the privatization of electricity distribution in turkey a legal and economic analysis this paper analyzes the recent regulatory reform in the turkish electricity distribution market from a legal and economic perspective we highlight tensions between the judiciary politicians and bureaucracy and discuss their economic consequences the paper engages in a discussion of economic consequences of legal procedures we stress interactions between legal decisions and economic institutions the historical positions of the constitutional court and danistay council of state on privatizations have been ambivalent and it is hard to qualify them as an incentive for privatization and reform despite some recent liberal decisions we address reasons behind their decisions and offer some suggestions toward improving the privatization process

openness central bank independence and the sacrifice ratio traditional explanations of the negative correlation between openness and inflation presume that an inverse relationship between the degree of openness and the sacrifice ratio reduces the inflation bias of descretionary monetary policy temple 2002 concludes however that such a relationship fails to emerge in cross country data our analysis of the same cross country data considered by temple indicates that once the degree of central bank independence and its interaction with greater openness and the sacrifice ratio in addition increased openness lessens the positive effect of central bank independence on the sacrifice ratio

the british model in britain failing slowly in 1990 britain reorganised its electricity industry to run on competitive lines the british reforms are widely regarded as successful and the model used provides the basis for reforms of electricity industries worldwide the main reason for this perception of success is major reductions in the real price of electricity with no reduction in service quality this paper examines whether the reputation of the british reforms is justified it concludes that the reputation is not justified and that serious fundamental problems are beginning to emerge the central question is have the british reforms resulted in the creation of efficient wholesale and retail markets on this criterion the reforms have failed the wholesale market is dominated by obscure long term contracts privileged access to the market and self dealing within integrated generator retailers leaving the spot markets with minimal liquidity and unreliable prices the failure to develop an efficient wholesale market places the onus on consumers to impose competitive forces on electricity companies by switching regularly small consumers will not do this and they are paying too much for their power for the future there is a serious risk that the electricity industry will become a weakly regulated oligopoly with a veneer of competition

market forces meet behavioral biases cost misallocation and irrational pricing psychological and experimental evidence as well as a wealth of anecdotal examples suggests that firms may confound fixed sunk and variable costs leading to distorted pricing decisions this article investigates the extent to which market forces and learning eventually eliminate these distortions we envision firms that experiment with cost methodologies that are consistent with real world accounting practices including ones that confuse the relevance of variable fixed and sunk costs to pricing decisions firms follow naive adaptive learning to adjust prices and reinforcement learning to modify their costing methodologies costing and pricing practices that increase profits are reinforced in some market structures but not in others this process of reinforcement causes pricing practices of all firms to systematically depart from standard equilibrium predictions

explaining peak inflation rates prior to disinflationary policy adjustments or what got us into this mess this study investigates using annual data from 1974 2004 whether unionization rates trade openness and central bank independence can help explain cross national and inter temporal variations in level of peak inflation prior to a disinflationary policy adjustment i find that unionization is positively associated with both peak inflation rates whereas more independent central banks and trade openness are correlated with lower inflation levels these results are robust to controlling for the high inflation decade of the 1970s and to using average rather than peak inflation as the explanatory variable

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

the endowment effect as blessing we study the idea that seemingly unrelated behavioral biases can coevolve if they jointly compensate for the errors that any one of them would give rise to in isolation we pay specific attention to barter trade of the kind that was common in prehistoric societies and suggest that the endowment effect and the winner s curse could have jointly survived natural selection together we develop a new family of hybrid replicator selection dynamics and show that under such dynamics even if biases only partially compensate for each other individuals with both biases can survive in the population in the long run

in search of predatory pricing can predatory pricing be reproduced in a laboratory environment we report research motivated by this objective we began with conditions that based on the literature appeared to combine the features this literature has suggested are favorable to the emergence of predation next we operationalized what was meant by predatory pricing in our design in order to compare prices with predictions from alternative theories of 10 experiments none evidenced predatory behavior most supported the dominant firm theory the second series of experiments addresses remedies for predation and finds that the effect is to increase prices and reduce efficiency

evolutionary dynamics and backward induction the backward induction or subgame perfect equilibrium of a perfect information game is shown to be the unique evolutionarily stable outcome for dynamic models consisting of selection and mutation when the mutation rate is low and the populations are large

