seller reputation from word of mouth to centralized feedback abstract reputation is one of the most important incentives for trade and cooperation using the complete selling history of 125 135 sellers on eachnet com an ebay equivalent in china we show that sellers with a longer successful selling record enjoyed more repeat business reached more buyer regions sold in more product categories and had a higher completion rate even before eachnet introduced a centralized feedback system since the centralized feedback system the difference between reputable and non reputable sellers has decreased in terms of repeat business but enlarged in terms of market expansion these findings suggest that while reputation can facilitate trade through buyer experience and word of mouth it is not as effective as centralized feedback our study also shows that although completion rate and transaction price are the two outcomes most often examined in the literature seller reputation is important for buyer clientele market reach business scope and market survival

learning to trust in indefinitely repeated games abstract although it is well known that trust and trustworthiness i e the fulfillment of trust are important behaviors for the fulfillment of incomplete contracts less is known about how the economic environment influences them in this paper we design an experiment to examine how exogenously determined stochastic past relationship lengths affect trust and trustworthiness in new relationships we find that shorter lasting relationships have an immediate negative impact on both behaviors in the relationships that immediately follow while longer lasting relationships have the opposite effect the effect of stochastic end points declines for trustworthiness but not for trust as subjects gain experience indicating that trust is able to rebound when longer lasting relationships follow shorter lasting ones

sticks and carrots two incentive mechanisms supporting intra group cooperation abstract in this note we introduce two distinct incentive mechanisms that support dynamic intra group cooperation in the context of prisoner s dilemma payoffs rewards for cooperating and punishments for defection where the rewarding or punishing party may be outside the relationship

decision maker preferences for international legal cooperation why do some decision makers prefer big multilateral agreements while others prefer cooperation in small clubs does enforcement encourage or deter institutional cooperation we use experiments drawn from behavioral economics and cognitive psychology along with a substantive survey focused on international trade to illustrate how two behavioral traits patience and strategic reasoning of individuals who play key roles in negotiating and ratifying an international treaty shape their preferences for how treaties are designed and whether they are ratified patient subjects were more likely to prefer treaties with larger numbers of countries and larger long term benefits as were subjects with the skill to anticipate how others will respond over multiple iterations of strategic games the presence of an enforcement mechanism increased subjects willingness to ratify treaties however strategic reasoning had double the effect of adding enforcement to a trade agreement more strategic subjects were particularly likely to favor ratifying the agreement we report these results for a sample of 509 university students and also show how similar patterns are revealed in a unique sample of ninety two actual us policy elites under some conditions certain types of university student convenience samples can be useful for revealing elite dominated policy preferences different types of people in the same situation may prefer to approach decision making tasks and reason through trade offs in materially different ways

an experimental study of finitely and infinitely repeated linear public goods games abstract a growing literature in experimental economics examines the conditions under which cooperation can be sustained in social dilemma settings in particular several recent studies contrast cooperation levels in games in which the number of decision rounds is probabilistic to games in which the number of decision rounds is finite we contribute to this literature by contrasting the evolution of cooperation in probabilistically and finitely repeated linear voluntary contribution public goods games vcm consistent with past results ceteris paribus cooperation is found to increase in the marginal value of the public good additionally as the number of decision sequences increases there is a pronounced decrease in cooperation in the final round of finite sequences compared to those with a probabilistic end round we do not however find consistent evidence that overall cooperation rates are affected by whether the number of decision rounds is finite or determined probabilistically

group reputations stereotypes and cooperation in a repeated labor market reputation effects and other regarding preferences have both been used to predict cooperative outcomes in markets with inefficient equilibria existing reputation building models require either infinite time horizons or publicly observed identities but cooperative outcomes have been observed in several moral hazard experiments with finite horizons and anonymous interactions this paper introduces a full reputation equilibrium fre with stereotyping perceived type correlation in which cooperation is predicted in early periods of a finitely repeated market with anonymous interactions new experiments generate results in line with the fre prediction including final period reversions to stage game equilibrium and non cooperative play under unfavorable payoff parameters

