the carbon footprint of uk households 1990 2004 a socio economically disaggregated quasi multi regional input output model this paper presents a socio economically disaggregated framework for attributing co2 emissions to people s high level functional needs based around a quasi multi regional input output qmrio model the study in theory takes into account all co2 emissions that arise from energy used in production of goods and services to satisfy uk household demand whether the emissions occur in the uk or abroad results show that co2 emissions attributable to households were 15 above 1990 levels in 2004 and that although absolute decoupling occurred between household expenditure and co2 during the uk s switch from coal to gas in the early 1990s since then only slight relative decoupling is evident the proportion of co2 that arises outside uk borders in support of uk consumption is rising and reducing these emissions is particularly problematic in a global trading system investigation into the carbon footprint of different segments of the uk population shows wide variation the segment with the highest carbon footprint emits 64 more co2 than the segment with the lowest results show that recreation and leisure are responsible for over one quarter of co2 emissions in a typical uk household in 2004 we conclude that expanding lifestyle aspirations are significant factors in driving household co2 emissions but the study also emphasizes that attention must be paid to the infrastructures and institutions that result in considerable amounts of co2 being locked up in basic household activities through which people meet their everyday needs for subsistence protection and communication with family and friends the findings highlight the sheer scale of the challenge facing uk policy makers and suggest that policies should be targeted towards segments of society responsible for the highest carbon footprints

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

on the sources of aggregate fluctuations in emerging economies recent research on macroeconomic fluctuations in emerging economies has advocated introducing a stochastic productivity trend or allowing for interest rate shocks and financial frictions we estimate a model that encompasses these two approaches shedding light on their relative merits and on how financial frictions affect the transmission of shocks the model accounts for aggregate fluctuations by assigning a dominant role to financial frictions in amplifying conventional temporary productivity shocks whereas trend shocks play a minor role a link between spreads and expected future productivity emerges as essential for a reasonable approximation to the data

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

examining the global environmental impact of regional consumption activities part 2 review of input output models for the assessment of environmental impacts embodied in trade this paper offers a detailed review of recently described single and multi region input output models used to assess environmental impacts of internationally traded goods and services it is the second part of a two part contribution in part 1 turner k lenzen m wiedmann t and barrett j in press examining the global environmental impact of regional consumption activities part 1 a technical note on combining input output and ecological footprint analysis ecological economics we describe how to enumerate the resource and pollution content of inter regional and inter national trade flows with the aim to illustrate an ideal accounting and modelling framework for the estimation of ecological footprints a large number of such environment economic models have been described but only in the last few years models have emerged that use a more sophisticated multi region multi sector input output framework this has been made possible through improvements in data availability and quality as well as computability we identify six major models that employ multi sector multi region input output analysis in order to calculate environmental impacts embodied in international trade results from the reviewed studies demonstrate that it is important to explicitly consider the production recipe land and energy use as well as emissions in a multi region multi sector and multi directional trade model with global coverage and detailed sector disaggregation only then reliable figures for indicators of impacts embodied in trade such as the ecological footprint can be derived

responsibility and trade emission balances an evaluation of approaches this paper compares two concepts to evaluate the international responsibility of a country with respect to its emissions using a multi regional input output model we show that the trade emission balance and the responsibility emission balance yield the same result in practical work however a lack of data availability implies that the same technology assumption has been commonly adopted in that case also a third alternative exists which simply evaluates the emissions embodied in the trade balance of the country this third alternative yields the same results as the other two approaches at the aggregate level at the level of individual products however the results are clearly different and it turns out that the third alternative answers a different question that is it is appropriate for measuring the emission content of the products that cross the border in our empirical application we consider spain in 1995 and 2000 distinguishing nine different gases co 2 ch 4 n 2 o sf 6 hfcs pfcs so 2 nox and nh 3 c 2010 elsevier b v all rights reserved