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

promises and endogenous reneging costs we present a novel theoretical mechanism that explains the capacity for non enforceable communication about future actions to improve efficiency we explore a two player partnership game where before choosing a level of effort to exert on a joint project each player makes a cheap talk promise to their partner about their own future effort we allow agents to incur a psychological cost of reneging on their promises we demonstrate a strong tendency for evolutionary processes to select agents who incur intermediate costs of reneging and show that these intermediate costs induce second best optimal outcomes

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

on the existence of predatory pricing an experimental study of reputation and entry deterrence in the chain store game a single monopolist plays a sequence of eight periods against a series of different entrants there are two types of monopolists weak monopolists whose single period best response is to acquiesce after entry and strong monopolists whose dominant strategy is to fight entry data show high levels of predatory pricing defined as weak monopolists fighting all entrants in early periods both with and without experimenter induced strong monopolists we reject a number of predictions of the asymmetric information sequential equilibrium model of kreps and wilson 1982 and find important deviations from more general sequential equilibrium models as well

openness exchange rate regimes and the phillips curve abstract recent research suggests that the phillips curve slope measured using sacrifice ratios from the period 1961 88 is positively related to trade openness contradicting the romer 1993 openness and inflation theory and evidence quarterly journal of economics 108 869 903 hypothesis that disinflations are less costly in open economies in this paper i consider sacrifice ratios and output inflation trade offs from 1981 98 and allow their dependence on openness to vary with the exchange rate regime sacrifice ratios are weakly negatively related to openness but the strength of the relationship does not increase with exchange rate flexibility output inflation trade offs are negatively related to openness and the strength of the relationship increases with exchange rate flexibility

analysing success of regulatory policy transfers evidence from turkish energy markets abstract economic regulation of public utilities has become a worldwide phenomenon with the preceding privatisation stream it is questionable to transfer regulatory models hastily without customising the policy options or introducing necessary institutional reforms enabling the achievement of expected results of regulatory reform institutional configuration of a country affects credibility of regulatory commitments quality of regulatory design and way of policy transfer turkey s energy market regulation experience confirms the decisive role of institutions in shaping the regulatory framework

on the detection of collusion and predation abstract this lecture not only shows how game theory can contribute to the detection of collusion and predation but also how experts for the defense can use game theoretic arguments to make such detection difficult a few important european anti trust cases are discussed to illustrate

wholesale pricing and evolutionarily stable strategies of retailers with imperfectly observable objective abstract this paper develops a one population indirect evolutionary game model of a supply chain with one manufacturer supplier and many a sufficiently large number of retailers to study how the retailer s marketing objective depends on the wholesale price its observability the error probability of the observed result on the rival s preference the market scale and the retailer s bargaining power this paper also presents an algorithm for computing the optimal wholesale price of the manufacturer we find that the profit revenue maximization behavior is an evolutionarily stable marketing strategy if the wholesale price is sufficiently high low given an appropriate wholesale price the revenue maximization behavior coexists with the profit maximization behavior in the retailers population the larger the market scale the stronger the motivation of the retailer to take profit maximization behavior due to a higher wholesale price the cross effects of the retailer s reservation payoff and the other factors should be considered in the decision process

