perfect foresight and equilibrium selection in symmetric potential games the equilibrium selection approach of matsui and matsuyama j econ theory65 1995 415 434 which is based on rational players who maximize their discounted future payoff is analyzed for symmetric two player games with a potential function it is shown that the maximizer of the potential function is the unique state that is absorbing and globally accessible for small discount rates journal of economic literatureclassification number c72

a study of productivity changes in food retailing based on a general production function this study estimates productivity gains and losses for the various outputs of food retailing over the period 1959 to 1979 because it allows for the incorporation of all factors of production rather than just labor the methodology employed in this study is superior to conventional methods of studying productivity change our estimates indicate that between 1959 1979 total factor productivity in food retailing rose at a slower rate than total factor productivity in manufacturing while total factor productivity in food retailing rose from 1959 until about 1972 it remained constant or declined between 1972 1979 we discuss the policy and managerial implications of our results and provide suggestions for further research

optimal fiscal policy under multiple equilibria abstract we study optimal fiscal policy in an economy where i search frictions create a coordination problem and generate multiple pareto ranked equilibria and ii the government finances the provision of a public good by taxing market activity the government must choose the tax rate before it knows which equilibrium will obtain and therefore an important part of the problem is determining how the policy will affect the equilibrium selection process we show that when the equilibrium selection rule is based on the concept of risk dominance higher tax rates make coordination on the pareto superior outcome less likely as a result taking equilibrium selection effects into account leads to a lower optimal tax rate

global analysis of an expectations augmented evolutionary dynamics we consider a deterministic evolutionary model where players form expectations about future play players are not fully rational and have expectations that change over time in response to current payoffs and feedback from the past we provide a complete characterization of the qualitative dynamics so induced for a two strategy population game and relate our findings to standard evolutionary dynamics and equilibrium selection when agents have rational forward looking expectations

coordination and delay in global games abstract what is the effect of offering agents an option to delay their choices in a global coordination game we address this question by considering a canonical binary action global game and allowing players to delay their irreversible decisions those that delay have access to accurate private information at the second stage but receive lower payoffs we show that as noise vanishes as long as the benefit to taking the risky action early is greater than the benefit of taking the risky action late the introduction of the option to delay reduces the incidence of coordination failure in equilibrium relative to the standard case where all agents must choose their actions at the same time we outline the welfare implications of this finding and probe the robustness of our results from a variety of angles

dynamic global games of regime change learning multiplicity and the timing of attacks global games of regime change coordination games of incomplete information in which a status quo is abandoned once a sufficiently large fraction of agents attack it have been used to study crises phenomena such as currency attacks bank runs debt crises and political change we extend the static benchmark examined in the literature by allowing agents to take actions in many periods and to learn about the underlying fundamentals over time we first provide a simple recursive algorithm for the characterization of monotone equilibria we then show how the interaction of the knowledge that the regime survived past attacks with the arrival of information over time or with changes in fundamentals leads to interesting equilibrium properties first multiplicity may obtain under the same conditions on exogenous information that guarantee uniqueness in the static benchmark second fundamentals may predict the eventual fate of the regime but not the timing or the number of attacks finally equilibrium dynamics can alternate between phases of tranquility where no attack is possible and phases of distress where a large attack can occur even without changes in fundamentals

unique equilibrium in a model of self fulfilling currency attacks even though self fulfilling currency attacks lead to multiple equilibria when fundamentals are common knowledge we demonstrate the uniqueness of equilibrium when speculators face a small amount of noise in their signals about the fundamentals this unique equilibrium depends not only on the fundamentals but also on financial variables such as the quantity of hot money in circulation and the costs of speculative trading in contrast to multiple equilibrium models our model allows analysis of policy proposals directed at curtailing currency attacks

stochastic stability in asymmetric binary choice coordination games abstract a recent literature in evolutionary game theory is devoted to the question of robust equilibrium selection under noisy best response dynamics in this paper we present a complete picture of equilibrium selection for asymmetric binary choice coordination games in the small noise limit we achieve this by transforming the stochastic stability analysis into an optimal control problem which can be solved analytically this approach allows us to obtain precise and clean equilibrium selection results for all canonical noisy best response dynamics which have been proposed so far in the literature among which we find the best response with mutations dynamics the logit dynamics and the probit dynamics

