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

heterogeneity in informal salaried employment evidence from the egyptian labor market survey summary this paper contributes to the continuing debates on the mechanisms driving labor market informality in developing countries by proposing an innovative way to discriminate between segmented and competitive markets an empirical analysis is applied to egyptian paid employment in the highly dynamic context of 1998 2006 the study is based on recent nonparametric methods applied to estimate the model with essential heterogeneity the model is extended to decomposing the treatment effects into unobserved and observed components the results show triple heterogeneity of workers on the egyptian labor market offering support to both segmented and competitive views on informal labor

essays on duopoly competition with asymmetric firms is profit maximization always an evolutionary stable strategy abstract we propose both a well mixed and spatially structured evolutionary game to analyze the competitive behavior of retail firms in duopolistic markets firms from two different populations high low efficiency compete and the available strategies are i profit or ii revenue maximization under bounded rationality assumptions firms can update their behavior through dynamic learning mechanisms in addition to a replicator dynamics approach we develop an agent based model to increase realism and to capture possible spatial effects on firms strategic behavior a convergence between the methods is observed and given specific conditions revenue maximization may corresponds to an evolutionary stable strategy ess

winner take all and proportional prize contests theory and experimental results abstract this study provides a unified framework to compare three canonical types of contests winner take all contests won by the best performer winner take all lotteries where probability of success is proportional to performance and proportional prize contests in which rewards are shared in proportion to performance we derive equilibria and observe outcomes from each contest in a laboratory experiment equilibrium and observed efforts are highest in winner take all contests lotteries and proportional prize contests have the same nash equilibrium but empirically lotteries induce higher efforts and lower more unequal payoffs behavioral deviations from theoretical benchmarks in different contests are caused by the same underlying attributes such as risk aversion and the utility of winning finally we find that subjects exhibit consistent behavior across different types of contests with subjects exerting higher effort in one contest also exerting higher effort in another contest

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

cash crop liberalization and poverty alleviation in africa evidence from malawi this article uses the case of burley tobacco liberalization in malawi to investigate the efficacy of cash crop liberalization as an instrument for poverty alleviation in sub saharan africa the principal justification for cash crop liberalization is that markets allow farm households to increase their incomes by producing that which provides the highest return to their productive resources and use the cash to buy consumption goods using a latent welfare model we find that households that selected to grow cash crops had higher incomes than those that did not grow cash crops however we also find that due to the lumpiness and seasonality of cash crop incomes higher household incomes while increasing food purchases did not significantly affect per capita food intake irrespective of participation in cash crops for much of the cropping season rural households seem to rely more on nonfarm income for expenditure and consumption smoothing

the strategic equivalence of rent seeking innovation and patent race games abstract we establish the strategic equivalence of a variety of rent seeking contests innovation tournaments and patent race games the results allow us to disentangle negative and positive externalities and to apply theorems and results intended for rent seeking games to other games and vice versa we conclude with several examples that highlight the practical utility of our results

election goals and the allocation of campaign resources this paper compares the equilibrium behavior and outcomes in a model of two party competition for legislative seats under two different assumptions about the parties goals 1 parties maximize the expected number of seats won and 2 parties maximize the probability of winning a majority of the seats the two goals may lead to qualitatively different behavior and studying the differences yields insights into the relationship between the goals and the role of assymetries between the parties

demand for maize hybrids and hybrid change on smallholder farms in kenya kenya is a globally recognized maize success story as the overall percentage of maize farmers growing hybrids tops 80 and the seed industry matures the slow pace of hybrid replacement on farms and the continued dominance of the seed industry by kenya seed company may dampen productivity our econometric analysis identifies the factors that explain farmer demand for hybrid seed and the age of hybrids they grow considering hybrid seed ownership male headed households with more education more assets and more land plant more hybrid seed scale of seed demand per farm is differentiated by agroecology we find a strong farmer response to the seed to grain price ratio which we interpret as evidence of a commercial orientation even on household farms however despite the dramatic increase in the number of hybrids sold and the breadth of seed suppliers as seed markets liberalize an older hybrid still dominates national demand

equilibrium selection and the dynamic evolution of preferences abstract a population of fully rational agents plays a symmetric 2 player game in biological fitnesses but each agent s play is determined by his payoffs which are free to evolve according to survival of the fittest pressures an equilibrium selection mechanism is assumed to exist and deliver a unique outcome for any given profile of payoffs this allows the evolution of payoffs to be modeled as a well defined replicator dynamics the existing static stability results that efficient strict nash implies stability and stability implies efficiency are translated to this dynamic context although the latter gives way to indeterminacy in the absence of a specific equilibrium selection mechanism a strong form of stability is established for the efficient outcome of games with common interests whilst a weaker stability result is provided for efficient mixed strategy equilibria of doubly symmetric games the results are illustrated using the equilibrium selection mechanism provided by global games