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

rules of thumb for social learning this paper studies agents who consider the experiences of their neighbors in deciding which of two technologies to use we analyze two learning environments one in which the same technology is optimal for all players and another in which each technology is better for some of them in both environments players use exogenously specified rules of thumb that ignore historical data but may incorporate a tendency to use the more popular technology in some cases these naive rules can lead to fairly efficient decisions in the long run but adjustment can be slow when a superior technology is first introduced

observations on cooperation we study environments in which agents are randomly matched to play a prisoner s dilemma and each player observes a few of the partner s past actions against previous opponents we depart from the existing related literature by allowing a small fraction of the population to be commitment types the presence of committed agents destabilizes previously proposed mechanisms for sustaining cooperation we present a novel intuitive combination of strategies that sustains cooperation in various environments moreover we show that under an additional assumption of stationarity this combination of strategies is essentially the unique mechanism to support full cooperation and it is robust to various perturbations finally we extend the results to a setup in which agents also observe actions played by past opponents against the current partner and we characterize which observation structure is optimal for sustaining cooperation

observable contracts strategic delegation and cooperation the role of commitments in noncooperative games is well acknowledged and documented one way to achieve commitments is by letting delegates represent the players of a game in this paper the authors study a delegation game in which the players can use agents strategically to play on their behalf and the contracts they sign with them are common knowledge they show that in such cases every pareto optimal outcome of the game can become the unique subgame perfect nash equilibrium of the delegation game the authors demonstrate this result by discussing the cournot type duopolistic game copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

do people play nash equilibrium lessons from evolutionary game theory evolutionary game theory provides an answer to two of the central questions in economic modeling when is it reasonable to assume that people are rational and when is it reasonable to assume that behavior is part of a nash equilibrium and if it is reasonable which equilibrium the traditional answers are not compelling and much of evolutionary modeling is motivated by the need for a better answer evolutionary game theory suggests that in a range of settings agents do eventually play a nash equilibrium moreover evolutionary modeling has shed light on the relative plausibility of different nash equilibria

on the evolution of attitudes towards risk in winner take all games abstract a long standing conjecture is that winner take all games such as patent races lead to the survival of risk takers and the extinction of risk averters in many species a winner take all game determines the males right to reproduce and the same argument suggests that males will evolve to be risk takers psychological and sociological evidence buttresses the argument that males are more risk taking than females using an evolutionary model of preference formation we investigate to what extent evolution leads to risk taking in winner take all environments journal of economic literature classification numbers c7 d8

openness inflation and the phillips curve a puzzle models of open economies with nominal rigidities are often thought to predict a correlation between openness to trade and the slope of the output inflation trade off or phillips curve using a variety of measures of the trade off and a standard measure of openness this paper argues that the direct evidence for a correlation is not strong in turn this calls into question the usual explanation for the negative correlation between openness and inflation that was documented by romer 1993 the paper considers some alternative explanations for the romer evidence

intergenerational transmission of preferences we propose a perfect empathy model of cultural transmission to capture the evolution of preferences in a population unlike existing imperfect empathy models focusing on stable interior equilibria we demonstrate that a corner outcome will eventuate however which corner outcome emerges is unknown and depends on the interplay of history and expectations

trust trustworthiness and the consensus effect an evolutionary approach abstract people often form expectations about others using the lens of their own attitudes the so called consensus effect we study the implications of this for trust and trustworthiness in an evolutionary model where social preferences are endogenous trustworthy individuals are more optimistic than opportunists and are accordingly less afraid to engage in market based exchanges where they may be vulnerable to cheating depending on the distribution of social preferences in the population the material benefits from greater participation may compensate for the costs of being trustworthy by providing an explicit account of how individuals form and revise their beliefs we are able to show the existence of a polymorphic equilibrium where both trustworthiness and opportunism coexist in the population we also analyze the effect of enforcement distinguishing between its role as deterrence of future misbehavior and as retribution for past misbehavior we show that enforcement aimed at deterring opportunistic behavior has ambiguous effects on social preferences it may favor the spreading of trustworthiness crowding in but the opposite crowding out may also occur by contrast crowding out never occur when punishment is merely intended as retribution

