crisis or opportunity economic degrowth for social equity and ecological sustainability introduction to this special issue abstract this article reviews the burgeoning emerging literature on sustainable degrowth this is defined as an equitable downscaling of production and consumption that increases human well being and enhances ecological conditions at the local and global level in the short and long term the paradigmatic propositions of degrowth are that economic growth is not sustainable and that human progress without economic growth is possible degrowth proponents come from diverse origins some are critics of market globalization new technologies or the imposition of western models of development in the rest of the world all criticize gdp accounting though they propose often different social and ecological indicators degrowth theorists and practitioners support an extension of human relations instead of market relations demand a deepening of democracy defend ecosystems and propose a more equal distribution of wealth we distinguish between depression i e unplanned degrowth within a growth regime and sustainable degrowth a voluntary smooth and equitable transition to a regime of lower production and consumption the question we ask is how positive would degrowth be if instead of being imposed by an economic crisis it would actually be a democratic collective decision a project with the ambition of getting closer to ecological sustainability and socio environmental justice worldwide most articles in this issue were originally presented at the april 2008 conference in paris on economic degrowth for ecological sustainability and social equity this conference brought the word degrowth and the concepts around it into an international academic setting articles of this special issue are summarized in this introductory article hueting d alessandro and colleagues van den bergh kerschner spangenberg and alcott discuss whether current growth patterns are un sustainable and offer different perspectives on what degrowth might mean and whether and under what conditions it might be desirable matthey and hamilton focus on social dynamics and the obstacles and opportunities for voluntary social action towards degrowth lietaert and cattaneo with gavalda offer a down to earth empirical discussion of two practical living experiments cohousing and squats highlighting the obstacles for scaling up such alternatives finally van griethuysen explains why growth is an imperative in modern market economies raising also the question whether degrowth is possible without radical institutional changes

decentralized organizational learning an experimental investigation we experimentally study decentralized organizational learning our objective is to understand how learning members of an organization cope with the con founding effects of the simultaneous learning of others we test the predictions of a stylized rational agent model of organizational learning that provides sharp predictions as to how learning members of an organization might cope with the simultaneous learning of others as a function of fundamental variables e g firm size and the discount factor while the problem of learning while others are learning is quite difficult we find support for the comparative static predictions of the models unique symmetric equilibrium jel c72 d23 d83 if one s own actions are embedded in an ecology of the actions of many others who are simultaneously learning and changing it is not easy to understand what is going on the relationship between the actions of individuals in the organization and overall organiza tional performance is confounded by simultaneous learning of other actors

sentiments and aggregate demand fluctuations we formalize the keynesian insight that aggregate demand driven by sentiments can generate output fluctuations under rational expectations when production decisions must be made under imperfect information about demand optimal decisions based on sentiments can generate stochastic self fulfilling rational expectations equilibria in standard economies without persistent informational frictions externalities nonconvexities or strategic complementarities in production the models we consider are deliberately simple but could serve as benchmarks for more complicated equilibrium models with additional features

financial intermediation variability and the development process abstract in this paper we build a model of financial intermediation that explains the pattern of gdp variability in an economy during the development process we find evidence that per capita output is more volatile in middle income economies than in both low and high income economies we show that if the model economy is in the early or in the mature stages of development there is a unique equilibrium however in the middle stages of development multiple equilibria exist moreover we find that in economies with imperfect credit markets per capita output volatility tends to be higher than in economies with perfect or non existent credit markets

long run welfare under externalities in consumption leisure and production a case for happy degrowth vs unhappy growth in this paper we contribute to the debate on the relationship between growth and well being by examining an endogenous growth model where we allow for externalities in consumption leisure and production we analyze three regimes a decentralized economy where each household makes isolated choices without considering their external effects a planned economy where a myopic planner fails to recognize both leisure and consumption externalities but recognizes production externalities and a planned economy with a fully informed planner we first compare the balanced growth paths under the three regimes and then we numerically investigate the transition to the optimal balanced growth path we provide a number of findings first in a decentralized economy growth or labor or both are greater than in the regime with a fully informed planner and hence are sub optimal from a welfare standpoint second a myopic intervention which overlooks consumption and leisure externalities leads to more growth and labor than in both the decentralized and the fully informed regime third we provide a case for happy degrowth a transition to the optimal balanced growth path that is associated with downscaling of production a reduction in private consumption and an ongoing increase in leisure and well being