examining generic competitive strategy types in u s and european markets identification of generic competitive strategy types has recently attracted considerable attention most of this research has however focused on competitive strategy of u s businesses in their domestic market the present study extends these findings to markets outside the united states and more specifically europe based on a sample of industrial businesses drawn from the pims database similar dimensions underlying competitive strategy and similar generic types are found among business in the u s and in europe some differences in the performance and business characteristics of certain strategy types were however observed between u s and european markets rate of market growth also appeared to have more significant relation to performance of businesses in europe than in the u s

social security life insurance and annuities for families abstract in this paper we ask whether an aspect of social security namely its role as a provider of insurance against uncertain life spans is welfare enhancing to this end we use an olg model where agents have a bequest motive and differ in sex and marital status and where families are formed and destroyed and their characteristics evolve exogenously according to u s demographic patterns of marriage divorce fertility and mortality we compare the implications of social security under a variety of market structures that differ in the extent to which life insurance and annuities are available we find that social security is a bad idea in economies where the private sector provides annuities and life insurance it is a bad idea for the standard reason that it distorts the intertemporal margin by lowering the capital stock in the absence of such securities social security is still a very bad idea only marginally less so compared with economies with annuities and life insurance we also explore these issues in a world where people live longer and we find no differences in our answers as a by product of our analysis we find that the existence of life insurance opportunities for people is important in welfare terms while that of annuities is not

bargaining and reputation an experiment on bargaining in the presence of behavioural types we conduct a series of laboratory experiments to understand what role commitment and reputation play in bargaining the experiments implement the abreu and gul 2000 bargaining model that demonstrates how introducing behavioral types which are obstinate in their demands creates incentives for all players to build reputations for being hard bargainers the data are qualitatively consistent with the theory as subjects mimic induced types furthermore we find evidence for the presence of complementary types whose initial demands acquiesce to induced behavioural demands however there are quantitative deviations from the theory subjects make aggressive demands too often and participate in longer conflicts before reaching agreements overall the results suggest that the abreu and gul 2000 model can be used to gain insights to bargaining behavior particularly in environments where the process underlying obstinate play is well established

strategic entry deterrence and terrorism theory and experimental evidence using a two stage rent seeking framework we present a simple model of strategic entry terrorism deterrence and test the model using laboratory experiments our contest success function highlights the potential for strategic spillovers the theory illustrates that relative to a cooperative outcome negative externalities lead to over spending on deterrence and positive externalities lead to under spending on deterrence our experimental results are broadly consistent subjects in the negative externality treatment had higher expenditures in contrast to theoretical predictions participation decisions while primarily driven by the probability of winning a contest were influenced by a subject s ability to participate in multiple contests

migration and foreign aid when it comes to linkages between migration and the global allocation of foreign development assistance the size of the immigrant population from a recipient country residing in a donor country is an important determinant of dyadic aid commitments two complementary hypotheses probe this relationship first donors use foreign aid to achieve their broader immigration goals targeting migrant sending areas to increase development and decrease the demand for entry into the donor country second migrants already residing in the donor country mobilize to lobby for additional aid for their homeland empirical tests on a large sample of country pairs made up of twenty two donors and more than 150 recipients over the period 1993 to 2008 show robust support for these hypotheses

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

taxation and household labor supply we evaluate reforms to the u s tax system in a life cycle setup with heterogeneous married and single households and with an operative extensive margin in labor supply we restrict our model with observations on gender and skill premia labor force participation of married females across skill groups children and the structure of marital sorting we concentrate on two revenue neutral tax reforms a proportional income tax and a reform in which married individuals flle taxes separately separate flling our flndings indicate that tax reforms are accompanied by large increases in labor supply that difier across demographic groups with the bulk of the increase coming from married females under a proportional income tax reform married females account for more than 50 of the changes in hours across steady states while under separate flling reform married females account for all the change in hours