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

regulatory reform in turkish energy industry an analysis the republic of turkey has initiated an ambitious reform program in the most important segments of her energy market which requires privatization liberalization as well as a radical restructuring of these industries however there is no consensus that the measures introduced are optimal the present article attempts first to evaluate the regulatory framework created by the laws of 2001 in terms of economic efficiency considerations and second to determine what still needs to be done to improve the current situation the paper not only provides an analysis of these reforms but also lists some policy suggestions the study concludes that despite relatively good legislative framework in practice the reforms in turkey are far from ideal as they are mainly in the form of textbook reforms and therefore a significant amount of work still lies ahead of turkey to set up a fully fledged energy market

review of the security of supply in turkish energy markets lessons from the winter shortages abstract turkey has changed the essentials of its energy markets more than a decade ago it was mainly a transition from a state led model to a free market one although some levels of progress is observable security of supply particularly in times of short term supply disruption had not been widely tested harsh winter conditions set a litmus test for turkish energy markets basing on the this test this paper provides an analysis of to what extent turkey is open to the risks of energy supply security and discusses possible measures to relieve future supply disruption risks energy policy making should consider the fact that electricity and gas markets are highly intertwined in turkey and security of supply measures could have cross market implications paper concludes

evolution of time preference by natural selection this paper entertains the hypothesis that human time preferences are in evolutionary equilibrium i e that no mutation changing time preferences could be favored by natural selection this hypothesis implies that the marginal rate of substitution mrs holding darwinian fitness constant must equal the mrs holding utility constant furthermore in a market economy the latter must equal the mrs in exchange exploiting these principles the author finds that the long term real interest rate should equal ln 2 per generation about 2 percent per year and that young adults should discount the future more rapidly than their elders copyright 1994 by american economic association

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

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

central bank independence and macroeconomic performance some comparative evidence this note uses information on a sample of sixteen oecd countries to assess the relationship between central bank independence and macroeconomic performance as previous work suggests politically controlled central banks are more likely to pursue policies that lead to high and variable inflation however the authors find little evidence that political control of central bank policy has any impact on measures of the level or variability of growth unemployment or the ex ante real interest rate copyright 1993 by ohio state university press

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

learning in common value auctions some initial observations abstract inexperienced bidders in first price common value auctions suffer from a winner s curse losing money on average with experience bidders approximate the nash equilibrium the mechanisms underlying this adjustment are 1 a market selection effect as the most aggressive bidders are less likely to return for subsequent sessions and 2 players who lose money bid less experiential learning and those who would have lost money had they won the auction with the high bidder s signal bid less observational learning

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

revisiting games of incomplete information with analogy based expectations this paper studies the effects of analogy based expectations in static two player games of incomplete information players are assumed to be boundedly rational in the way they forecast their opponent s state contingent strategy they bundle states into analogy classes and play best responses to their opponent s average strategy in those analogy classes we provide general properties of analogy based expectation equilibria and apply the model to a variety of well known games we characterize conditions on the analogy partitions for successful coordination in coordination games under incomplete information rubinstein a 1989 the electronic mail game strategic behavior under almost common knowledge amer econ rev 79 385 391 we show how analogy grouping of the receiver may facilitate information transmission in crawford and sobel s cheap talk games crawford v p sobel j 1982 strategic information transmission econometrica 50 1431 1451 and we show how analogy grouping may give rise to betting in zero sum betting games such as those studied to illustrate the no trade theorem

inflation targeting matters evidence from oecd economies sacrifice ratios using data from oecd economies we show that inflation targeters suffered smaller output losses during disinflations when compared to nontargeters we also study why some countries choose to inflation target while others do not and find that higher average inflation and smaller debt levels render the adoption of the regime more likely applying heckman s procedure to control for selection bias does not alter the link between inflation targeting and less costly disinflations

the politics of regulation in the turkish electricity market abstract turkey began reforming the electricity market in 2001 the regulatory reform aimed to liberalize the market however the institutional and political structure was not ready for creating an efficiently working competition the independent regulator did not have both experience and will to direct the industry to a more competitive environment currently the reform has slowed down and political preferences drive the industry this paper studies the reasons for the slowdown in the reform efforts by focusing on the relationships between the government judiciary and the independent regulator we conclude that strategic behaviors of players in the market including the judiciary the government and the regulator have made the introduction of competition to the market more costly