supply chain disruption management and evolutionarily stable strategies of retailers in the quantity setting duopoly situation with homogeneous goods this paper develops an indirect evolutionary game model with two vertically integrated channels to study evolutionarily stable strategies ess of retailers in the quantity setting duopoly situation with homogeneous goods and analyzes the effects of the demand and raw material supply disruptions on the retailers strategies every channel consists of one manufacturer and many a sufficiently large number of retailers that sell products in different markets by adopting two pure marketing strategies profit maximization and revenue maximization we find that revenue maximization strategy may prevail and profit maximization strategy may become extinct two strategies may coexist i e all retailers in one channel will choose profit maximization strategy and all retailers in the other will choose revenue maximization strategy the ess of retailers depends on the relative size of the market scale and unit cost the supply chain disruptions affect the ess of retailers we also introduce a recovery model of the supply chain under disruptions and illustrate the effect of disruptions on the ess and on the average profits of channels in a market using a numerical simulation

the elementary economics of social dilemmas a social dilemma is in essence a prisoners dilemma in a continuous strategy space i discuss a number of social dilemmas that have caught my attention offer an elementary diagrammatic synthesis of them and discuss some of the economic insights that the diagrams capture including incentives for pre commitment finally i model pre commitment via delegation and link results to the literature on the evolution of preferences l economie elementaire des dilemmes sociaux un dilemme social est essentiellement un dilemme du prisonnier dans un espace continu de strategie l auteur discute d un certain nombre de dilemmes sociaux qui ont retenu son attention il en propose une synthese graphique elementaire et discute certaines des suggestions economiques qui decoulent de ces diagrammes comme par exemple les incitations a se pre engager finalement l auteur construit un modele de pre engagement par delegation et relie ses resultats a la litterature sur l evolution des references

evolution of preferences in an exchange economy abstract we propose an evolutionary theory of how economic environments shape individual preferences consumption is assumed to have both a standard utilitarian payoff and a biological payoff which determines long term survival we show that heterogeneous preference types can co exist in equilibrium

contests with limited resources abstract many interesting phenomena electoral competition r d races lobbying are instances of multiple simultaneous contests with unconditional commitment of limited resources specifically the following game is analyzed two players compete in a number of simultaneous contests the players have limited resources budgets and must decide how to allocate these to the different contests in each contest the player who expends more resources than his adversary wins a corresponding prize mixed strategy equilibria are characterized in the case of identical values and budgets and the connections with the classical blotto game are analyzed

racing with uncertainty and strategic interaction between competitors as the race unfolds most of the existing literature examines one or other of these features but not the two combined our aim is to see how the efforts of competitors in a race vary with the intensity of rivalry between them in our principal model whch is of a one dimensional race it is shown that the leader in the race makes greater efforts than the follower and efforts increase as the gap between competitors decreases under certain conditions the same results hold in our second related model which is of a two dimensional race

a biological basis for expected and non expected utility abstract a biological model is developed here to determine the fittest attitude to risk with a fixed environment the type maximizing expected offspring is selected this yields the expected utility theorem when translated into a criterion for evaluating gambles over commodities with a random environment however the type selected is strictly less averse to idiosyncratic risk than to risk which is correlated across all individuals the implied criterion for choice over gambles does not satisfy the expected utility theorem and may induce choice of a gamble which is first order stochastically dominated journal of economic literature classification number d81

effectiveness of electoral systems for reducing government corruption a game theoretic analysis abstract a theoretical model is developed for predicting the relative effectiveness of different electoral systems for reducing government corruption we consider voting games in which parties with known corruption levels and known positions on a major policy question compete for legislative seats we find that approval voting and proportional representation are fully effective in the sense that all equilibria exclude corrupt parties from legislative seats plurality voting is partly effective in the sense that there always exist some equilibria that exclude corrupt parties borda voting is ineffective because for some political situations no equilibria can guarantee the exclusion of corrupt parties journal of economic literature classification number d72

carrot or stick the evolution of reciprocal preferences in a haystack model this paper studies the evolution and the co evolution of both characteristics of reciprocity the willingness to reward friendly behavior and the willingness to punish hostile behavior firstly both preferences for rewarding and preferences for punishing can survive in evolution provided individuals interact within separate groups this holds even with randomly formed groups and even when individual preferences are unobservable secondly preferences for rewarding survive only in coexistence with self interested preferences but preferences for punishing tend either to vanish or to dominate the population entirely finally the evolution of preferences for rewarding and the evolution of preferences for punishing influence each other decisively the existence of rewarders enhances the evolutionary success of punishers but punishers crowd out rewarders jel classification c72 d63 d64 d83

primaries and the new hampshire effect candidates for u s presidential elections are determined through sequential elections in single states the primaries we develop a model in which candidates can influence their winning probability in electoral districts by spending money on campaigning the equilibrium replicates several stylized facts very well campaigning is very intensive in the first district the outcome of the first election then creates an asymmetry in the candidates incentives to campaign in the next district which endogenously increases the equilibrium probability that the first winner wins in further districts on the normative side our model oers a possible explanation for the sequential organization it leads in expectation to a lower level of advertising expenditures than simultaneous elections moreover if one of the candidates is the more eective campaigner sequential elections also perform better with regard to the selection of the best candidate