the life cycle and the business cycle of wage risk cross country comparisons abstract we provide evidence on life cycle and business cycle fluctuations in the dispersion of household level wage innovations comparing the us the uk and germany first we find that household characteristics explain about 25 of the dispersion in wages within an age group in all three countries second the cross sectional variance of wages is almost linearly increasing in household age in all three countries but with increments being smaller in the european data third wage risk is procyclical in germany while it is countercyclical in the us and acyclical in the uk

dynamic decisions in a laboratory setting many economic models involve a trade off between current and future rewards for example in neoclassical one sector growth models there is a trade off between immediate consumption and investment for future consumption in sequential job search models of labor economics workers must decide between continuing their job search at a cost or accepting the best wage offered so far in oligopoly models of tacit collusion firms decide whether or not to defect from collusive behavior and the defection leads to short term benefit but future punishment these models are all dynamic in the sense that an action at one stage influences the available actions or rewards at a future stage many such examples fall into the class of dynamic programming problems and for large classes of such problems techniques for finding optima are well understood less well understood however are the decisions which individuals actually make in such dynamic settings this is an empirical issue which lends itself to the methodology of laboratory investigation there have already been a number of experiments in which subjects face a sequence of related decisions examples include the asset market studies of camerer and weigelt 3 and smith suchanek and williams 13 the predictions of dynamic game theory have been tested extensively for example in the contexts of the centipede game by mckelvey and palfrey 9 of the repeated prisoner s dilemma by selten and stoecker 11 and andreoni and miller 1 and of bargaining by ochs and roth 10 dynamic job search has been studied by cox and oaxaca 4 and two armed bandits have been studied by banks olson and porter 2 in the market and game theory studies the decisions made by subjects are complicated by the strategic aspects of the games subjects decisions must take into account the strategies they expect the other players to use in asset markets subjects seem to have difficulty making decisions and speculative bubbles frequently result as noted by mccabe rassenti and smith 8 the robust tendency of laboratory stock markets to produce bubbles is attributable to the myopic trading behavior of subjects in effect subjects fail to act according to the backward induction

extortion in the laboratory in a laboratory experiment we study a finitely repeated game t 15 under complete information in each round p demands tribute cash transfer from a a complies or refuses and after refusals p may punish a in equilibrium payoff maximization p does not punish and a refuses any positive demand in the experiment p punishes increasingly often and increasingly severely as she gains experience most as comply with p s demands the observations are compatible with linear spite in a finite mixture model the types of p and a in the subject pool are characterized an a that is resistant to extortion declines all demands is very rare and hence the threat of punishment in general is effective but all as either ignore actual punishment or react negatively to it they accept to pay tribute but they are resistant to piecemeal expropriation

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

cooperation among strangers with limited information about reputation abstract the amount of institutional intervention necessary to secure efficiency enhancing cooperation in markets and organizations in circumstances where interactions take place among essentially strangers depends critically on the amount of information informal reputation mechanisms need transmit models based on subgame perfection find that the information necessary to support cooperation is recursive in nature and thus information generating and processing requirements are quite demanding models that do not rely on subgame perfection on the other hand suggest that the information demands may be quite modest the experiment we present indicates that even without any reputation information there is a non negligible amount of cooperation that is however quite sensitive to the cooperation costs for high costs providing information about a partner s immediate past action increases cooperation recursive information about the partners previous partners reputation further promotes cooperation regardless of the cooperation costs

the family as an incomplete annuities market families can self insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers interfamily transfers need have nothing to do with altruistic feelings they may simply reflect risk sharing behavior of completely selfish family members although family annuity markets are incomplete even small families can substitute by more than 70 percent for perfect market annuities given adverse selection and transaction costs family risk pooling may be preferred to public market annuities in the absence of public annuities these risk sharing arrangements provide powerful incentives for marriage and family formation

honor and war southern us presidents and the effects of concern for reputation reputation has long been considered central to international relations but unobservability strategic selection and endogeneity have handicapped quantitative research a rare source of haphazard variation in the cultural origins of leaders the fact that one third of us presidents were raised in the american south a well studied example of a culture of honor provides an opportunity to identify the effects of heightened concern for reputation for resolve a formal theory that yields several testable predictions while accounting for unobserved selection into disputes is offered the theory is illustrated through a comparison of presidents john f kennedy and lyndon b johnson and systematically tested using matching permutation inference and the nonparametric combination of tests interstate conflicts under southern presidents are shown to be twice as likely to involve uses of force last on average twice as long and are three times more likely to end in victory for the united states than disputes under non southern presidents other characteristics of southern presidencies do not seem able to account for this pattern of results the results provide evidence that concern for reputation is an important cause of interstate conflict behavior

