and non forest fuels and of dissimilarities in household responses under different market access conditions

an experimental study of jury decision rules we present experimental results on groups facing a decision problem analogous to that faced by a jury we consider three treatment variables group size three or six number of votes needed for conviction majority or unanimity and pre vote deliberation we find evidence of strategic voting under the unanimity rule a large fraction of our subjects vote for a decision analogous to conviction even when their private information indicates a state analogous to innocence this is roughly consistent with the game theoretic predictions of feddersen and pesendorfer although individual behavior is explained well by the game theoretic model there are discrepancies at the level of the group decision contrary to feddersen and pesendorfer in our experiments there are fewer outcomes analogous to incorrect convictions under unanimity rule than under majority rule in the case of no deliberation we simultaneously account for the individual and group data using quantal response equilibrium

is there an intrahousehold flypaper effect evidence from a school feeding programme are public transfers targeted toward children neutralised by the household as the theory of altruism implies or is there an intrahousehold flypaper effect whereby such transfers stick to the child this paper studies the impact of a school feeding programme on child caloric intake in the philippines using a quasi experimental methodology the empirical results confirm an intrahousehold flypaper effect indeed they indicate virtually no intrahousehold reallocation of calories in response to the feeding programme in poorer households however children s gains from the programme appear to be taxed more heavily

the demand for primary schooling in madagascar price quality and the choice between public and private providers abstract we estimate a discrete choice model of primary schooling and simulate policy alternatives for rural madagascar among school quality factors the results highlight the negative impacts on schooling demand of poor facility quality and the use of multigrade teaching several grades being taught simultaneously by one teacher in public schools simulations indicate the feasibility of reducing multigrade in public schools by adding teachers and classrooms a policy that would lead to modest improvements in overall enrollments and would disproportionately benefit poor children given much higher price elasticities for poorer households raising school fees to cover some of the additional costs would strongly counteract these favorable distributional outcomes an alternative policy of consolidation of primary schools combined with multigrade reduction or other quality improvements is likely to be ineffective because of the strongly negative impact of distance to school

the impact of school quality on earnings and educational returns evidence from a low income country abstract the expansion of education has been widely adopted as a key element in the development strategies of low income countries while there is substantial evidence on the benefits of greater educational attainment for subsequent labor market earnings empirical evidence on the role played by school quality is scarce this paper combines household survey data with unique data on school quality from honduras to study the importance of school quality as a determinant of earnings our objective measures of school quality capture teacher training school infrastructure and school crowding the results display strong positive effects of school quality on earnings and on educational returns these effects persist across a variety of model specifications

quantal response equilibrium models of the ultimatum bargaining game abstract this paper investigates the implications of quantal response equilibrium qre models mckelvey and palfrey 1995 games econ behav 10 6 38 1998 exper econ 1 9 41 in the ultimatum bargaining game it is shown that in a normal form qre nqre each bargainer s decision depends critically on the anticipated behavior of the other and there is a nqre in which the proposer makes any offer between zero and equal split as a strict best response the application of nqre to the experimental data slonim and roth 1998 econometrica 66 569 596 suggests that the history dependence observed in the experiment is a result of the strategic interactions between bargainers

on the empirical content of quantal response equilibrium the quantal response equilibrium qre notion of mckelvey and palfrey 1995 has recently attracted considerable attention due largely to its widely documented ability to rationalize observed behavior in games played by experimental subjects we show that this ability to t the data as typically measured in this literature is uninformative without ap riori distributional assumptions a qre can match any distribution of behavior by each player in any normal form game we discuss approaches that might be taken to provide valid empirical evaluation of the qre and discuss its potential value as an approximating empirical structure

contest efforts in light of behavioural considerations this study shows that distortion of probabilities is a possible reason for rent under dissipation incontests with relatively small number of participants such distortion may also result however inover dissipation of the contested rent focusing on contests with homogeneous contestants and thecommonly studied contest success function our main results clarify under what circumstances i rents are more under dissipated relative to the standard situation where probabilities are notdistorted ii rents are under dissipated yet less intensely relative to the standard situation whereprobabilities are not distorted iii rents are over dissipated and iv the contest does not possess asymmetric interior equilibrium in pure strategies