a model of the evolution of duopoly does the asymmetry between firms tend to increase or decrease this paper is an attempt to identify some of the factors that affect the evolution of market structure in a model of dynamic competition between two firms the stochastic evolution of the state of competition depends on the respective effort rates of the firms the question is whether the current leader works harder than the laggard does the gap between firms tend to increase or decrease we show that several effects are at work the state tends to evolve in the direction where joint payoffs are greater since joint payoffs are related to joint product market profits less joint effort costs there are two classes of effect the joint profit effect and various joint cost effects the latter result in part from the pattern of profits and in part from endpoint effects that give relief from efforts asymptotic expansions illuminate these influences moreover we show by numerical simulation that there is another kind of joint cost effect the pattern of joint effort costs can influence the pattern of evolution of market structure and the evolution of the pattern of market structure can influence the pattern of efforts in a mutually self reinforcing manner in particular there may be equilibria in which this last effect means that the laggard works harder than the leader even though all the other effects work in favour of the leader

evolution population growth and history dependence abstract we consider an evolutionary model with mutations which incorporates stochastic population growth we provide a complete characterization of the effects of population growth on the evolution of play in particular we show that if the rate of population growth is at least logarithmic the stochastic process describing play converges only one equilibrium will be played from a certain point forward if in addition the rate of mutation is taken to zero the probability that the equilibrium selected is the first equilibrium played approaches one thus population growth generates history dependence the contingency of equilibrium selection on historical conditions journal of economic literature classification numbers c72 c73 o33

stochastic asymmetric blotto games some new results stochastic asymmetric blotto games some new results john duffy abstract blotto games alexander matros we develop some new theoretical results for stochastic asymmetric keywords colonel blotto game contests resource allocation lotteries jel classification nos c72 c73 d72 d74 1 introduction the colonel blotto game borel 1921 is a two player non cooperative game in which players decide how to allocate their given resources across battlefields in borel s original version of this game the player who allocates the most resources to any given battlefield wins that battlefield with certainty the players objective function is either to maximize the sum of the value of the battlefields won or to win a majority value of the battlefields in this paper we study stochastic asymmetric versions of the blotto game under both of these objective functions in an asymmetric blotto game the values of the battlefields may di er from one another though these di erent values are common to all players in the stochastic asymmetric version of the blotto game the deterministic rule for determining which player wins each battlefield is replaced by a lottery contest success function where the chances of winning a given battlefield are increasing with the amount of resources devoted to that battlefield this stochastic lottery specification makes the payo function continuous as a result if a nash equilibrium exists it is unique and in pure strategies as opposed to the multiplicity of typically mixed strategy equilibria that arise in deterministic versions of the blotto game there are two main theoretical papers about stochastic asymmetric blotto games 1 the first one friedman 1958 considers two players who seek to maximize their expected total payo we show that friedman s result can be extended to any number of players the second paper lake 1979 was the first to study the stochastic asymmetric majority rule blotto game 2 this version of the game is particularly relevant to understanding electoral competitions in two party systems e g the electoral college system for electing the u s president lake studied only the case of equal budget constraints we show that if players budgets are the same as in lake or if they are su ciently similar and the number of items battlefields is not too large then resource allocation under the majority rule version of the stochastic asymmetric blotto game is proportional to the banzhaf power index for each item while more generally resource allocation for a particular item will not be proportional to each item s banzhaf power index our findings thus generalize those of lake 1979 department of economics university of california irvine email du y uci edu moore school of business university of south carolina and lancaster university management school email alexander matros gmail com see kovenock and roberson 2012 for a broader survey of the blotto game literature we discovered lake s 1979 paper only after we had completed our analysis his proofs are di erent from ours but his main result coincides with our prediction for the case of equal budgets we thank steve brams for providing this reference

cash transfer programs and agricultural production the case of malawi cash transfer programs are increasingly utilized to combat poverty and hunger while building the human capital of future generations however they have been faulted by some for failing to build the productive capacity of current generations this article analyzes the impact of the malawi social cash transfer scheme on agricultural production the results show strong increases in ownership of productive agricultural assets in time devoted to household farms and in food types consumed from own production coupled with a sharp decrease in ganyu labor which is often used as a coping mechanism once food stores have been depleted these results are most likely achieved by helping farmers overcome credit and liquidity constraints this research shows that cash transfer programs can help the capacity of extremely poor farm households to expand agriculture production even if the goal of the program is focusing on other dimensions of poverty

labor shortages on small landholdings in malawi implications for policy reforms abstract a simple linear programming model of representative smallholder households is used to investigate the sources of relative scarcity of labor and land in malawi the paradox of on farm labor shortages on small landholdings can be explained by the multiple constraints smallholders face these multiple constraints including lack of finance concerns for food security and others lead to suboptimal allocations of household resources in turn the low returns to labor and land contribute to household food insecurity and a vicious cycle of poverty the findings of the paper provide a clear signal to policymakers and research and extension institutions that these constraints are all linked and addressing one cannot be effective without addressing the others