casting a long shadow demand based accounting of canada s greenhouse gas emissions responsibility abstract canada is the only country to have ratified the kyoto protocol and then withdrawn part of the justification for canada s reluctance to commit to greenhouse gas ghg emissions reductions is the country s status as fossil fuel exporter in this paper we use input output analysis and the world input output database wiod to ask whether canada s contribution to global ghg emissions changes when calculated using a demand based shadow emission approach that excludes ghg emissions created in the production of exports like fossil fuels but includes emissions released to produce imports to canada we find that from 1995 to 2005 canada s contribution to global emissions was lower using this demand based ghg accounting approach than a production based approach from 2006 to 2009 however increased imports from ghg intensive trading partners like china meant that canada s demand based shadow emissions were higher than its production based ghg emissions we also introduce a method of calculating sub national ghg shadows using limited data applied to canada this exercise demonstrates that fossil fuel exporting provinces such as alberta and saskatchewan have demand based shadow emissions significantly lower than their production based emissions while populous provinces such as quebec and ontario have demand based emissions that are relatively higher than their production based emissions

linking namea and input output for consumption vs production perspective analyses evidence on emission efficiency and aggregation biases using the italian and spanish environmental accounts we integrate input output and namea tables for spain and italy in 1995 2000 and 2005 in order to address the hot policy issue of sustainable consumption and production a comparison of production and consumption perspectives may have relevant policy implications we deal with the domestic technology assumption and primarily the aggregation bias that may result when calculating indirect emission using different sector aggregations in the analyses e g 16 30 50 extended input output analysis provides analyses of the emissions embodied in domestic consumption and domestic production by considering the structure of intermediate inputs and environmental efficiency in each production sector our empirical findings show that different sectoral aggregation significantly biases the amount of emissions for the consumption perspective though differently in the two countries italy surprisingly show consumption production ratios around or lower than one but in line with some major work at eu level our results thus suggest that special attention must be paid when interpreting the ee ioa of country estimated amounts of embodied emissions both in domestic final demand and those directly associated with the production sectors when the sectoral aggregation level has a low definition as considered in some recent similar studies

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

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

sharing a ride on the commodities roller coaster common factors in business cycles of emerging economies fluctuations in commodity prices are an important driver of business cycles in small emerging market economies emes this paper documents how these fluctuations correlate strongly with the business cycle in emes a commodity sector is then embedded into a multi country emes business cycle model where exogenous fluctuations in commodity prices follow a common dynamic factor structure and coexist with other driving forces the estimated model assigns to commodity shocks 42 percent of the variance in income of which a considerable part is linked to the common factor a further amplification mechanism is a spillover effect from commodity prices to risk premia

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

a review of recent multi region input output models used for consumption based emission and resource accounting abstract the interest in consumption based emission and resource accounting has grown significantly many studies juxtapose consumer emissions carbon footprint and producer territorial emissions of greenhouse gases in order to demonstrate the effects of trade on the national emission budget to this end a respectable number of studies have been undertaken worldwide in order to estimate emissions embedded in international trade of numerous countries and world regions input output approaches and increasingly multi region input output mrio models are commonly chosen as they provide an appropriate methodological framework for complete carbon footprint estimates at the national and supra national level with increasing processing capabilities of computers and a wider availability of economic accounts environmental accounts and trade data such models are now being implemented on a wide scale after a brief overview of salient single region input output studies i provide an in depth review of the most recent multi region input output models used for the purpose of consumption based environmental accounting the main methodological features and important results are described for around twenty studies covering the years 2007 to 2009 this is followed by a detailed review of studies dealing with uncertainty in mrio analysis an area which has not received a lot of attention so far i conclude that further research is mainly needed in two areas a improvements in data availability and quality and b improvements in the accuracy of mrio modelling

limits of floating exchange rates the role of foreign currency debt and import structure abstract a traditional argument in favor of flexible exchange rates is that they insulate output better from real shocks because the exchange rate can adjust and stabilize demand for domestic goods through expenditure switching this argument is weakened in models with high foreign currency debt and low exchange rate pass through to import prices the present study evaluates the empirical relevance of these two factors we analyze the transmission of real external shocks to the domestic economy under fixed and flexible exchange rate regimes for a broad sample of countries in a panel var and let the responses vary with foreign currency debt and import structure we find that flexible exchange rates do not insulate output better from external shocks if the country imports mainly low pass through goods and foreign indebtedness is high