agricultural support policies in imperfectly competitive markets why market power matters in policy design most agricultural policy analysis assumes that markets are perfectly competitive despite increasing evidence to the contrary we demonstrate that the interaction of market power and government intervention may lead to outcomes that are counter to key results of policy analysis for perfectly competitive markets we show that market power may reduce or eliminate entirely the net welfare benefits from removing two traditional support mechanisms price floors and deficiency payments and may increase considerably the government s cost of implementing either of them accordingly optimally designed price support measures may improve welfare in the presence of downstream oligopoly and or oligopsony power copyright 2011 oxford university press

distinguishing trust from risk an anatomy of the investment game the role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists a popular way to measure trust at the individual level is the so called investment game berg dickhaut and mccabe 1995 it has been widely noted however that risk attitudes can also affect decisions in this game and thus in principle confound inferences about trust we provide novel evidence shedding light on the role of risk attitudes for trusting decisions to the best of our knowledge our data are the first rigorous evidence that i aggregate investment distributions differ significantly between trust and risk environments and ii risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games our results are convergent evidence that trust decisions are not tightly connected to a person s risk attitudes and they lend support to the trust interpretation of decisions in investment games

agricultural trade liberalization and economic development the role of downstream market power a model is developed to characterize the vertically linked and concentrated nature of developed country food markets this model is then parameterized and used to simulate the effects of varying food market structures on the benefits to developing country exporters of agricultural commodities from trade liberalization by developed countries results demonstrate that even relatively modest departures from perfect competition can cause much of the benefits from trade liberalization to flow to marketing firms instead of producers in the developing country the distributional effects under downstream market power differ significantly from the perfectly competitive case and may result somewhat paradoxically in developing countries receiving a lower share of the total value added within the food chain as trade reform occurs

rational behaviour in extensive form games it is argued that subgame perfect equilibrium behavior is not an inevitable consequence of common belief of rationality among players in noncooperative extensive form games the argument centers around a particular extensive form game with perfect information in the context of this game it is argued that if rationality is not common belief throughout play of the game then it can be perfectly rational to play contrary to subgame perfection even if rationality is common belief at the beginning of the game it is then shown that it is impossible for rationality to be common belief throughout every play of the game

measuring progress in the degrowth transition to a steady state economy article i nfo in order to determine whether degrowth is occurring or how close national economies are to the concept of a steady state economy clear indicators are required within this paper i analyse four indicator approaches that could be used 1 gross domestic product 2 the index of sustainable economic welfare 3 biophysical and social indicators and 4 a composite indicator i conclude that separate biophysical and social indicators represent the best approach but a unifying conceptual framework is required to choose appropriate indicators and interpret the relationships between them i propose a framework based on ends and means and a set of biophysical and social indicators within this framework the biophysical indicators are derived from herman daly s definition of a steady state economy and measure the major stocks and flows in the economy environment system the social indicators are based on the stated goals of the degrowth

improving nash by coarse correlation we consider a class of symmetric two person quadratic games where coarse correlated equilibria cce moulin and vial 1978 can strictly improve upon the nash equilibrium payoffs while correlated equilibrium ce aumann 1974 1987 cannot because these games are potential games with concave potential functions we compute the largest feasible total utility in any cce in those games and show that it is achieved by a cce involving only two pure strategy profiles applications include the cournot duopoly and the game of public good provision where the improvement over and above the nash equilibrium payoff can be substantial

knowledge beliefs and game theoretic solution concepts in situations of strategic interaction it is important for agents to consider not only what their rivals will do but also what they know what they know about what they know and so on formal models of knowledge have been developed to help us keep track of these levels of knowledge this paper provides a non technical introduction to one of these models and investigates its foundations it is then shown how the model can be used to analyse game theoretic solution concepts in particular nash equilibrium copyright 2002 oxford university press

viable ramsey economies the ramsey model of economic growth is revisited from the perspective of viability theory the ramsey model augmented with minimal consumption and sustainability criteria becomes a viability problem the framework allows for a clear picture of optimal viable optimal non viable and viable non optimal paths the drastic sacrifices in terms of present consumption required by the implementation of brundtland sustainability are visualized the rich countries bearing the major part of the burden the econometric analysis of viability sets enhances the role of technological progress in ensuring brundtland sustainability preference parameters such as the pure time preference rate are statistically non significant

all stage strong correlated equilibrium abstract a strong correlated equilibrium is a strategy profile that is immune to joint deviations different notions of strong correlated equilibria were defined in the literature one major difference among those definitions is the stage in which coalitions can plan a joint deviation before ex ante or after ex post the deviating players receive their part of the correlated profile in this paper we show that an ex ante strong correlated equilibrium is immune to deviations at all stages thus the set of ex ante strong correlated equilibria of moreno wooders games econ behav 17 1996 80 113 is included in all other sets of strong correlated equilibria