targeting bias and expected impact of complex innovations on developing country agriculture evidence from malawi agronomic analyses of new technologies are often conducted under carefully controlled research station programs or trials managed by self selected farmers oftentimes the technologies are then scaled up with minimal evaluation under real world conditions yet the interim step between agronomic trials and large scale promotion is crucial to generate evidence on the social and economic impact of technologies that is both internally valid and generalizable the article focuses on a participatory action research program in malawi designed to test and identify scalable technology options to intensify the smallholder sector and contribute to poverty reduction and food and nutrition security we examine the socioeconomic characteristics of farmers testing technologies and find evidence of systematic targeting of better endowed farmers after controlling for observable differences using matching and a doubly robust estimator we find evidence of early positive effects on maize yield and harvest value although placebo tests suggest possible selection on unobservables we note that attention should be given to program design and household characterization to better define and improve targeting criteria technology selection and external validity

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

the evolution of attitudes to risk lottery tickets and relative wealth abstract individual attitudes to risk are examined in an evolutionary model males obtain more offspring as a consequence of greater wealth both directly and because this attracts more mates the second effect induces gambling driven by relative wealth and can create pareto inefficiency fair bets involving small losses and large gains are taken if any fair bets at all are taken altogether the model accords with observations concerning bets taken and declined by typical individuals despite settings of widely varying per capita wealth journal of economic literature classification numbers c72 d81

whether to attack a terrorist s resource stock today or tomorrow reprinted from games and economic behavior 64 2 kjell hausken whether to attack a terrorist s resource stock today or tomorrow pages no 548 564 copyright 2008 with permission from elsevier

u turns and full circles two decades of agricultural reform in malawi 1981 2000 abstract this paper traces the evolution of malawi s agricultural policy over the past two decades during this period the world bank has played a key role in shaping policy reform through its adjustment loans three distinct reform phases can be identified 1981 87 when policy was dominated by the dogmatism of the world bank s pricist and state minimalist policies 1988 94 when a more flexible position was taken by both the bank and the malawi government both of whom acknowledged the structuralist critique of earlier policies and 1994 to the present when the reform process in agriculture became more politicized and a schism developed between the bank and the government this latter period is used to illustrate some of the unresolved policy issues pertaining to similar low income agrarian economies

patent competition rent dissipation and the persistence of monopoly the role of research budgets abstract the paper investigates how patent rights can contribute to the persistence of monopoly patent competition is modelled as a dollar auction game between two firms incumbent and entrant any bid expenditure on r d in the game constitutes sunk cost whose total amount is constrained by fixed research budgets the explicit solution subgame perfect equilibrium determines who wins the patent and how the winning expenditures depend on order of play and budgets of firms the entrant can win if he moves first and has the higher budget rent may or may not be dissipated by the competition

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

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

on the evolutionary stability of altruistic and spiteful preferences abstract this note demonstrates that a result on evolutionary stability presented by bester and guth bester h guth w 1998 journal of economic behavior and organization 34 193 209 applies under more general preference and payoff functions

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

the evolution of monetary equilibrium abstract the hahn problem is that even if a monetary equilibrium with valued fiat money exists in general equilibrium a nonmonetary equilibrium with a zero price on money generally also exists why should we expect the former over the latter here i consider the preferences that will survive repeated trading in an exchange economy where agents compete in biological fitness with unobservable preferences and positive assortativity in matching evolutionarily stable preferences implement the competitive equilibrium that maximizes the sum of agents fitnesses in a standard bewley townsend model this implies selection of the monetary over the nonmonetary equilibrium and also implies the survival of agents with money in the utility function trust in fiat money is only a recent development and even today such faith is hardly universal cass and shell 1980

best of three contest experiments strategic versus psychological momentum abstract we conduct an experimental analysis of a best of three tullock contest intermediate prizes lead to higher efforts while increasing the role of luck as opposed to effort leads to lower efforts both intermediate prizes and luck reduce the probability of the contest ending in two rounds the patterns of players efforts and the probability that a contest ends in two rounds are consistent with strategic momentum i e a momentum generated due to strategic incentives inherent in the contest we do not find evidence for psychological momentum i e a momentum which emerges when winning affects players confidence similar to the previous studies of contests we find significantly higher efforts than predicted and strong heterogeneity in effort between the subjects

the evolution of preferences and competition a rationalization of veblen s theory of invidious comparisons we examine how preferences evolve by natural selection in a competitive environment similar to that characterizing much of our evolutionary past we find that the evolutionarily stable preferences in this context exhibit a concern not only for absolute payoffs but also for relative payoffs and that this intensifies the degree of competition relative to what obtains when players consider only absolute payoffs we argue that this has consequences for the equilibrium population size we argue that the premise of this analysis is consistent with the available anthropological evidence and that the prediction is broadly consistent with the findings of experimental game theory