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

endogenous fertility and optimal population size pareto optimality which is the standard criterion of efficiency in general equilibrium models takes population size as given and therefore cannot be directly applied to analyze the question of optimal population size the criterion then for optimal population size must be based on a more restrictive definition of optimality this paper extends peter diamonds 1965 golden golden rule growth model by assuming that individuals derive utility from their own consumptionand from their own children offspring are assumed to consume resources before reaching adulthood the authors show that the optimal steady state utility yields a higher population growth rate when it converges to the golden rule allocation they then demonstrate that a voluntary social security program in which the size of the transfer to a particular agent is directly tied to his own fertility leads the competitive allocation to be identical to the allocation corresponding to the maximum of the steady state utility of the representative individual

behavioral convergence properties of cournot and bertrand markets an experimental analysis abstract this paper reports an experiment that examines the relative convergence properties of differentiated product cournot and bertrand oligopolies overall bertrand markets tend to converge to nash equilibrium predictions more quickly and more completely than cournot markets further when products are close substitutes bertrand markets respond more quickly to an announced nominal shock as products become weaker substitutes however an increased tendency for tacit collusion degrades convergence in bertrand markets this effect is particularly pronounced following a nominal shock our results suggest that in an oligopoly context variations in decision error costs dominate a strategic substitutes effect isolated in previous experimental research

migration selectivity and the effects of public programs abstract a model of the spatial distribution of mobile heterogeneous agents is formulated to assess how a price change or program subsidy that is location specific affects the composition of local residents via selective migration and thus biases evaluations of the effectiveness of the program based on its local consequences longitudinal data from colombia are used to test the implications of migration selectivity the findings confirm the existence of selective migration suggesting that local subsidies to human capital attract high income but within income groups low fertility households and those with low human capital endowments these migration patterns are shown to be consistent with the dominance of endowment over tastes heterogeneity in the population under plausible behavioral assumptions

fertility and child mortality in cote d ivoire and ghana this article examines individual household and community characteristics that may affect fertility in contemporary cote d lvoire and ghana and the relationship between child mortality and fertility it was not possible to reject the null hypothesis that child mortality is exogenous treating child mortality as exogenous fertility responds directly to child mortality but by a smaller proportion than estimated in studies of east asia and latin america increases in female education and urbanization are likely to contribute to declines in fertility in both countries but economic growth without these structural changes is not yet strongly related to lower fertility

behavior in all pay auctions with incomplete information abstract this paper analyzes the behavior of single unit all pay auctions within the independent private values environment in the laboratory we study revenue individual bidding behavior and efficiency in relation to theoretical benchmarks and to a similar study of winner pay first price sealed bid auctions we conclude that the all pay auction yields significantly higher revenue than both the risk neutral bayesian equilibrium and the winner pay auction bidders decisions move closer to equilibrium levels over time in the auction

should we tax or cap political contributions a lobbying model with policy favors and access abstract this paper develops a model of political contributions in which a politician can either sell policy favors or sell access access allows interest groups to share hard information with the politician in support of their preferred policy here selling access maximizes policy utility while selling policy favors maximizes total contributions imposing a binding contribution limit makes it more likely that the politician sells access which can improve expected constituent welfare however a contribution limit distorts the signals associated with the contributions which tends to result in worse policy alternatively a tax on political contributions can ensure that the politician sells access without distorting his information therefore from the viewpoint of a representative constituent a tax on contributions is strictly preferred to a contribution limit or no reform the politician however may prefer regulation in the form of a contribution limit even when a tax is better for the constituent

evaluating the effects of optimally distributed public programs child health and family planning interventions this paper develops and tests an optimizing model determining the distribution of family planning and health subsidies across heterogeneous households and assesses the biases in cross area estimates of the health effects of such subsidies due to public resource optimization the model incorporates both health externalities and the endogenous response of the size of the recipient population to program subsidies longitudinal data describing child health and publicly provided family planning and health programs in 20 barrios in laguna province in the philippines are used to estimate the effects of such programs on child health and the relationships between the distribution of the programs and preprogram health levels the impact of a program on a particular childs health status is viewed as dependent upon the childs length of exposure to the program a basic feature of the model is the presence of health externalities which is shown to be sufficient along with plausible features of household behavior to make selective subsidization of fertility control either alone or in combination with health investment subsidies pareto efficient the model suggests that subsidization of fertility control is likely to be pareto efficient in the presence of health or human capital externalities when human capital and family size are gross substitutes and or when any per child human capital subsidies may substitute for direct subsidies to health investment and an equalizing distribution of the subsidies the highest family planning subsidies to the lowest health recipient households is efficient when both health and family planning subsidies are used fertility control subsidies minimize the subsidy burden for donors and are highest when total subsidy expenditures per child are greatest