the bayesian foundations of solution concepts of games abstract we transform a noncooperative game into a bayesian decision problem for each player where the uncertainty faced by a player is the strategy choices of the other players the priors of other players on the choice of other players the priors over priors and so on we provide a complete characterization between the extent of knowledge about the rationality of players and their ability to successively eliminate strategies which are not best responses this paper therefore provides the informational foundations of iteratively undominated strategies and rationalizable strategic behavior b d bernheim econometrica 52 1984 1007 1028 d pearce econometrica 52 1984 1029 1050 sufficient conditions are also found for nash equilibrium behavior and a result akin to r j aumann econometrica 55 1987 1 18 on correlated equilibria is derived with different hypotheses

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

the reeded edge and the phillips curve money neutrality common knowledge and subjective beliefs abstract i present a simple two person auction model in which a seller and a buyer make bids in terms of money however the value of a unit of money is uncertain i show 1 a monetary revaluation has purely nominal effects if and only if it is common knowledge 2 if seller and buyer have identical beliefs making the value of money common knowledge maximizes total gains from trade 3 if seller and buyer are equally well informed and have identical beliefs then monetary revaluations have no net effect 4 when the seller knows the value of money but the buyer does not the expected utilities of both seller and buyer are proportional to 1 1 2 where is the standard deviation of the value of money expressed as a fraction of the mean and 5 when beliefs are subjective monetary policy can improve total gains from trade as in friedman s explanation of the phillips curve and an optimal level of inflation can be determined journal of economic literature classification numbers c78 e52

private information and sunspots in sequential asset markets we study a model where some agents have private information about risky asset returns and trade to obtain capital gains while others acquire the risky asset and hold it to maturity forming expectations of returns based on market prices we show that under such a structure in addition to fully revealing rational expectations equilibria there exists a continuum of equilibrium prices consistent with rational expectations where the asset prices are subject to sunspot shocks such sunspot shocks can generate persistent uctuations in asset prices that look like a random walk in an e cient market

existence and dynamic consistency of nash equilibrium with non expected utility preferences sufficient conditions for the existence of a nash equilibrium are given when preferences may violate the reduction of compound lotteries assumption rcla without rcla decision makers may not be indifferent between compound lotteries which have the same probabilities of final outcomes therefore the conditions depend on how players perceive the game whether they view themselves as moving first or second we also review conditions under which the equilibria will be dynamically consistent

correlated equilibrium in stochastic games we study the existence of uniform correlated equilibrium payoffs in stochastic games the correlation devices that we use are either autonomous they base their choice of signal on previous signals but not on previous states or actions or stationary their choice is independent of any data and is drawn according to the same probability distribution at every stage we prove that any n player stochastic game admits an autonomous correlated equilibrium payoff when the game is positive and recursive a stationary correlated equilibrium payoff exists journal of economic literature classification numbers c72 c73

sunspot like effects of random endowments abstract random endowments can affect economic outcomes in two ways directly by affecting resources and indirectly by endogenously affecting expectations this second effect which we call a sunspot like effect allows prices to overreact to movements in fundamentals we prove that sunspot equilibria can be viewed as the limiting case of markets overreacting to small shocks to fundamentals two examples illustrate the theorem and show that sunspot like effects can be present even with significant shocks to fundamentals

asymptotic efficiency in large exchange economies with asymmetric information the authors provide conditions on an exchange economy with asymmetric information that guarantee that when the economy is replicated sufficiently often there will be an allocation that is incentive compatible individually rational and nearly efficient the main theorem covers both the case in which aggregate uncertainty remains when the economy is replicated and the case in which replication eliminates aggregate uncertainty in addition the authors demonstrate how their theorem does or does not apply to standard asymmetric information problems such as the buyer s bid double auction problem akerlof s lemons problem and insurance with asymmetric information copyright 1992 by the econometric society

learning correlated equilibria in games with compact sets of strategies hart and schmeidler s extension of correlated equilibrium to games with infinite sets of strategies is studied general properties of the set of correlated equilibria are described it is shown that just like for finite games if all players play according to an appropriate regret minimizing strategy then the empirical frequencies of play converge to the set of correlated equilibria whenever the strategy sets are convex and compact

the economics of degrowth economic degrowth is ecologically desirable and possibly inevitable but under what conditions can it become socially sustainable how can we have full employment and economic stability without growth what will happen to public spending and to public debt how would production be organised in a degrowing economy and under what plausible socio political conditions could such grand changes happen standard economic theories and models ignore these questions for them economic growth is an axiomatic necessity this article reviews recent contributions in the economics of degrowth and identifies research avenues for ecological economists