multi battle contests abstract we study equilibrium in a multistage race in which players compete in a sequence of simultaneous move component contests players may win a prize for winning each component contest as well as a prize for winning the overall race each component contest is an all pay auction with complete information we characterize the unique subgame perfect equilibrium analytically and demonstrate that it exhibits endogenous uncertainty even a large lead by one player does not fully discourage the other player and each feasible state is reached with positive probability in equilibrium pervasiveness expected effort in the component contests may be non monotonic in the closeness of the race and realized individual effort may exceed the value of the prize by a factor that is proportional to the maximum number of stage victories required

us and them the origin of identity and its economic implications we investigate the origins of identity and the innate proclivity to draw a distinction between insiders and outsiders we propose an evolutionary explanation we argue that identity arises because it facilitates survival in an evolutionary setting we endogenize preferences and demonstrate that the evolutionarily stable preferences fashioned by natural selection would draw a distinction between insiders and outsiders we then work out the implications of such preferences in two contemporary scenarios one entailing rent seeking behavior and the other involving public good provision our results are in conformity with empirical evidence

the gender difference in the value of winning we design an all pay auction experiment in which we reveal the gender of the opponent using this design we find that women bid higher than men but only when bidding against other women these findings interpreted through a theoretical model incorporating differences in risk attitude and the value of winning suggest that women have a higher value of winning than men

experimental comparison of multi stage and one stage contests this article experimentally studies a two stage elimination contest and compares its performance with a one stage contest contrary to the theory the two stage contest generates higher revenue than the equivalent one stage contest there is significant over dissipation in both stages of the two stage contest and experience diminishes over dissipation in the first stage but not in the second stage our experiment provides evidence that winning is a component in a subject s utility a simple behavioral model that accounts for a non monetary utility of winning can explain significant over dissipation in both contests it can also explain why the two stage contest generates higher revenue than the equivalent one stage contest

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

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

multi battle contests an experimental study this study examines behavior of subjects in simultaneous and sequential multi battle contests in simultaneous contests subjects make positive bids in each battle 80 of the time and bids fall within the predicted boundaries however 35 of the time subjects make positive bids in only two instead of all three battles and they significantly overuse moderately high bids in sequential contests theory predicts sizable bids in the first battle and no bids in the subsequent battles contrary to this prediction subjects significantly underbid in the first battle and overbid in subsequent battles consequently instead of always ending in the second battle contest proceeds to the third battle 38 of the time finally in both simultaneous and sequential settings subjects make higher aggregate bids than predicted resulting in negative expected payoffs

market imperfections access to information and technology adoption in uganda challenges of overcoming multiple constraints limited empirical evidence exists on how multiple binding constraints influence the adoption of improved technologies by smallholder farmers this article uses the case of groundnut variety adoption in uganda to investigate the role of information seed supply and credit constraints in conditioning technology uptake new data from a household survey in seven groundnut growing districts n 945 indicate that 8 of farmers lack information on new varieties while 18 and 6 of farmers respectively cannot adopt mainly due to seed supply and capital constraints a tobit type specification that considers all nonadopters as being uninterested in the technology i e corner solutions would lead to inconsistent parameter estimates and incorrect conclusions in this context we therefore estimate a modified multi hurdle specification of demand for new varieties taking into account how information seed supply and capital constraints jointly determine adoption probability and intensity the study reveals new empirical insights on why agricultural technology adoption in africa has lagged behind slow uptake is not mainly due to a lack of economic incentives but rather a reflection of information seed supply and credit constraints that prevent farmers from translating their desired demand into adoption of modern varieties policy implications are discussed

evolution and kantian morality what kind of preferences should one expect evolution to favor we propose a definition of evolutionary stability of preferences in interactions in groups of arbitrary finite size groups are formed under random matching that may be assortative individuals preferences are their private information the set of potential preferences are all those that can be represented by continuous functions we show that a certain class of such preferences that combine self interest with morality of a kantian flavor are evolutionarily stable and that preferences resulting in other behaviors are evolutionarily unstable we also establish a connection between evolutionary stability of preferences and a generalized version of maynard smith s and price s 1973 notion of evolutionary stability of strategies