who matters in coordination problems we consider a common investment project that is vulnerable to a self fullling coordination failure and hence is strategically risky based on their private information agents who have heterogeneous investment incentives form expectations or sentiments about the project s outcome we nd that the sum of these sentiments is constant across dierent strategy proles and it is independent of the distribution of incentives as a result we can think of sentiment as a scarce resource divided up among the dierent payo types applying this nding we show that agents who benet little from the project s success have a large impact on the coordination process the agents with small benets invest only if their sentiment towards the project is large per unit investment cost as the average sentiment is constant a subsidy decreasing the investment costs of these agents will free up a large amount of sentiment provoking a large impact on the whole economy intuitively these agents insensitive to the project s outcome and hence to the actions of others are inuential because they modify their

fear of miscoordination and the robustness of cooperation in dynamic global games with exit this paper develops a framework to assess how fear of miscoordination affects the sustainability of cooperation building on theoretical insights from carlsson and van damme 1993 it explores the effect of small amounts of private information on a class of dynamic cooperation games with exit lack of common knowledge leads players to second guess each other s behavior and makes coordination difficult this restricts the range of equilibria and highlights the role of miscoordination payoffs in determining whether cooperation is sustainable or not the paper characterizes the range of perfect bayesian equilibria as the players information becomes arbitrarily precise unlike in one shot two by two games the global games information structure does not yield equilibrium uniqueness

immigration and the diffusion of technology the huguenot diaspora in prussia abstract this paper analyzes long term effects of skilled worker immigration on productivity for the huguenot migration to prussia in 1685 religiously persecuted french huguenots settled in brandenburg prussia and compensated for population losses due to plagues during the thirty years war we combine huguenot immigration lists from 1700 with prussian firm level data on the value of inputs and outputs in 1802 in a unique database to analyze the effects of skilled immigration to places with underused economic potential exploiting this settlement pattern in an instrumental variable approach we find substantial long term effects of huguenot settlement on the productivity of textile manufactories jel j24 j61 l67 n33 n63 o33 o47

is ambiguity aversion bad for innovation abstract not necessarily i consider two firms that compete both on the research market and on the product market assuming the product market outcome is ambiguous i e uncertainty is described by multiple distribution of outcomes i show that an increase in firms ambiguity aversion increases the ex ante likelihood that they invest in r d an increase in their risk aversion on the other hand decreases innovation the result holds when the innovation has a business stealing effect as in a cournot duopoly with vertical differentiation the key intuition is that ambiguity aversion exacerbates the competitive threat whereas risk aversion diminishes the profit incentive to invest in addition to showing that an increase in ambiguity aversion leads to more projects being pursued i show that an increase in ambiguity aversion can lead to an increase in investment for incremental projects in the case of more radical projects an increase in ambiguity aversion can but not necessarily lead to lower investment in equilibrium overall ambiguity aversion has a positive effect on most innovative projects but can sometimes have a negative effect on some of the more radical game changing ones

property rights to technical knowledge in premodern europe 1300 1800 the role of technology in the transition from premodem malthusian to modem economies in late 18thand 19th century europe is among the major questions in economic history but it is still poorly understood in particular the view that premodern societies experienced low labor productivity and stagnant living standards and that technological change before ca 1800 was close to zero due to pervasive guild rent seeking and poorly specified property rights to knowledge douglass c north 1981 joel mokyr 2002 is hard to square with the fact that the surge of technological innovation in the 18th century occurred within institutional frameworks not too dissimilar to those of 1300

economic growth with bubbles this paper presents a stylized model of economic growth with bubbles this model views asset price bubbles as a market generated device to moderate the effects of frictions in financial markets improving the allocation of investments and raising the capital stock and welfare the model illustrates various channels through which asset price bubbles affect the incentives for innovation and economic reforms and therefore the rate of economic growth the model also offers a new perspective on the effects of financial development on asset price bubbles and economic growth