wage premiums and profit maximization in efficiency wage models abstract the standard shirking model of efficiency wages is essentially a continuous time repeated prisoners dilemma game thus to sustain an equilibrium with employment requires sufficient gains from future co operation each division of these gains corresponds to some equilibrium efficiency wages correspond to employees receiving the gains bonds allow firms to receive them in markets well informed about agents pasts employment is independent of the distribution of gains but in anonymous markets with more workers than jobs employment is highest in efficiency wage equilibria efficiency wages thus arise naturally as the unique efficient equilibrium without recourse to assumptions that limit bonding

an exploration of the eductive justifications of the rational expectations hypothesis this paper examines justifications of the rational expectations hypothesis that rely on the analysis of the agents mental forecasting educing activity which involves forecasting the forecasts of others etc the corresponding concept of eductive learning stability based on the game theoretical concept of rationalizability is primarily used within the classical muth model conditions for coordination of beliefs are interpreted and discussed they are robust to the introduction of noise more generally eductive stability fits economic intuition on coordination stability increases when the industry product differentiation increases and when decisions are sequential and observable copyright 1992 by american economic association

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

equilibrium play and adaptive learning in a three person centipede game the two person centipede game is one of the most celebrated paradoxes of backward induction in complete information extensive form games an experimental investigation of a three person centipede game shows that the paradoxical results are strongly affected by the size of the stakes when the number of players in the game is increased from two to three and the game is played for unusually high stakes with group composition being randomly changed from trial to trial the paradox is considerably weakened as players approach equilibrium play with multiple iterations of the stage game when the game is played with low stakes there is no evidence for equilibrium play or learning across iterations of the stage game an adaptive learning model that assumes updating of the individual probabilities of choice outperforms alternative static and dynamic models in accounting for the major results observed in the high stake experiment

rational behavior and rational expectations abstract this paper presents a new definition of rational expectations equilibrium in security markets characterized by a rigorous treatment of the decision problem facing each agent a rational expectations equilibrium is one in which it is common knowledge among the agents that all of them are rational and that the price observed is the market clearing price the paper shows that such equilibria always exist and that they need not have the property that for generic economies the equilibrium price reveals all economically relevant information the paper also shows that the new definition generalizes existing definitions of rational expectations equilibrium

correlated equilibrium in games with type dependent strategies abstract this paper extends aumann s definition of correlated equilibrium to games with incomplete information a strategy correlated equilibrium is defined to be a correlated equilibrium of the game in behavioral strategies it is shown that this equilibrium concept is robust with respect to misspecifications of the uncertainty in the game and the equilibrium correspondence is upperhemicontinuous with respect to the players payoff functions and information this implies the existence of strategy correlated equilibria without assumptions on the structure of players information none of these results have been proven for bayesian nash equilibria

waiting to persuade i analyze a sequential bargaining model in which players are optimistic about their bargaining power measured as the probability of making offers but learn as they play the game i show that there exists a uniquely predetermined settlement date such that in equilibrium the players always reach an agreement at that date but never reach one before it given any discount rate if the learning is sufficiently slow the players agree immediately i show that for any speed of learning the agreement is delayed arbitrarily long provided that the players are sufficiently patient therefore although excessive optimism alone cannot cause delay it can cause long delays if the players are expected to learn

bargaining and international environmental agreements this article surveys game theoretic papers focused on the negotiation process that leads to an international environmental agreement most of the papers considered apply bargaining theory although other approaches have been considered as well among other issues the papers considered analyze the burden sharing rule that will result from a negotiation over a global public good the role of information asymmetries the impact of unilateral commitments delegation and ratification whether or not countries are going to form groups during the negotiation process and the influence of the expectation of a future bargaining process on investment decisions the basic bargaining model is optimistic as it predicts that countries will reach an efficient agreement immediately however all the developments of this model surveyed afterwards are rather pessimistic and even the basic model has perverse incentives for pre negotiation signals

equilibrium without independence abstract because players whose preferences violate the von neumann morgenstern independence axiom may be unwilling to randomize as mixed strategy nash equilibrium would require a nash equilibrium may not exist without independence this paper generalizes nash s definition of equilibrium retaining its rational expectations spirit but relaxing its requirement that a player must bear as much uncertainty about his own strategy choice as other players do the resulting notion equilibrium in beliefs is equivalent to nash equilibrium when independence is satisfied but exists without independence this makes it possible to study the robustness of equilibrium comparative statics results to violations of independence