the evolutionary logic of honoring sunk costs i introduction economists claim that sunk costs should not figure in current decision making because by definition these expenditures cannot be retrieved and should be treated as bygones but there is a large literature both experimental and anecdotal in which people are observed to waste resources by honoring bygones that could not possibly make them better off see e g arkes and blumer 1985 arkes and ayton 1999 mcafee mialon and mialon 2010 thaler 1980 such excess in wasting resources is unlikely to have been tolerated by nature in the process of evolution if it did not serve some purpose to enhance fitness in our remote past the purpose of this study is to suggest such a function whereby evolutionary processes have hardwired a concern for sunk costs in human decision making 1 the concept of honoring sunk costs has been referred to in the literature as the concorde fallacy 2 arkes and blumer 1985 have a number of other examples of good money being thrown after bad economists have provided various explanations for why sunk costs appear salient to humans kanodia bushman and dickhaut 1989 and prendergast and stole 1996 propose a theory where reputational effects make agents unwilling to change their decisions mcafee mialon and mialon 2010 have suggested several models involving information content reputation or constraints on decision making that provide rational reasons for taking sunk costs into account likewise baliga and ely 2011 have proposed a model in which sunk costs may acquire salience as a memory kludge because they may contain information about the value of a project previously initiated but whose value has now been forgotten carmichael and macleod 2003 have proposed a model where in a bilateral bargaining situation the norm of taking account of sunk costs resolves the hold up problem that typically results in underinvestment thaler 1980 arkes and blumer 1985 and whyte 1986 suggested a prospect theory approach to understanding sunk cost effects arkes and blumer 1985 the philosopher nozick 1993 and others have argued that honoring sunk costs can alleviate problems of time inconsistency and temptation john may believe that going to the theater is a good thing but when the time comes he cannot rouse himself to do so because it would require relinquishing whatever else appears appealing at the time to circumvent this john buys tickets in advance as a precommitment device but to do this he must believe in the first place that his future self is going to honor sunk costs 3 whatever the reason for the time inconsistent preferences say hyperbolic discounting the honoring of sunk costs may be used to remedy the problem of time inconsistency but nozick for example offers no reason for why sunk costs are honored in the first place we offer an evolutionary reason to suggest why nature may have hardwired a proclivity in humans to honor sunks costs a reason that differs from those offered in the articles cited above we propose that the built in salience of sunk costs is an adaptation to the problem of self control self control problems may arise in decision making because contrary to our untutored perceptions the human brain has a triune 4 rather than a unitary structure maclean 1989 panksepp 1998 because of the way the brain has evolved different regions within it defined by their own neuroanatomical and neurochemical features deal with different aspects of action and behavior although interconnected through chemical and neuronal pathways the different control centers tend to act autonomously and may conflict in their responses to stimuli when the emotional or motivational centers which lie in the sub cortical limbic system push us to certain actions that the rational persona in the cortex wishes to deny there is a conflict and the problem of self control arises panksepp 1998 301 notes

racing with uncertainty a patent race experiment this paper presents an experimental test of the multi stage patent race model of harris and vickers rev econ stud 54 1987 1 tied competitors invested more when nearer the end of the race but this may have followed from a more general and unexplained pattern of a positive correlation between investment and progress in the race the relationship between investment and gap between competitors was mostly not as predicted also leaders did not invest more than not heavily lagging followers and the race did not approach monopoly as the gap between competitors widened overall the evidence brings only limited support to the theory

learning and evolution of altruistic preferences in the centipede game abstract several studies show that evolution favors non selfish preferences only if preference types are observable we present a new evolutionary scenario applied to the centipede game where we adopt self confirming equilibrium to capture behavior we show that altruism may be evolutionarily successful even if preferences are unobservable

heterogeneity of commercialization gains in the rural economy farmers in low income rural economies often fail to switch to cash crops from staple production despite the positive income effects of commercialization expected by policy makers the literature suggests that market failures prevent households from cash crop adoption but remains inconclusive regarding farmers motives and the effects of commercialization this article contributes to the debate by offering an original approach to the analysis of commercialization outcomes and farmers decisions it consists of applying a model with essential heterogeneity and a semiparametric estimation technique to analyzing harvest value returns to cash cropping using malawian data we show considerable heterogeneity in harvest value returns to cash cropping both within and between groups of farmers choosing different crop portfolios importantly the results imply rational choices based on comparative advantage considerations of farming households farmers self select into the activity where they expect higher gains and adopt cash crops when facing weaker market barriers

the evolutionary role of toughness in bargaining the experimental evidence on the endowment effect kahneman et al j polit economy 98 1990 1325 1348 and the self serving bias in negotiations babcok and loewenstein j econ perspect 11 1997 1337 1343 suggests that individuals enter a tough state of mind when they have to make a stand vis a vis somebody else in this work we show how a toughness bias in bargaining may indeed be evolutionary viable when the inherent toughness of the bargainer is observed by the opponent this opponent will adjust his behavior accordingly in a way which may enhance the actual payoff of the biased bargainer suppose then that a population consists initially of individuals with different inherent degrees of toughness or softness they are often matched at random to bargain and biases which are objectively more successful tend to appear more frequently in the society we characterize a salient class of bargaining mechanisms under which the population will consist asymptotically of individuals with some moderate degree of toughness

pork barrel politics targetable policies and fiscal federalism this article utilizes a simple model of redistributive politics with jurisdictional specific local projects to analyze the inefficiencies that arise under differing levels of targetability in both taxes transfers and local projects the ability to tactically target taxes transfers and or local projects leads political parties to engage in pandering to favored groups however in equilibrium we find that greater targetability in the set of available policies actually intensifies the competition between the political parties and so increases efficiency in the provision of local projects jel d72 h41

