equilibrium in justifiable strategies a model of reason based choice in extensive form games i explore the idea that people care about the justifiability of their decisions in the context of two person extensive games each player justifies his strategy s with a belief b of the opponent s strategy which is consistent with the play path and maximally plausible according to some exogenous criterion we say that s is justifiable if against the ex post criticism that some other strategy s outperforms s against b the player can argue that playing s would have exposed him to similar criticism in the opposite direction under a simplicity based plausibility criterion this concept implies systematic departures from maximizing behaviour in familiar games

stable equilibrium in beliefs in extensive games with perfect information abstract the purpose of this paper is to present a new solution concept of stable equilibrium in beliefs seb by assuming it is common knowledge that players are uncertainty averse in the sense of gilboa and schmeidler 1989 journal of mathematical economics 18 141 153 by making use of an appealing criterion of stability an seb is defined as a strategy profile supported by a stable belief system it is shown that all sebs constitute a unique stable belief system and an seb satisfies subgame perfectness moreover it is shown that the notion of seb refines that of subgame perfect equilibrium in terms of path of play finally following aumann 1995 games and economic behavior 8 6 19 this paper establishes some epistemic foundation for the notion of seb

rationalizable conjectural equilibrium between nash and rationalizability abstract static equilibria can be viewed as steady states of recurring play of a game such steady states in which players do not perfectly observe the actions of others need not be nash equilibria this paper suggests a static solution concept rationalizable conjectural equilibrium that corresponds to such steady states to present it the basic model of a normal form game is enriched by specifying the signals that players get about others actions the solution is a profile of actions such that each player s action is optimal given that it is common knowledge that all players maximize utility given their signals journal of economic literature classification number c72

ex ante consumer welfare evaluation in cost benefit analysis abstract public projects and policies are normally evaluated ex ante i e while consumers may still be uncertain about future prices income levels interest rates and preferences this paper extends the theory of ex ante consumer welfare evaluation by developing a 2 period model with multiple sources of uncertainty it provides insights into the influence of temporal uncertainty on the empirical measurement of ex ante willingness to pay

public and private returns from joint venture research an example from agriculture public research institutions are turning increasingly to the private sector for additional financial support such a trend in the short run lessens the need for public research expenditures but may in the long run prove to be very costly to the economy as a whole this is because private funding increases the chance that the direction of research will shift so that private benefits are enhanced such a shift is especially costly if public research funds are then not forthcoming that would have the potential of producing the maximum level of benefits to the economy as a whole a case study of canadian barley research is used to illustrate this problem

welfare measurement in the household production framework the household production approach to consumer behavior developed from the work of gary becker william gorman and kelvin lancaster has considerable descriptive appeal in modelling the decisions of households the approach derives from the observation that households frequently purchase market goods that do not yield utility directly but are combined to produce commodity service flows which the household values thus observed behavior is determined by household production technology as well as by tastes the advantage of this distinction is that we can pose reasonable hypotheses about characteristics of technology though we rarely possess useful a priori information regarding tastes the putative advantages of the household production approach are questioned on empirical and conceptual grounds by robert pollak and michael wachter 1975 they show that jointness in production or nonconstant returns to scale cause implicit commodity prices to depend on both tastes and technology raising serious econometric difficulties in the estimation of commodity demand functions in addition since commodity prices become functions of the commodity bundle consumed the analogy to traditional demand theory breaks down joint production occurs when a good enters several production processes simultaneously or equivalently when a good in one production process also enters directly into the individual s utility function the most common example is time which provides the context for all production processes and is often associated with the production of several commodities simultaneously since joint production in the household is likely to be pervasive the critique by pollak and wachter cannot be ignored in response to the comment by william barnett pollak and wachter 1977 suggest dispensing with the notion of commodity prices and treating the demand for commodities as a function of goods prices this approach confounds tastes and technology but it eliminates the troublesome concept of commodity prices as parameters when in fact they are likely to be endogenous in this paper we show that results from positive analysis such as the critique by pollak and wachter have implications for the use of the household production framework for welfare analysis the household production function approach has had considerable appeal for measuring welfare effects of public actions in the environmental and natural resource areas gardner brown john charbonneau and michael hay elizabeth wilman yet traditional approaches to welfare measurement are frequently inapplicable we argue that welfare measurement in this framework is complicated by the difficulties of unravelling tastes and technology we extend pollak and wachter s results by demonstrating that marshallian demand functions for commodities cannot be uniquely defined thus marshallian functions cannot be used to derive exact compensated functions in the manner of jerry hausman and of george mckenzie and i f pearce nor can compensating and equivalent variation measures be bounded by marshallian consumer s surplus estimates following robert willig in fact duality results that normally allow us to move between marshallian and hicksian functions are not assistant and associate professors respectively department of agricultural and resource economics university of maryland college park md 20742 this paper is scientific article no a3404 contribution no 6476 of the maryland agricultural experiment station we wish to thank darrell hueth james opaluch v kerry smith and elizabeth wilman for comments on an earlier draft