p dominance and equilibrium selection under perfect foresight dynamics this paper studies equilibrium selection based on a class of perfect foresight dynamics and relates it to the notion of p dominance a continuum of rational players are repeatedly and randomly matched to play a symmetric n n game there are frictions opportunities to revise actions follow independent poisson processes the dynamics has stationary states each of which corresponds to a nash equilibrium of the static game a strict nash equilibrium is linearly stable under the perfect foresight dynamics if independently of the current action distribution there exists a consistent belief that any player necessarily plays the nash equilibrium action at every revision opportunity it is shown that a strict nash equilibrium is linearly stable under the perfect foresight dynamics with a small degree of friction if and only if it is the p dominant equilibrium with p 1 2 it is also shown that if a strict nash equilibrium is the p dominant equilibrium with p 1 2 then it is uniquely absorbing and globally accessible for a small friction but not vice versa set valued stability concepts are introduced and their existence is shown journal of economic literature classication numbers c72 c73

economic efficiency of greek retail smes in a period of high fluctuations in economic activity a dea approach this study aims to analyse the economic efficiency of greek small and medium retail enterprises before and after the crisis that started in 2008 based on the accounting equation we use data envelopment analysis dea to estimate variable returns of scale efficiency scores and to conclude on specific characteristics that efficient companies have for example on capital structure our results from the dea application show a high degree of inefficiency we found that smes on the islands are more efficient than those on the mainland and that smes in the cities are the least efficient size seems to be important more so on the islands and on the mainland than in the cities we conclude that companies should act more conservatively in terms of operating cost when the first signs of a recession appear in addition during a recession period companies that have evidences that their operations will continue positively should strengthen their operations by raising more own capital finally our study clarifies

a dynamic model of quality competition with endogenous prices abstract we develop a dynamic model of price and quality competition in order to analyze the effects of competition on quality provision and to which extent an unregulated market is able to provide a socially optimal quality level our model combines a differential game approach with a hotelling spatial competition framework and our analysis applies in particular to industries such as long term care health care child care and education if providers nursing homes hospitals schools nurseries use closed loop decision rules which imply strategic interaction over time we show that although increased competition leads to higher quality in the steady state quality provision is nevertheless lower than under open loop rules and also suboptimally low from a welfare perspective thus our analysis identifies dynamic strategic interaction between competing providers as a potential source of inefficiency in quality provision

tractable dynamic global games and applications abstract we present a family of tractable dynamic global games and its applications agents privately learn about a fixed fundamental and repeatedly adjust their investments while facing frictions the game exhibits many externalities payoffs may depend on the volume of investment on its volatility and on its concentration the solution is driven by an invariance result aggregate investment is in a pivotal contingency invariant to a large family of frictions we use the invariance result to examine how frictions including those similar to the tobin tax affect equilibrium we identify conditions under which frictions discourage harmful behavior without compromising investment volume

history expectations and leadership in the evolution of social norms we study the evolution of a social norm of cooperation in a dynamic environment each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game social norms emerge as patterns of behaviour that are stable in part due to agents interpretations of private information about the past influenced by occasional commonly observed past behaviours for sufficiently backward looking societies history completely drives equilibrium play leading to a social norm of high or low cooperation in more forward looking societies there is a pattern of reversion whereby play starting with high low cooperation reverts towards lower higher cooperation the impact of history can be countered by occasional prominent agents whose actions are visible by all future agents and who can leverage their greater visibility to influence expectations of future agents and overturn social norms of low cooperation

productivity growth in the grocery trade this paper presents a model of the growth of the average efficiency of labour per type of shop as a function of the wage rate use of part time labour labour supply and demand and economies of scale shop size the model is estimated on the basis of data for the grocery trade prior to 1975 this yields a forecast beyond 1975 which is compared with more recent observations are estimate of the model on the basis of data for the grocery trade in the period 1975 78 is found to be in agreement with the original estimate some implications of the model are indicated

dynamic debt runs we develop a dynamic model of debt runs on a rm which invests in an illiquid asset by rolling over staggered short term debt contracts i e dierent contracts mature at dierent times we derive a unique threshold equilibrium in which creditors coordinate their asynchronous rollover decisions based on the rm s publicly observable and time varying fundamental the coordination problem ampli es the creditors concerns about the rm s future rollover risk created by its time varying fundamental and causes each maturing creditor to run ahead of others even when the current fundamental is substantially higher than its liability our model provides a set of implications on the roles played by volatility illiquidity and debt maturity in driving debt runs as well as on rms capital adequacy standards and credit risk