the evolution of preferences why sovereign preferences may not lead to sustainable policies and what to do about it abstract the conventional economic paradigm assumes that tastes and preferences are exogenous to the economic system and that the economic problem consists of optimally satisfying those preferences tastes and preferences usually do not change rapidly and in the short term this assumption makes sense sustainability is an inherently long term problem and in the long run it does not make sense to assume tastes and preferences are fixed and given if preferences are expected to change over time and under the influence of education advertising changing cultural assumptions etc the old assumption of consumer sovereignty is not adequate different criteria of optimality are needed how preferences change how they relate to the goal of sustainability and how they can or should be actively influenced to satisfy the new criteria needs to be determined ecological economics has emphasized the three rank ordered goals of ecological sustainability fair distribution and allocative efficiency this paper examines how preferences evolve and change over time and the implications of this for developing policies that meet these three goals in democratic societies

from custer to thermopylae last stand behavior in multi stage contests abstract in a multi stage contest known as a two player race players display two fundamental behaviors 1 the laggard will make a last stand in order to avoid the cost of losing and 2 the player who is ahead will defend his lead if it is threatened last stand behavior in particular contrasts with previous research where the underdog simply gives up the distinctive results are achieved by introducing losing penalties and discounting into the racing environment this framework permits the momentum effect typically ascribed to the winner of early stages to be more thoroughly examined i study the likelihood that the underdog will catch up i find that neck and neck races are common when the losing penalty is large relative to the winning prize while landslide victories occur when the prize is relatively large closed form solutions are given for the case where players have a common winning prize and losing penalty

is altruism evolutionarily stable and envy and malevolence remarks on bester and guth abstract in a convincing analysis of the conditions and strength of altruism bester and guth journal of economic behavior organization vol 34 1998 193 209 unfortunately restrict the interpretation of their results their paper provides us with an analysis of the conditions and strength of malevolence or envy as well

learning to like what you have explaining the endowment effect the endowment effect describes the fact that people demand much more to give up an object than they are willing to spend to acquire it the existence of this effect has been documented in numerous experiments we attempt to explain this effect by showing that evolution favors individuals whose preferences embody an endowment effect the reason is that an endowment effect improves one s bargaining position in bilateral trades we show that for a general class of evolutionary processes strictly positive endowment effects will survive in the long run

finding missing markets and a disturbing epilogue evidence from an export crop adoption and marketing intervention in kenya in much of the developing world many farmers grow crops for local or personal consumption despite export options that appear to be more profitable thus many conjecture that one or several markets are missing this paper reports on a randomized controlled trial conducted by drumnet in kenya that attempts to help farmers adopt and market export crops drumnet provides smallholder farmers with information about how to switch to export crops makes in kind loans for the purchase of the agricultural inputs and provides marketing services by facilitating the transaction with exporters the experimental evaluation design randomly assigns pre existing farmer self help groups to one of three groups 1 a treatment group that receives all drumnet services 2 a treatment group that receives all drumnet services except credit or 3 a control group after one year drumnet services led to an increase in production of export oriented crops and lower marketing costs this translated into household income gains for new adopters however one year after the study ended the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy european export requirements drumnet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans the risk of such events may explain at least partly why many seemingly more profitable export crops are not adopted

three object two bidder simultaneous auctions chopsticks and tetrahedra symmetric equilibria are constructed for a class of symmetric auction games the games all have two identical bidders bidding in three simultaneous first price sealed bid auctions for identical objects information is complete and the bidders marginal valuations increase for the second object and then decrease for the third in all cases the support of the mixture that generates the equilibrium is two dimensional and it surrounds a three dimensional set of best responses this appears to be a previously unknown structure

beyond chopsticks symmetric equilibria in majority auction games majority auction games are simultaneous sealed bid auctions of identical objects among identical bidders who each want to win a specified fraction more than a half of the objects each bidder receives no benefit from winning less than the specified fraction and no additional benefit from winning more than it symmetric equilibria having simple intuitive forms are shown to exist in first price second price and all pay versions of such games when the number of bidders is sufficiently large this contrasts with earlier results for the two bidder pure chopstick majority auction games where the only known equilibria are more complicated

promotions and incentives the case of multistage elimination tournaments promotions play an important role for the provision of incentives in firms we analyze incentives in multistage elimination tournaments with controlled laboratory experiments in our two main treatments we compare a two stage tournament to a one stage tournament subjects in the two stage treatment provide excess effort in the first stage both with respect to nash predictions and compared to the strategically equivalent one stage tournament additional control treatments confirm that excess effort in early stages is a robust finding and suggest that above equilibrium effort might be driven by limited degrees of forward looking behavior and subjects deriving nonmonetary value from competing

homo moralis preference evolution under incomplete information and assortative matching what preferences will prevail in a society of rational individuals when preference evolution is driven by the resulting payoffs we show that when individuals preferences are their private information a convex combination of selfishness and morality stands out as evolutionarily stable we call individuals with such preferences homo moralis a t one end of the spectrum is homo oeconomicus who acts so as to maximize his or her own payoff at the opposite end is homo kantiensis who does what would be the right thing to do in terms of payoffs if all others would do likewise we show that the stable degree of morality the weight placed on the moral goal is determined by the degree of assortativity in the process whereby individuals are matched to interact