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

reaching out access to and use of banking services across countries the authors 1 present new indicators of banking sector penetration across 99 countries based on a survey of bank regulatory authorities 2 show that these indicators predict household and firm use of banking services 3 explore the association between the outreach indicators and measures of financial institutional and infrastructure development across countries and 4 relate these banking outreach indicators to measures of firms financing constraints in particular they find that greater outreach is correlated with standard measures of financial development as well as with economic activity controlling for these factors the authors find that better communication and transport infrastructure and better governance are also associated with greater outreach government ownership of financial institutions translates into lower access while more concentrated banking systems are associated with greater outreach finally firms in countries with higher branch and atm penetration and higher use of loan services report lower financing obstacles thus linking banking sector outreach to the alleviation of firms financing constraints

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

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

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

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

emissions in a decarbonised economy global lessons from a carbon footprint analysis of iceland abstract decarbonisation of stationary energy supply particularly electricity grids is the current focus of climate change mitigation policy however studies have suggested that this narrow policy focus is insufficient to achieve meaningful global emissions reductions using iceland as a case study this paper demonstrates that significant emissions arise from transport and imported products which are often not fully captured in territorial ghg inventories this results in high greenhouse gas emissions per capita regardless of the nation s domestic energy supply the result is a low carbon illusion in which rich economies believe they are reducing their ghg responsibility whilst global emissions continue to grow this paper presents the first consumption based carbon footprint cbcf analysis for iceland a nation where the stationary energy supply is 99 renewable and could be viewed as a decarbonisation future case for rich nations globally the study combines icelandic household expenditure data with the multi regional input output database eora to calculate the cbcf of icelandic households the average annual cbcf of icelandic households was 10 4 tco2eq capita similar in magnitude to other eu nations despite iceland s unique energy supply ghg emissions from transport food and goods dominated the household cbcf the national cbcf was higher than most european nations and 55 higher than the territorial emissions inventory approximately 71 of household emissions were attributed to imported goods which were mapped globally revealing that the ghg emissions burden of icelandic consumption falls primarily on developing nations the findings suggest that a broader ghg accounting framework and resulting policy focus is required both in iceland and globally that incorporates both supply and demand based ghg reduction strategies

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

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

business cycle implications of rising household credit market participation in emerging countries abstract a small open emerging economy model is extended with a household sector financial constraint to investigate business cycle implications of a rise in household access and use of financial services estimating the model on mexican data and consistent with empirical findings this paper finds that a rise in household credit market participation 1 yields larger aggregate consumption volatility and 2 amplifies the effects of shocks in the domestic economy particularly those transmitted through the interest rate channel the estimated model also highlights that 3 the lesser financial frictions are the lower is the increase of consumption growth and trade balance volatility driven by a rise in household credit market participation and 4 trend productivity shocks become a more relevant source of business cycle fluctuations finally standard measures of predictive accuracy suggest that the extended model outperforms the baseline emerging market model

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

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

does ecologically unequal exchange occur the hypothesis of ecologically unequal exchange posits that low and middle income developing nations maintain an ecological deficit with wealthy developed nations exporting natural resources and high impact commodities thereby allowing wealthy economies to avoid operating ecologically impactful industries at home in this survey we assess the footprint of consumption of 187 countries using eight indicators of environmental pressure in order to determine whether or not this phenomenon occurs we use input output analysis with a new high resolution global multi region input output table to calculate each trading pair s balance of trade in biophysical terms of ghg emissions embodied water and scarcity weighted water content air pollution threatened species human appropriated net primary productivity total material flow and ecological footprint we test three hypotheses that should be true if ecologically unequal exchange occurs one the inter regional balance of trade in biophysical terms is disproportional to the balance of trade in financial terms we find this is true though not strongly so two exports from developing nations are more ecologically intensive than those from developed nations we find this is true three high income nations disproportionately exert ecological impacts in lower income nations we find this is false high income nations are mostly exporters not importers of biophysical resources