the shanghai effect do exports to china affect labor practices in africa summary to investigate whether africa s exports to china influence labor practices in africa we reconsider the debate over trade s influence on regulatory standards in exporting countries the first generation of trade regulation scholars asked whether high levels of exports influenced regulatory standards of exporting countries with inconclusive results the second generation of scholarship focused not on how much a country exported but to whom it exported identifying a california effect by which firms and consumers in mostly developed importing countries projected their high regulatory standards on less developed export partners structural change especially the rise of china as a major importer poses a challenge to these optimistic findings drawing on insights from the analysis of compositional data this paper introduces a third generation of trade regulation research which suggests examining not only with whom a country trades but also how the composition of markets in a country s export basket reshuffles over time specifically we explore the possibility of a shanghai effect whereby african countries begin to reflect the lower labor standards of china which has emerged as a major destination for their exports we show that when a country increases exports to china the net effect on domestic labor standards depends critically on the labor practices of other export destinations compositionally displaced by china exports our analysis of a panel of 49 african countries for the period 1985 2010 produces a small continent wide estimate of china s negative influence on african labor practices in sample simulation at the country level uncovers a moderate shanghai effect for a handful of countries only

shifting foundations of agricultural policy analysis welfare economics when risk markets are incomplete the neat alignment of resources output and prices specified by the perfect competition model is far from duplicated in free markets and the equally neat alignment assumed under the constraints of a program is not experienced when programs are in effect in particular areas under empirically determined supply curves are unlikely to represent opportunity costs the basic theory is invaluable in providing a conceptual orientation for the analysis of programs but the assumptions implicit in the literal use of simple forms of it for policy conclusions are breathtakingly heroic

on non nash equilibria abstract i consider generalisations of the nash equilibrium concept based on the idea that in equilibrium the players beliefs should not be contradicted even if they could possibly be incorrect this possibility depends on the information about opponents behaviour available to the players in equilibrium therefore the players information is crucial for this notion of equilibrium called conjectural equilibrium in general and rationalizable conjectural equilibrium rubinstein wolinsky 1994 when the game and the players bayesian rationality are common knowledge in this paper i argue for a refinement of rationalizable conjectural equilibrium showing by propositions and by examples how this equilibrium notion works and how the suitable equilibrium concept depends on the players information journal of economic literature classification numbers c72 d83 d82

imperfect monitoring in communication networks individuals in many social networks imperfectly monitor other individuals network relationships this paper shows that in a model of a communication network imperfect monitoring leads to the existence of many inefficient equilibria reasonable restrictions on actions or on beliefs about others actions can however eliminate many of these inefficient equilibria even with imperfect monitoring star networks known to be efficient in many settings are shown to have desirable monitoring characteristics more generally this paper provides a formal framework in which to study incorrect perceptions as an equilibrium phenomenon in social networks

the trade facilitation impact of the chinese diaspora using an enhanced data set on the population share of overseas chinese in 1970 and 1990 this paper analyses the impact of the chinese diaspora on facilitating china s bilateral trade during the period 1973 2013 our findings suggest substantial trade creation effects resulting from the presence of ethnic chinese in the trade partner population diaspora impacts on chinese bilateral imports are in general higher than those found for exports coethnic networks play a larger role as long as the partner country does not have an rta with china in place among export sectors effects found were strongest for food as well as for machinery and transport equipment in regard to imports coethnic networks matter mostly for raw materials machinery and transport equipment and chemicals