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

rationality in extensive form games let us adopt the classical point of view that a theory of games is a description of rational behavior consequently equipped with a book entitled theory of games any individual in any strategic situation need only consult the book to make a rational decision one of the questions to address in this context is indeed whether or not strategies other than those provided by backward induction can ever appear in such a book in offering an answer we shall also explore the logical limits within which any theory of games must operate

promises or policies an experimental analysis of international agreements and audience reactions a key assumption of audience costs theories of crisis bargaining and international cooperation is that audience members have strong preferences for consistency between their leader s commitments and actual policy choices however audiences also have strong preferences over the policy choices themselves regardless of their consistency with past commitments i conducted a randomized survey experiment to evaluate the magnitude of consistency and policy effects in the context of international agreements over trade policy respondents with expressed policy preferences whether supporting or opposing free trade have muted reactions to learning that their leader has broken an agreement only respondents with no opinion on trade policy are affected by learning that their leader s policy is inconsistent with prior commitments this suggests that constituents underlying preferences limit the degree to which audience costs influence policymakers calculations

the effects of marital status and children on savings and portfolio choice this paper investigates the impact of demographic shocks on optimal decisions about saving life insurance and most centrally asset allocation we analyze these choices within the framework of a life cycle model that features exogenous changes in family composition heterogeneity in lifetime income and uninsurable fluctuations in earnings and medical costs our analysis indicates that marital status transitions and children can have important effects on optimal household decisions widowhood induces sharp reductions in the portfolio shares in stock and the impact is largest for women and individuals with children divorce causes men and women to reallocate their portfolios in different directions men choose much riskier allocations while women opt for safer ones children play a fundamental role in the optimal portfolio decisions men with children for example increase their shares in response to divorce by less than half as much as men without children comparing our simulation results with panel data evidence on stockholding from the psid and the hrs we conclude that changes in marital status and children matter empirically as well but not always in the ways that the model predicts

marriage divorce and reciprocity based cooperation this paper considers partnership formation partnership dissolution and reciprocity based cooperation by couples in the form of voluntary transfers to smooth consumption while risk sharing is one benefit of having a partner it is also limited by the endogenous risk of separation the equilibrium formation and dissolution of partnerships are determined simultaneously with cooperative behavior publicly provided earnings insurance is shown to increase the turnover rate in the marriage market as well as to reduce the steady state marriage rate and the implicit financial cooperation between partners

taxes and marriage a two sided search analysis this article analyzes the effects of differential tax treatment of married and single individuals in the united states on marriage formation and composition divorce and labor supply we develop a marriage market model with search frictions and heterogeneous agents that is sufficiently rich to capture key elements of the problem under consideration we then calibrate the model and use it to evaluate the quantitative effects of several tax reforms aimed at making the tax law neutral with respect to marital status we find that these reforms i systematically increase the labor supply of married females with changes ranging from 0 3 to 10 1 percent ii have substantial effects on the correlation of spouses incomes which changes from 0 2 to values between 0 185 and 0 334 iii can lead to either an increase or decrease in the fraction of people married with changes that range from 0 6 to 2 4 percent