an agent based simulation of power generation company behavior in electricity markets under different market clearing mechanisms deregulated electricity markets are expected to provide affordable electricity for consumers through promoting competition yet the results do not always fulfill the expectations the regulator s market clearing mechanism is a strategic choice that may affect the level of competition in the market we conceive of the market clearing mechanism as composed of two components pricing rules and rationing policies we investigate the strategic behavior of power generation companies under different market clearing mechanisms using an agent based simulation model which integrates a game theoretical understanding of the auction mechanism in the electricity market and generation companies learning mechanism results of our simulation experiments are presented using various case studies representing different market settings the market in simulations is observed to converge to a nash equilibrium of the stage game or to a similar state under most parameter combinations compared to pay as bid pricing bid prices are closer to marginal costs on average under uniform pricing while gencos total profit is also higher the random rationing policy of the iso turns out to be more successful in achieving lower bid prices and lower genco profits in minimizing gencos total profit a combination of pay as bid pricing rule and random rationing policy is observed to be the most promising

estimating the market for tomatoes an econometric model of the market for tomatoes in israel is developed to take into account the distortions brought about by the marketing board and intermediaries the existence of monopoly and monopsony power is hypothesized by analyzing the middlemen s optimal behavior being compelled by the marketing board to purchase all produce wholesalers exert monopsony power by reducing quantities marketed to consumers by selling surpluses to the marketing board at the minimum price the empirical results confirm the existence of strong monopsony power together with weak monopoly power in that market

the revelation of information and self fulfilling beliefs abstract at a rational expectations equilibrium ree individuals are assumed to know the map from states to prices this hypothesis has two components that agents agree consensus and that they have point expectations degeneracy we consider economies where agents beliefs are described by a joint distribution on states and prices and these beliefs are fulfilled at equilibrium beliefs are self fulfilling if every price in the support of the distribution is an equilibrium price the corresponding equilibria are beliefs equilibria be the further restriction that agents have the same beliefs results in common beliefs equilibria cbe we study the relationship between be cbe and ree thus isolating the role of consensus and of degeneracy in achieving rational expectations journal of economic literatureclassification numbers d51 d82

sufficient conditions for inessentiality three theorems state conditions sufficient for the inessentiality of equilibrium in a pure exchange sequence economy the agents have uncommon priors state contingent utility functions and asymmetric information in every trading period and they trade different sets of event contingent claims in different periods the theorems provide alternative interpretations of the concept of market completeness reveal two fundamentally different ways to obtain inessentiality and shed light on the conditions permitting speculation and the role of price contingent trading none of the theorems requires ex ante pareto optimality or the absence of arbitrage opportunities copyright 1993 by the econometric society

beyond gdp measuring and achieving global genuine progress article i nfo while global gross domestic product gdp has increased more than three fold since 1950 economic wel fare as estimated by the genuine progress indicator gpi has actually decreased since 1978 we synthesized estimates of gpi over the 1950 2003 time period for 17 countries for which gpi has been estimated these 17 countries contain 53 of the global population and 59 of the global gdp we compared gpi with gross domestic product gdp human development index hdi ecological footprint biocapacity gini coefficient and life satisfaction scores results show a significant variation among these countries but some major trends we also estimated a global gpi capita over the 1950 2003 period global gpi capita peaked in 1978 about the same time that global ecological footprint exceeded global biocapacity life satisfaction in almost all countries has also not improved significantly since 1975 globally gpi capita does not increase beyond a gdp capita of around 7000 capita if we distributed income more equitably around the planet the current world gdp 67 trillion yr could support 9 6 billion people at 7000 capita while gpi is not the perfect economic welfare indicator it is a far better approximation than gdp development policies need to shift to better account for real welfare and not merely gdp growth

de growth and welfare in an equilibrium model with heterogeneous consumers this paper studies equilibrium growth and voluntary degrowth allowing for heterogeneous and time varying preferences the approach is based on applying a dynamic equilibrium model with externalities in production consumption and leisure preference heterogeneity regarding status competition is modeled by asymmetric consumption externality parameters whereas heterogeneity regarding voluntary simplicity is incorporated by allowing for agent specific restrictions on maximum consumption equilibrium is studied in terms of a balanced growth path bgp numerical examples suggest that degrowth triggered by voluntary simplicity by a subset of consumers less affected by status competition has a positive effect on the aggregate welfare under externalities in consumption and leisure a reduction in status competition increases the aggregate welfare and reduces the equilibrium growth rate simulations suggest that a time varying equilibrium in the heterogeneous preference model with two consumer classes is well approximated by a constant bgp