learning self control this article examines how a decision maker who is only partially aware of his temptations learns about them over time in facing temptations individuals use their experience to forecast future self control problems and choose the appropriate level of commitment i demonstrate that rational learning can be perpetually partial and need not result in full sophistication the main result of this article characterizes necessary and sufficient conditions for learning to converge to full sophistication i apply this result to a consumption savings environment in which a decision maker is tempted by present bias and establish a learning theoretic justification for assuming sophistication in this setting an individual who finds himself continuously repudiating his past plans may learn to distrust his future behavior and may do something about it strotz 1955

payoff information and self confirming equilibrium abstract in a self confirming equilibrium each player correctly forecasts the actions that opponents will take along the equilibrium path but may be mistaken about the way that opponents would respond to deviations this paper develops a refinement of self confirming equilibrium in which players use information about opponents payoffs in forming beliefs about the way that opponents play off of the equilibrium path we show that this concept is robust to payoff uncertainty we also discuss its relationship to other concepts and show that it is closely related to assuming almost common certainty of payoffs in an epistemic model with independent beliefs journal of economic literature classification numbers c72 d84

measuring economic welfare new methods preface 1 an introduction to the money metric 2 the marginal utility of money as an integrating factor 3 calculation of the money metric 4 the approach of dupuit and marshall 5 the hicksian approach 6 approximations based on consumer surplus 7 a reconsideration of the theory of index numbers 8 the money metric as a basis for calculation of social welfare functions 9 measurement of the social costs of monopoly 10 a final comment and conclusion references index

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

selfcon rming equilibrium and model uncertainty we propose to bring together two conceptually complementary ideas 1 selfcon rming equilibrium sce at rest points of learning dynamics in a game played recurrently agents best respond to con rmed beliefs i e beliefs consistent with the evidence they accumulated and 2 ambiguity aversion agents other things being equal prefer to bet on events with known rather than unknown probabilities and more generally distinguish objective from subjective uncertainty a behavioral trait captured by their ambiguity attitudes using as a workhorse the smooth ambiguity model of klibano marinacci and mukerji 2005 we provide a de nition of smooth sce which generalizes the traditional concept of fudenberg and levine 1993a b here called bayesian sce and admits waldean maxmin sce as a limit case we show that the set of equilibria expands as ambiguity aversion increases the intuition is simple by playing the same strategy in

on the dynamic selection of mechanisms for provision of public projects abstract how do individuals spatial decisions affect the institutions for public goods provision over time this paper describes a dynamic model in which the provision mechanism for a public project is itself the object of locational choice of individuals individuals in an ongoing society must choose between a location with a majority rule mechanism and one with a voluntary contribution mechanism each mechanism determines a funding decision for a local public project which is repeated over time generations of individuals asynchronously supercede their parents creating an entry exit process that allows individuals with possibly different beliefs to enter society a self confirming equilibrium sce belief process describes an evolution of beliefs in this society consistent with a self confirming equilibrium fudenberg and levine 1993 of the repeated location provision game it is shown that the process with belief mutation as new individuals enter society results in a globally absorbing state in which the majority rule mechanism is the unique survivor of the two

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

the gravity of china s african export promise africa s largest trade partner china criticised for exchanging resources for manufactures has promised to increase imports and optimise the structure of trade with africa using a gravity model of china s imports for the years 1995 2009 we explore potential dynamics for this promise uniquely accounting for market economy recognition and taiwan recognition the former is associated with increased imports while the latter effect is ambiguous and statistically insignificant comparison of projected against actual imports across three growth path aligned economic geography typologies resource rich landlocked and resource poor coastal and resource poor sets out china s imports trends in an abstract framework of african export potential we find not only under importing across a majority of resource poor countries we also find that current trade policy is the least applicable to these comparatively poor exporters trade with china if the latter are to serve a broader catalytic role in africa s regional industrial transformation as compared to the role of coastal and resource poor countries in regional economic transformation in asia and latin america china africa trade and investment policies may need additional thinking

outcome equivalence of self confirming equilibrium and nash equilibrium abstract we introduce a condition nash equivalent self confirming equilibrium if beliefs are assumed to be independent and unitary nash equivalent self confirming equilibrium and nash equilibrium are outcome equivalent we show that the set of nash equivalent self confirming equilibria and the set of self confirming equilibria which are outcome equivalent to nash equilibria coincide our condition identifies the collection of information sets and requires the existence of beliefs shared by certain sets of players regarding these information sets if the information sets are off the equilibrium path the beliefs regarding them do not have to be correct our condition is weaker than that of strongly consistent self confirming equilibrium by kamada 2010