a model of retail formats based on consumers economizing on shopping time retailers in developed countries increasingly provide one stop shopping why are they responding to growing demand for time saving convenience or are they responding to economies of scale made possible by new retail technology and what role if any is played by improvements in automotive refrigeration and other consumer technology to examine these questions we develop a model that can help explain the growth of one stop shopping estimate the model with aggregate grocery retail data and compare the implications of our model with competing explanations our model includes several desirable features 1 the extent of one shop shopping is endogenously determined 2 consumer store choice is determined in an explicit household production utility maximizing context this choice is based on a tradeoff between time saving shopping convenience and price 3 the model is readily amenable to empirical testing the key endogenous parameter of our model describes the number of categories carried by a store in the context of grocery retailing this parameter can distinguish between a single category specialty store a simple grocer a supermarket and a large superstore this parameter is determined by the interplay of consumers economizing on shopping time and retail competition in the presence of technological constraints which relate operating cost with assortment size our approach may also be viewed as an example of how the boundary between retail service production and household service production can be modeled as a market outcome in the spirit of betancourt and gautchi betancourt roger david gautschi 1990 demand complementarities household production and retail assortments marketing sci 92 spring 146 161 and wernerfelt wernerfelt birger 1994 an efficiency criterion for marketing design j marketing res 31november 462 470 the nature of extant retail formats and other channel related institutions circumscribes the boundary between retailers and households with the notable early exception of baumol and ide baumol william j edward a ide 1956 variety in retailing management sci 31 october 93 101 few explicit models describe retail format determination as an equilibrating market mechanism our model describes the determination of one aspect of retail formats namely the extent of one stop shopping our hope is that similar approaches can be used to describe other aspects and types of emergent retail formats we estimate our model using u s aggregate annual data for a 26 year period and later corroborate parts of the analysis using cross sectional data for the 48 contiguous states of the u s the equilibrium conditions of our model translate into a system of two equations with two endogenous variables estimates of the reduced form parameters provide our central empirical finding that per capita disposable income has had a significant positive effect on both supermarket assortment as expected from our model and store operating costs perhaps somewhat less expected this suggests that greater prevalence of one stop shopping has been a response to growing demand for time saving convenience the estimates of the underlying structural parameters also provide a measure of the imputed net savings to consumers from supermarket shopping taking into account reductions in shopping time made possible by supermarkets savings equivalent to approximately 2 2 of expenditures on grocery products over the 1961 1986 period we lastly consider competing hypotheses while a number of explanations can account for increased store assortment these explanations have divergent implications for retail margins operating costs and profits these implications suggest that retail scale economies were not the drivers of one stop shopping in the years of our data nor was the impetus to increase store size primarily a desire to bring in new higher margin items however we acknowledge that transportation and inventory holding technologies are prerequisites to one stop shopping and that improvements in these technologies were particularly important in the early growth period of supermarkets

banking competition and market efficiency this paper analyses competition among financial intermediaries in a set up where financial intermediaries economize on duplicated monitoring diamond 1984 we analyse two different games in which both direct trade and indirect trade are available we show that in general equilibrium outcomes are inefficient so that diamond s efficiency result is fragile intermediation may increase rather than decrease transaction costs disintermediation may also be an equilibrium we discuss the role played by the nonconvexities of banks technology and that played by competition for deposits and loans

contagion and uninvadability in local interaction games the bilingual game and general supermodular games abstract in a setting where an infinite population of players interact locally and repeatedly we study the impacts of payoff structures and network structures on contagion of a convention beyond 2 2 coordination games first we consider the bilingual game where each player chooses one of two conventions or adopts both i e chooses the bilingual option at an additional cost for this game we completely characterize when a convention spreads contagiously from a finite subset of players to the entire population in some network and conversely when a convention is never invaded by the other convention in any network we show that the pareto dominant risk dominant resp convention is contagious if the cost of bilingual option is low high resp furthermore if the cost is in a medium range both conventions are each contagious in respective networks and in particular the pareto dominant convention is contagious only in some non linear networks second we consider general supermodular games and compare networks in terms of their power of inducing contagion we show that if there is a weight preserving node identification from one network to another then the latter is more contagion inducing than the former in all supermodular games