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

the new keynesian transmission mechanism a heterogenous agent perspective we present a tractable heterogeneous agent version of the new keynesian model that allows us to study the interaction between inequality and monetary policy though formulated as a precautionary saving model a la huggett aiyagari its reduced form is a two agent model with a highly concentrated wealth distribution when prices are sticky and wages flexible as in the textbook representative agent model monetary policy affects the distribution of consumption but has no effect on output as workers choose not to change their hours worked in response to wage movements this highlights a transmission mechanism of the textbook model that we find implausible in response to a monetary stimulus the representative worker s labor supply is greatly affected by the profits she receives first the lower profits induced by higher wages raise labor supply through a wealth effect and secondly the mere presence of profits reduces the negative income effect of a wage rise when wages are rigid in contrast our model exhibits plausible responses of output and hours worked to monetary policy shocks

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

asset market participation monetary policy rules and the great inflation this paper argues that limited asset market participation is crucial in explaining u s macroeconomic performance and monetary policy before the 1980s and their changes thereafter in an otherwise conventional sticky price model standard aggregate demand logic is inverted at low enough asset market participation interest rate increases become expansionary passive monetary policy ensures equilibrium determinacy and maximizes welfare this suggests that federal reserve policy in the pre volcker era was better than conventional wisdom implies we provide empirical evidence consistent with this hypothesis and study the relative merits of changes in structure and shocks for reproducing the conquest of the great inflation and the great moderation

world shocks world prices and business cycles an empirical investigation abstract svar models that include a single world price such as the terms of trade predict that world shocks explain a small fraction of movements in domestic output typically less than 10 this paper presents an empirical framework in which multiple commodity prices transmit world disturbances estimates on a panel of 138 countries over the period 1960 2015 indicate that world shocks explain on average 33 of output fluctuations in individual economies this figure doubles when the model is estimated on post 2000 data the findings reported here suggest that one world price specifications significantly underestimate the importance of world shocks for domestic business cycles

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

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

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

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

limited asset markets participation monetary policy and inverted aggregate demand logic abstract this paper incorporates limited asset markets participation in dynamic general equilibrium and develops a simple analytical framework for monetary policy analysis aggregate dynamics and stability properties of an otherwise standard business cycle model depend nonlinearly on the degree of asset market participation while moderate participation rates strengthen the role of monetary policy low enough participation causes an inversion of results dictated by conventional wisdom the slope of the is curve changes sign the taylor principle is inverted optimal welfare maximizing discretionary monetary policy requires a passive policy rule and the effects and propagation of shocks are changed however a targeting rule implementing optimal policy under commitment delivers equilibrium determinacy regardless of the degree of asset market participation our results may justify fed s behavior during the great inflation period

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 financial development in the short and long run theory and evidence from india abstract although many view financial access as a means of reducing poverty or increasing growth empirical studies have produced contradictory results one problem is that most studies cover only a short time frame and do not consider dynamic effects i show that introducing credit in a general model of intertemporal consumption creates a boom in consumption and reduces poverty initially but eventually reduces mean consumption because credit substitutes for precautionary wealth using new consistent consumption data that cover a much longer time period than most studies my empirical findings show that increased access to bank branches in rural india increased consumption initially and reduced poverty but consumption later fell and poverty rose the long term effect is still positive however suggesting that credit may have a beneficial role beyond consumption smoothing

examining the global environmental impact of regional consumption activities part 1 a technical note on combining input output and ecological footprint analysis in recent years there have been a number of attempts to develop a more comprehensive approach to the issue of measuring resource use and or pollution generation embodied in trade flows including contributions that combine input output techniques and ecological footprint analysis in this two part paper we describe how to enumerate the resource and or pollution content of inter regional and inter national trade flows part 1 and we present a literature review of recent methodological and empirical developments part 2 it is straightforward in principle to extend the basic input output approach to capture international trade flows however in practice problems of data availability and compatibility and of computability of extended input output matrices mean that simplifying assumptions are generally applied but with the implications of these assumptions often not made fully explicit what appears to be absent from previous applications is an account of the analytical method by which ecological footprints should ideally be estimated in an international input output accounting analysis this allows an explicit analysis of the problems that prevent the application of the full method and identification of the most appropriate short cut methods in a transparent way the objective of this paper is to provide such an account