flexible and semiflexible consumer demands with quadratic engel curves in this paper we introduce three flexible consumer demand systems in which expenditures on goods are quadratic functions of income we view these alternatives as to the demand systems used heretofore in the empirical modeling of rank three demands namely those in which expenditure shares are quadratic functions of the logarithm of income curvature conditions required by theory can be imposed locally during the estimation for each and a semiflexible version can be estimated for illustrative purposes we estimate various forms of two of the systems using canadian data on seven categories of goods for the period 1947 to 1995

all pay contests this paper studies a class of games all pay contests which capture general asymmetries and sunk investments inherent in scenarios such as lobbying competition for market power labor market tournaments and r d races players compete for one of several identical prizes by choosing a score conditional on winning or losing it is weakly better to do so with a lower score this formulation allows for differing production technologies costs of capital prior investments attitudes toward risk and conditional and unconditional investments among others i provide a closed form formula for players equilibrium payoffs and analyze player participation a special case of contests is multiprize complete information all pay auctions

axiomatic characterizations of rational choice in strategic environments for more than forty years economists have wrestled with the elusive notion of rational behavior in strategic environments generating a variety of competing approaches even for simple simultaneous move games four distinct solution concepts including the notions of nash equilibria correlated equilibria rationalizability and iterated dominance currently have some standing as theories of strategic rationality here i propose four axioms for rational choice in strategic environments and use these to characterize the sets of pure strategies that players may select under each of the solution concepts mentioned above my results underscore both the similarities and differences between the four concepts

learning correlated equilibria an evolutionary approach abstract correlated equilibrium aumann 1974 aumann 1987 is an important generalization of the nash equilibrium concept for multiplayer non cooperative games in a correlated equilibrium players rationally condition their strategies on realizations of a common external randomization device and as a consequence can achieve payoffs that pareto dominate any of the game s nash equilibria in this paper we explore whether such correlated equilibria can be learned over time using an evolutionary learning model where agents do not start with any knowledge of the distribution of random draws made by the external randomization device furthermore we validate our learning algorithm findings by comparing the end behavior of simulations of our algorithm with both the correlated equilibrium of the game and the behavior of human subjects that play that same game our results suggest that the evolutionary learning model is capable of learning the correlated equilibria of these games in a manner that approximates well the learning behavior of human subjects and that our findings are robust to changes in the specification and parameterization of the model

rational expectations in games a player i s actions in a game are determined by her beliefs about other players these depend on the game s real life context not only its formal description define a game situation as a game together with such beliefs call the beliefs and i s resulting expectation rational if there is common knowledge of rationality and a common prior in two person zero sum games i s only rational expectation is the game s value in an arbitrary game g we characterize i s rational expectations in terms of the correlated equilibria of the doubled game 2g in which each of i s strategies in g appears twice

demand for slant how abstention shapes voters choice of news media political commentators warn that the fragmentation of the modern media landscape induces voters to withdraw into information cocoons and segregate along ideological lines we show that the option to abstain breaks ideological segregation and generates cross over in news consumption voters with considerable leanings towards a candidate demand information that is less biased towards that candidate than voters who are more centrist this non monotonicity in the demand for slant makes voters ideologies non recoverable from their choice of news media and generates disproportionate demand for media outlets that are centrist or only moderately biased it also implies that polarisation of the electorate may lead to an ideological moderation in news consumption

the effects of itq management on fishermen s welfare when the processing sector is imperfectly competitive in this paper we use a general model of imperfect competition to predict welfare changes within an open access fishery after it transitions to individual transferable quota itq management although related research has explored the effects of market power in the harvesting sector on itq performance none has considered the implications of an imperfectly competitive processing sector addressing this question we find that although fishermen should expect to gain from itqs under perfect competition they may suffer welfare losses if the processing sector is imperfectly competitive