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

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

endogenous games and equilibrium adoption of social norms and ethical constraints abstract we consider a situation in which games are formed endogenously in two senses 1 there is a pregame in which agents choose to learn a subset of all feasible strategies and can then employ only these strategies in subsequent play and 2 agents choose their game partners through a costly search process we show that at any subgame perfect equilibrium agents will constrain their action sets in the pregame in such a way that a single social norm prevails thus all agents in a society will abide by the same ethical standard although what standard this will be cannot be predicted we also show that these are essentially the only spe outcomes we suggest that this provides at least a partial explanation for experimental observations that agents apparently choose strategies that do not maximize their payoffs

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

signalling and adaptive learning in an entry limit pricing game in an experimental investigation of milgrom and roberts 1992 model play consistently converges to a unique equilibrium providing evidence of sophisticated strategic behavior that the theory predicts play starts with monopolists at their myopic maxima followed by an attempt to pool and then if no pooling equilibrium exists separation suggesting myopia rather than a forward looking process when both pure strategy equilibria and separating equilibria exist equilibrium selection is a function of the past history of play an adaptive learning model characterizes the major features of the data and provides predictions of intermediate term behavior that is otherwise lacking in the theory

grouping in group bias and the cost of cheating abstract the tendency of people to divide into groups and to show in group bias preferential treatment for insiders is widely observed this paper shows that it arises naturally when people incur a moral cost when defecting against cooperators provided that this cost is concave in the number of such defections if some people are asocial i e insusceptible to the moral cost then under incomplete information free riding and cooperation can coexist within groups costly signaling of sociality enables groups to screen out free riders but its availability may decrease the welfare of all individuals in society finally the concave moral cost is shown to be evolutionary stable with respect to an invasion by a convex mutation

predatory pricing in a multiple market experiment a note abstract isaac and smith 1985a b present a strong behavioral case that predatory pricing is not an observable laboratory phenomenon we propose several modifications of their design resulting in a multiple market experiment in which predatory pricing is present the primary modification involves conducting several markets concurrently providing an active escape opportunity for any prey and a potential reward to a reputation for predation these results provide a behavioral existence proof for the predatory pricing phenomenon they do not address the issue of the phenomenon s behavioral robustness

transferability of demand side policies between countries abstract the development of methods to determine the transferability of policies between countries has received limited attention in the energy policy field previous research has focussed on theoretical or less formal determinants of energy policy transferability rather than providing practical analytical tools the paper presents a practical framework for analysing the transferability of demand side management dsm policies and to identify where policies are transferable at different levels of policy transfer the paper tests the framework to determine the transferability of different types of dsm policy across 30 countries and 36 sub national states the method is a contextual based analysis that matches up countries states that have a comparable context at the proposed three levels of policy transfer direct copying adaptation and inspiration the paper utilises multi criteria decision making analysis with 17 dsm experts to validate the breakdown of contextual factors at different levels of policy transfer four groups of countries are identified where policy transfer is possible at the adaptation level and seven groups of countries states are identified at the inspiration level overall the paper argues that context is key and the level of contextual detail included in methods to analyse energy policy transferability will affect the level of policy transfer that is appropriate

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

an evolutionary approach to pre play communication we add a round of pre play communication to a finite two player game played by a population of players pre play communication is cheap talk in the sense that it does not directly enter the payoffs the paper characterizes the set of strategies that are stable with respect to a stochastic dynamic adaptive process periodically players have an opportunity to change their strategy with a strategy that is more successful against the current population any strategy that weakly improves upon the current poorest performer in the population enters with positive probability when there is no conflict of interest between the players only the efficient outcome is stable with respect to these dynamics for general games the set of stable payoffs is typically large every efficient payoff recurs infinitely often