multi player race abstract we present a model of race with multiple players and study players effort choices and expected prizes in equilibrium we show that in equilibrium once any two players win one battle each the remaining players do not exert any effort anymore this turns the continuation game into a two player race this is different than the results in previous two player models of race which report that all states of the game are reached with positive probabilities we also provide a set of comparative static results on the effects of the number of players and the victory threshold

cultural integration and its discontents a community s culture is defined by the preferences and equilibrium behaviours of its members contacts among communities alter individual cultures through two interrelated mechanisms behavioural adaptations driven by pay offs to coordination and preference changes shaped by socialization and self persuasion this paper explores the workings of these mechanisms through a model of cultural integration in which preferences and behaviours vary continuously it identifies a broad set of conditions under which cross cultural contacts promote cultural hybridization the analysis suggests that policies to support social integration serve to homogenize preferences across communities thereby undermining a key objective of multiculturalism yielding fresh insights into strategies pursued to influence cultural trends it also shows that communities benefit from having other communities adjust their behaviours

the incidence of overdissipation in rent seeking contests tullock s analysis of rent seeking and overdissipation is reconsidered we show that while equilibrium strategies do not permit overdissipation in expectation for particular realizations of players mixed strategies the total amount spent competing for rents can exceed the value of the prize we also show that the cross sectional incidence of overdissipation in the perfectly discriminating contest ranges from 0 50 to 0 44 as the number of players increases from two to infinity thus even though the original analysis of overdissipation is flawed there are instances in which rent seekers spend more than the prize is worth

package auctions and exchanges we report recent advances concerning the package allocation problem in which traders seek to buy or sell combinations of goods the problems are most difficult when some goods are not substitutes in that case competitive equilibrium typically fail to exist but the core is non empty and comprises the competitive solutions also in that case the vickrey auction fails to select core allocations and yield revenues that are less than competitive the ausubel milgrom auction generally selects core allocations and when goods are substitutes prescribes the vickrey allocation we also evaluate the problems and promise of mechanisms for the package exchange problem

evaluating marginal policy changes and the average effect of treatment for individuals at the margin this paper develops methods for evaluating marginal policy changes we characterize how the effects of marginal policy changes depend on the direction of the policy change and show that marginal policy effects are fundamentally easier to identify and to estimate than conventional treatment parameters we develop the connection between marginal policy effects and the average effect of treatment for persons on the margin of indifference between participation in treatment and nonparticipation and use this connection to analyze both parameters we apply our analysis to estimate the effect of marginal changes in tuition on the return to going to college

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

role dependent social preferences bargaining results emerge from the interplay of strategic options and social preferences for every bargaining game however the advantage of a player having certain preferences in terms of negotiated equilibrium revenues might differ we explore the hypothesis that preferences change according to the players strength combination simple 1 1 bargaining experiments from the literature are discussed and 2 2 as well as 2 3 assignment market experiments with possible renegotiations are investigated the assumption that players adopt preferences for two to five roles defined by strength combinations of the two bargainers explains the experimental results better than individually constant preferences

communication and efficiency in competitive coordination games costless pre play communication has been found to effectively facilitate coordination and enhance efficiency in games with pareto ranked equilibria we report an experiment in which two groups compete in a weakest link contest by expending costly efforts allowing intra group communication leads to more aggressive competition and greater coordination than control treatments without any communication on the other hand allowing inter group communication leads to less destructive competition as a result intra group communication decreases while inter group communication increases payoffs our experiment thus provides an example of an environment where communication can either enhance or damage efficiency this contrasts sharply with experimental findings from public goods and other coordination games where communication always enhances efficiency and often leads to socially optimal outcomes

non traditional crops traditional constraints long term welfare impacts of export crop adoption among guatemalan smallholders this study documents the long term welfare effects of household non traditional agricultural export ntx adoption the analysis uses a unique panel dataset which spans the period 1985 2005 and employs difference in differences estimation to investigate the long term impact of non traditional agricultural export adoption on changes in household consumption status and asset position in the central highlands of guatemala given the heterogeneity in adoption patterns the analysis differentiates the impact estimates based on a classification of households that takes into account the timing and duration of non traditional agricultural export adoption the results show that while on average welfare levels have improved for all households irrespective of adoption status and duration the extent of improvement has varied across groups long term adopters exhibit the smallest increase in the lapse of two decades in spite of some early gains conversely early adopters who withdrew from non traditional agricultural export production after reaping the benefits of the boom period of the 1980s are found to have fared better and shown greater improvements in durable asset position and housing conditions than any other category

cash crops in developing countries the issues the facts the policies the issue of cash crops is profoundly controversial the debate uses different definitions of the term and slides across levels of analysis from the household to the international economy it also cuts across arguments crops countries and time periods this paper sets out to order the debate it deals first with definitions and taxonomy and then reviews issues connected with cash crops and a growth b distribution c food security d dependency and e the environment the paper concludes that with appropriate policies cash crops can offer a route to equitable growth