the energetic metabolism of societies and the degrowth paradigm analyzing biophysical constraints and realities the belief that it is possible to have a perpetual economic growth based on fossil energy has been challenged since the 1970s however only in the last decade is this issue re emerging once again because of the predicaments of climate change and peak oil many finally start to perceive that an economic degrowth entailing a downscaling of the current size and pattern of socio economic systems seem unavoidable in this paper we analyze the implications the feasibility and the desirability of possible trajectories of downscaling from an energetic perspective the quantitative analysis is based on the methodological approach of societal metabolism and it provides a dynamic accounting of the profile of energy flows required and consumed by societies in relation the expression of a given set of societal functions this analysis makes it possible to check two types of constraints external constraints supply and sink side limits for the whole and internal constraints the feasibility of energy budget of the various parts of the society expressing the required functions the analysis of the metabolic pattern of a sample of developed countries is used to discuss possible implications of i demographic changes ii the declining supply of net energy sources and iii the effects of the jevons paradox within such an analysis a few assumptions and recipes of the degrowth movement seem problematic i population is and will remain as a relevant variable to be considered ii the proposed reduction in working hours seem to be impractical unless a major catastrophe will reset current civilization to pre industrial standards and iii voluntary reduction of personal energy consumption even if a welcome adjustment alone will not solve the existing problems in the final part of the paper future energetic road maps are questioned within the realm of post normal science can we plan degrowth if we are serious about the need of doing something completely different societies will have to learn how to deliberate under uncertainty within the realms of flexible management and stop planning for either growth or degrowth moreover before suggesting policies it would be wise first to try to understand the option space

unmediated communication in repeated games with imperfect monitoring we show that any correlated equilibrium payoff of two player repeated games with imperfect monitoring and without discounting can be reached as the nash equilibrium payoff of the game extended by a universal mechanism of unmediated communication this result holds regardless the particular concept of equlibrium involved upper lower banach or uniform equlibrium the communication mechanism is built up by using commutative one way functions these functions are designed with the help of cryptographic tools

you cannot gamble on others dissociable systems for strategic uncertainty and risk in the brain a b s t r a c t this paper tests whether strategic uncertainty employs circuits in the brain that encode risk and utility or circuits that are involved in theory of mind tom we compare participants decisions in a stag hunt game with an equivalent choice between bernoulli lotteries where the probabilities are equal to the mixed nash equilibrium of the stag hunt game behavioral data suggests that most participants are more willing to choose the payoff dominant option in a stag hunt game than the equivalent lottery neuroimaging shows that activations in the regions of the brain commonly associated with tom are correlated with a participant s propensity to choose payoff dominant this suggests that individuals who mentalize the other person are more likely to be cooperative than those who do not

are we consuming too much this paper articulates and applies frameworks for examining whether consumption is excessive we consider two criteria for the possible excessiveness or insufficiency of current consumption one is an intertemporal utility maximization criterion actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility the other is a sustainability criterion which requires that current consumption be consistent with non declining living standards over time we extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change in applying this formula we find that some poor regions of the world are failing to meet the sustainability criterion in these regions genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital

algorithmic rationality game theory with costly computation abstract we develop a general game theoretic framework for reasoning about strategic agents performing possibly costly computation in this framework many traditional game theoretic results such as the existence of a nash equilibrium no longer hold nevertheless we can use the framework to provide psychologically appealing explanations of observed behavior in well studied games such as finitely repeated prisoner s dilemma and rock paper scissors furthermore we provide natural conditions on games sufficient to guarantee that equilibria exist

competing lending platforms endogenous reputation and fragility in microcredit markets this paper shows that market fragility and mass default can arise in microcredit markets as a result of the strategic interaction between a microlender using a reputation based mechanism and a traditional lender using physical collateral in our model borrowers solve a dynamic programming problem which induces an endogenous equilibrium distribution of reputational capital because the quality of each lender s pool of borrowers is affected by both lenders interest rates lender reaction curves are non monotonic and discontinuous this can result in knife edge equilibria and mass default on the microlender precipitated by minor parametric perturbations fragility is exacerbated by borrower screening and sovereign risk but ameliorated when microlenders have social welfare goals our results highlight the importance of studying the entire credit market rather than microfinance in isolation

subjective games and equilibria applying the concepts of nash bayesian and correlated equilibria to the analysis of strategic interaction requires that players possess objective knowledge of the game and opponents strategies such knowledge is often not available the proposed notions of subjective games and of subjective nash and correlated equilibria replace essential but unavailable objective knowledge by subjective assessments when playing a subjective game repeatedly subjective optimizers converge to a subjective equilibrium we apply this approach to some well known examples including single and multi person multi arm bandit games and repeated cournot oligopoly games journal of economic literature classification numbers c73 and c83

institutions and short run macroeconomic performance abstract this paper reviews the growing interest in institutions it argues that the explanation for this interest is a fresh awareness of how institutions affect economic performance this connection arises because many economic interaction take the form of one or other of three classic games prisoners dilemma coordination and chicken and the outcome in these games and hence performance of the economy is influenced by the institutional context of these interactions the paper provides a detailed illustration of this argument with a survey of the literature which relates unemployment performances to the institutions of wage setting in oecd countries