if homo economicus could choose his own utility function would he want one with a conscience reply in my model of the evolution of honesty 1 i assumed the existence of a signal a blush perhaps extreme values of which served to identify some individuals as being honest with certainty joseph harrington notes that without this assumption honest individuals have difficulty invading a population initially dominated by defectors for readers who do not wish to work through the algebra in his comment the argument is easily summarized in nontechnical terms suppose two honest mutants a and b arrive in an uncountably large population consisting entirely of dishonest persons and suppose that the probability that an honest person exhibits an intense blush is say 0 999 while the corresponding probability for everyone else is only 0 001 when a sees an intense blush on the face of b what will then be his estimate of the probability that b is honest assuming that a knows the laws of elementary probability and corrects for the base rate of honest persons in the population it will be zero when virtually everyone in the population is dishonest even a person with an intense blush will be pegged as dishonest provided that even the smallest fraction of dishonest persons also shows an intense blush with

cheap talk in games with incomplete information abstract the paper studies bayesian games which are extended by adding pre play communication let be a bayesian game with full support and with three or more players the main result is that if players can send private messages to each other and make public announcements then every communication equilibrium outcome q that is rational i e involves probabilities that are rational numbers can be implemented in a sequential equilibrium of a cheap talk extension of provided that the following condition is satisfied there exists a bayesian nash equilibrium s in such that for each type t i of each player i the expected payoff of t i in q is larger than the expected payoff of t i in s

an experimental evaluation of strategic preemption abstract this paper reports the results of a series of two stage two person noncooperative games where one player can strategically preempt the other in one of our designs the subgame perfect equilibrium entails complete preemption in the other it entails partial preemption the data show that players tend to completely preempt when it is privately optimal however when partial preemption is privately optimal a non trivial fraction of players persist in choosing the non preemptive structure this may result because of occasional irrational behavior following preemptive play which induces some dominant agents to play less aggressively

the effects of risk preferences in mixed strategy equilibria of 2 2 games abstract we consider the effects of risk preferences in mixed strategy equilibria of 2 2 games provided such equilibria exist we identify sufficient conditions under which the expected payoff in the mixed equilibrium increases or decreases with the degree of risk aversion we find that at least moderate degrees of risk aversion will frequently be beneficial in mixed equilibria

the origin of utility sexual selection and conspicuous consumption abstract this paper proposes an explanation for the universal human desire for increasing consumption and the associated propensity to trade survival opportunity off conspicuous consumption i argue that this desire was moulded in evolutionary times by a mechanism known to biologists as sexual selection whereby an observable trait conspicuous consumption in this case is used by members of one sex to signal their unobservable characteristics valuable to members of the opposite sex it then shows that the standard economics problem of utility maximisation is formally equivalent to the standard biology problem of the maximisation of individual fitness the ability to pass genes to future generations and thus establishes a rigorous theoretical foundation for including conspicuous consumption in the utility function

cooperation secret handshakes and imitation in the prisoners dilemma building on a j robson 1990 j theoret biol 144 379 396 we introduce into the repeated prisoners dilemma mutants who have the ability to send a costly signal i e the secret handshake before each round of the game and to condition their actions on whether or not they observe the same signal from their opponent we show that as mutation probabilities approach zero in the limit cooperation occurs a positive fraction of the time using simulations to study the behavior of the system with nonzero mutation probabilities we obtain similar results surprisingly in some cases an increased payoff to unilateral defection actually raises the level of cooperation journal of economic literature classification numbers c70 c72 d60

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

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

malthusian selection of preferences the authors study natural selection of preferences using a golden age model with endogenous population in equilibrium all agents have preferences with maximum biological fitness given resource constraints and total population is the maximum the environment can sustain naturally selected agents follow the golden rule acting as if they maximize the undiscounted sum of per capita felicities of current and future generations selected preferences and hence work saving consumption and population density vary predictably with environmental differences copyright 1990 by american economic association

cultivating trust norms institutions and the implications of scale we study the co evolution of honesty norms and institutions new trading opportunities require institutional changes to be realised since the initial vulnerability of institutions to opportunistic behaviour leads to the deterioration of norms we show how an escape from opportunism requires that institutional improvements outpace norm deterioration a key prediction emerges larger economies are more likely to evolve to steady states with strong honesty norms but need not have better institutions this prediction is tested using a cross section of countries population has a significant positive relationship with trust even when controlling for standard trust determinants and institutional quality

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