coordination in the use of money abstract fundamental models of money while explicit about the frictions that render money essential are silent on how agents actually coordinate in its use this paper studies this coordination problem providing an endogenous map between the primitives of the environment and the beliefs on the acceptability of money we show that an increase in the frequency of trade meetings besides its direct impact on payoffs facilitates coordination in particular for a large enough frequency of trade meetings agents always coordinate in the use of money

intertemporal coordination with delay options abstract this paper studies equilibrium selection in intertemporal coordination problems with delay options the risk dominant action of the underlying one shot game is selected when frictions are arbitrarily small larger frictions introduce real option effects in the model and inhibit coordination

risk dominance and perfect foresight dynamics in n player games abstract in perfect foresight dynamics an action is linearly stable if expectation that people will always choose the action is self fulfilling a symmetric game is a pim game if an opponent s particular action maximizes the incentive of an action independently of the rest of the players this class includes supermodular games games with linear incentives and so forth we show that in pim games linear stability is equivalent to u dominance a generalization of risk dominance and that there is no path escaping a u dominant equilibrium existing results on n player coordination games games with linear incentives and two player games are obtained as corollaries

incentives for procrastinators we examine how principals should design incentives to induce time inconsistent procrastinating agents to complete tasks efficiently delay is costly to the principal but the agent faces stochastic costs of completing the task and efficiency requires waiting when costs are high if the principal knows the task cost distribution she can always achieve first best efficiency if the agent has private information the principal can induce first best efficiency for time consistent agents but often cannot for procrastinators we show that second best optimal incentives for procrastinators typically involve an increasing punishment for delay as time passes

p dominance and perfect foresight dynamics abstract we investigate stability of p dominant equilibria under perfect foresight dynamics we show that a strict p dominant equilibrium with i p i 1 is globally accessible and absorbing in perfect foresight dynamics we also investigate robustness and extensions of this result we apply our proof method to games with u dominant equilibria and unanimity games

dynamics of currency crises with asset market frictions abstract this paper presents a dynamic model of currency crises with frictions by construction a speculative attack is not an instantaneous event but takes a little time to deplete the country s reserves and in the event of an attack agents are uncertain about whether they will be able to act before the devaluation comes the currency will be overvalued ripe for attack for a long time before an attack takes place a discrete and sizable devaluation will occur small changes in fundamentals may trigger an attack the model brings insights about the dynamics of currency crises and the effects of some key policy variables

risk and wealth in a model of self fulfilling currency attacks market participants risk attitudes wealth and portfolio composition in uence their positions in a pegged foreign currency and therefore may have important efiects on the sustainability of currency pegs we analyze such efiects in a global game model of currency crises with continuous action choices generating a rich set of theoretical comparative static predictions related to often discussed but rarely modelled accounts of the onset and timing of currency crises the model can be solved in closed form and the methods could be used to study other economic issues in which coordination and risk aversion play important roles

rationalizable foresight dynamics abstract this paper proposes and studies the rationalizable foresight dynamics a normal form game is repeatedly played in a random matching fashion by a continuum of agents who make decisions at stochastic points in time a rationalizable foresight path is a feasible path of action distribution along which each agent takes an action that maximizes his expected discounted payoff against another path which is in turn a rationalizable foresight path we consider a set valued stability concept under this dynamics and compare it with the corresponding concept under the perfect foresight dynamics

an approach to equilibrium selection abstract we consider equilibrium selection in 2 2 bimatrix both symmetric and asymetric games with two strict nash equilibria by embedding the static games in a dynamic random matching framework played by a continuum of anonymous agents unlike in evolutionary games the players are rational and maximize discounted payoffs but they are restricted to make a short run commitment when choosing actions this dynamic game with frictions has stationary states which correspond to the nash equilibria of the static game our selection is based on differential stability properties of the stationary states it is shown that for a small degree of friction a strict nash equilibrium becomes uniquely absorbing and globally accessible if and only if it is risk dominant harsanyi and selten a general theory of equilibrium selection in games mit press cambridge ma 1988 journal of economic literature classification numbers c72 and c73