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

understanding the shadow impacts of investment and divestment decisions adapting economic input output models to calculate biophysical factors of financial returns abstract in recognition of the cumulative effects resulting from financial decisions a growing number of campaigns are advocating for the removal of investment funds from companies responsible for high levels of carbon emissions a systematic approach can aid in examining the social economic and environmental impacts that extend beyond political motivations to divest from fossil fuel companies we have adapted publicly available economic input output life cycle assessment models eio lca to develop a shadow impact calculator sic for examining the potential environmental impacts of investment decisions an investment portfolio s shadow impacts represent the economic social and environmental effects underlying an investor s decision to place their funds in particular financial instruments in this study we focus on greenhouse gas emissions to show which sectors of the united states economy have particularly large or small carbon shadows and place those results in the context of volatility and earnings to demonstrate how sic may be used we examine the endowment investments of a canadian university in the context of divesting from fossil fuel companies our analysis suggests that large pooled funds choosing to direct their investments away from heavy carbon emitters may have less of an impact than would otherwise be expected

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

the kenneth e boulding memorial award 2014 ecological economics a personal journey abstract this speech was delivered at the meeting of the international society for ecological economics at reykjiavik iceland on the 13th of august 2014 at the presentation of the 2014 kenneth e boulding memorial award in the speech peter victor pays tribute to kenneth boulding one of the pioneers of ecological economics and then describes his own principal contributions to ecological economics over a period of 45 years these contributions include environmental applications of input output analysis the problematic extension of the concept of capital to nature the definition and analysis of green growth and his research on ecological macroeconomics and the challenge to economic growth

quo vadis mrio methodological data and institutional requirements for multi region input output analysis abstract in order to understand wider sustainability impacts of consumption and to successfully promote and implement sustainable consumption and production policies there is a need to capture the whole life cycle impact of products and services across international supply chains multi region input output mrio databases are a well described and suitable foundation for global sustainability analyses addressing a wide range of policy and research questions in this paper we reflect on the reasons for the recent boom in mrio compilation summarise the current state of development and discuss future options for mrio analysis we list in detail the requirements for efficient and effective mrio research and propose systemic and institutional changes we deliberately try to go beyond existing ambitions for mrio compilation and thus intend to stimulate discussion and to lay out the options for the future of mrio research

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

the co2 trade balance between scotland and the rest of the uk performing a multi region environmental input output analysis with limited data in this paper we attempt an empirical application of the multi region input output mrio method proposed by turner lenzen wiedmann and barrett turner k lenzen m wiedmann t barrett j 2007 examining the global environmental impact of regional consumption activities part 1 a technical note on combining input output and ecological footprint analysis ecological economics 62 1 37 44 in a recent issue of this journal in order to enumerate the co2 pollution content of interregional trade flows between scotland and the rest of the uk ruk we extend the analysis to account for direct emissions generation by households as final consumers and to a social accounting matrix sam where a more comprehensive account of incomes and expenditures is possible while the existence of significant data problems mean that the quantitative results of this study should be regarded as provisional the interregional economy environment io and sam framework for scotland and ruk allows an illustrative analysis of some very important issues in terms of the nature and significance of interregional environmental spillovers within the uk and the existence of a co2 trade balance between scotland and ruk

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

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

commodity booms and busts in emerging economies abstract emerging economies particularly those dependent on commodity exports are prone to highly disruptive economic cycles this paper proposes a small open economy model for a net commodity exporter to quantitatively study the triggers of these cycles the economy consists of two sectors one of which produces commodities with prices subject to exogenous international fluctuations these fluctuations affect both the competitiveness of the economy and its borrowing terms as higher commodity prices are associated with lower spreads between the country s borrowing rate and world interest rates both effects jointly result in strongly positive effects of commodity price increases on gdp consumption and investment and a negative effect on the total trade balance furthermore they generate excess volatility of consumption over output and a large volatility of investment besides explicitly incorporating a double role of commodity prices the model structure nests the various candidate sources of shocks proposed in previous work on emerging economy business cycles estimating the model on argentine data we find that the contribution of commodity price shocks to fluctuations in post 1950 output growth is in the order of 38 in addition commodity prices account for around 42 and 61 of the variation in consumption and investment growth respectively we find transitory productivity shocks to be an important driver of output fluctuations exceeding the contribution of shocks to the trend which though smaller is not negligible

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

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

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

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

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