growth degrowth and climate change a scenario analysis article i nfo article history the paper proceeds with a discussion of the interplay of scale and intensity in determining greenhouse gas emissions this is followed by the presentation of several macroeconomic scenarios using lowgrow a simulation model of the canadian economy the scenarios considered are business as usual which is a projection into the future of past trends selective growth in which differential growth rates are applied to parts of the economy according to their direct and indirect greenhouse gas emissions and degrowth where the average gdp capita of canadians is reduced towards a level more consistent with a world economy the size of which respects global environmental limits the paper ends with a comparison of the scenarios 2011 published by elsevier b v

modelling cognitively bounded rationality an evaluative taxonomy abstract since its origins in the 1950s the notion of bounded rationality has been incorporated into economic theory using an array of methodological approaches this paper presents a taxonomy by which these approaches can be categorized and understood evaluating each approach against a range of important criteria at a time when the foundations of economic theory are being re examined this paper should be viewed as a first step towards an assessment of the appropriate role that this more realistic view of cognition should take in different areas of economic theory and also of the desirable characteristics of models that incorporate it

common beliefs and the existence of speculative trade abstract this paper shows that if rationality is not common knowledge the no trade theorem of milgrom and stokey fails to hold we adopt monderer and samet s notion of common p belief and show that when traders entertain doubts about the rationality of other traders arbitrarily large volumes of trade as well as rationality may be common p belief for a large p furthermore rationality and trade may simultaneously be known to arbitrary large but finite degree journal of economic theory classification numbers c70 d82 d84

the environment as a commodity all economic activity is based ultimately on re sources found in nature whether it is consumption the point in exposing the morphology of produced or production or whether it is exchange the comgoods and services is not to construct a resource moditi es which are involved are made of constitutheory of a value there are any number of natural ents provided by nature thus the ingredients of resources and this alone precludes such an at any manufactured good are other produced goods tempted theory from being coherent my purpose labour time and skills and natural resources each rather is to use it to express surprise at the fact that of these constituent produced goods is in turn made despite the centrality of natural resources in eco up from the ingredients that went into its manufacnomic activity they find little room in economics ture namely labour time and skills natural rediscourses interest in resource economics more sources and further produced goods it follows particularly environmental economics has only that any manufactured commodity is ultimately a been intermittent and if we are currently witness combination of labour and natural resources ing a resurgence and this special issue is an ex ample of it we have also just lived through a labour too is a produced good even raw labour is decade long neglect during which much valuable an output manufactured by those natural resources research could have been done 2 we are way behind which sustain life resources such as the multitude where we should have been and could have been

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

game theoretic models for climate change negotiations abstract negotiations to reduce greenhouse gas accumulation in the atmosphere are modeled as extensive games of perfect information various solution concepts such as nash equilibrium reaction function equilibrium correlated equilibrium and bargaining solutions are applied analyzed and computed special reduction techniques are used when the size of the game tree becomes excessive a new solution concept the tree correlated equilibrium is also introduced main features of an excel add in designed to compute various solutions are briefly described and a sample policy analysis for a special negotiating scenario is discussed

testing threats in repeated games under most game theoretic solution concepts equilibrium beliefs are justified by off equilibrium events i propose an equilibrium concept for infinitely repeated games called nash equilibrium with tests newt according to which players can only justify their equilibrium beliefs with events that take place on the equilibrium path itself in newt players test every threat that rationalizes a future non myopic action that they take the tests are an integral part of equilibrium behavior characterization of equilibrium outcomes departs from the classical folk theorems the concept provides new insights into the impact of self enforcement norms such as reciprocity on long run cooperation c 2004 elsevier inc all rights reserved

optimal versus sustainable degrowth policies abstract this paper introduces a natural resource and pollution in a ramsey growth model which relies on the postulates of ecological economics it studies the impact of voluntary degrowth policies on production and welfare the instrument of these policies is a tax on the natural resource these public policies are implemented after the downturn of the households welfare following from the increased pollution two kinds of policies are considered and rely either on an optimality criterion or on an intergenerational equity criterion with respect to the laissez faire case they decrease both production and pollution but increase welfare classes of sustainable degrowth paths characterized by time constant or time increasing tax rates are determined

a difficulty in implementing correlated equilibrium distributions we view achieving a particular correlated equilibrium distribution for a normal form game as an implementation problem we show using a parametric version of the two person chicken game that a social choice function that chooses any particular correlated equilibrium distribution does not satisfy maskin monotonicity and therefore can not be fully implemented in nash equilibrium thus no mechanism that aims to understand a correlated distribution as the unique outcome of nash equilibrium play can be found jel classi cation numbers c72 keywords correlated equilibrium distribution implementation monotonicity

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