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

household formation female labor supply and savings in this paper we aim to quantify the impact of changing family structures on labor supply and savings in western societies our dynamic general equilibrium model features both genders and it takes into account changes in marital status as a stochastic process the numerical results indicate that changes in household formation can partly explain the reallocation of male and female labor supply observed during the last decades in germany we also find a negative impact on capital accumulation and we show that a combination of higher marital risk and a narrowing gender wage gap can explain the changes in hours ratios between single and married men and women

engines of liberation electricity was born at the dawn of the last century households were inundated with a flood of new consumer durables what was the impact of this consumer durable goods revolution it is argued here that the consumer goods revolution was conducive to liberating women from the home to analyse this hypothesis a beckerian model of household production is developed households must decide whether or not to adopt the new technologies and whether a married woman should work can such a model help to explain the rise in married female labour force participation that occurred in the last century yes the housewife of the future will be neither a slave to servants nor herself a drudge she will give less attention to the home because the home will need less she will be rather a domestic engineer than a domestic labourer with the greatest of all handmaidens electricity at her service this and other mechanical forces will so revolutionize the woman s world that a large portion of the aggregate of woman s energy will be conserved for use in broader more constructive fields thomas alva edison as interviewed in good housekeeping magazine lv no 4 october 1912 p 436

risk aversion and expected utility theory a calibration theorem within the expected utility framework the only explanation for risk aversion is that the utility function for wealth is concave a person has lower marginal utility for additional wealth when she is wealthy than when she is poor this paper provides a theorem showing that expected utility theory is an utterly implausible explanation for appreciable risk aversion over modest stakes within expected utility theory for any concave utility function even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes illustrative calibrations are provided

more on marriage fertility and the distribution of income according to pareto 1896 the distribution of income depends on the nature of the people comprising a society on the organization of the latter and also in part on chance in the model developed here the nature of the people is captured by attitudes toward marriage divorce fertility and children singles search for mates in a marriage market married agents bargain about work and the quantity and quality of children they can divorce social policies such as child support requirements reflect the organization of the society finally chance is modeled by randomness in income marriage opportunities and marital bliss

assortative mating and female labor supply this paper investigates married women s hours worked disaggregated by the husband s wage decile in the united states this pattern has changed from downward sloping to hump shaped we show that this development can be explained within a standard household model of labor supply when taking into account trends in assortative mating a quantitative analysis of our model shows that female wage growth and decreasing fertility are primarily responsible for the overall increase in wives hours since the 1970s the fact that the most pronounced increases are observed for wives married to high wage men is a result of trends in assortative mating

strategizing niceness in co opetition the case of knowledge exchange in supply chain innovation projects abstract in this paper we take a novel approach to address the dilemma of innovation sharing versus protection among supply chain partners the paper conducts an exploratory study that introduces factors affecting a firm s optimum supply chain innovation strategy we go beyond the conventional prisoners dilemma with its limiting assumptions of players preferences and symmetry to explore a larger pool of 2 2 games that may effectively model the problem after classifying firm types according to collaboration motive and relative power we use simulation to explore the effects of firm type opponent type and payoff structure on repeated innovation interactions or equivalently long term relations and optimality of niceness surprisingly we find that opponent type is essentially irrelevant in long term innovation interactions and focal firm type is only conditionally relevant the paper contributes further by introducing reciprocation of strategy type nice versus mean showing that reciprocation is recommended while identifying and explaining the exceptions to this conclusion

why do europeans work so little market work per person is roughly 10 higher in the united states than in sweden however if we include the work carried out in home production the total amount of work only differs by 1 i set up a model and show that differences in policy mainly taxes can account for the discrepancy in both labor supply and home production between sweden and the united states these results are independent of the elasticity of labor supply

marriage and divorce changes and their driving forces the family is not a static institution in recent decades marriage rates have fallen divorce rates have risen and the defining characteristics of marriage have changed the economic approach to the family seeks to explain these trends by reference to models that can also explain how and why families form gary becker s 1981 treatise on the family proposed a theory based on production complementarities in which husband and wife specialize in the market and domestic spheres respectively production complementarities also arise in the production and rearing of one s own children however production complementarities at least as initially described are decreasingly central to modern family life increased longevity and declining fertility mean that most of one s adult life is spent without one s own children in the household also the rise in marital formation at older ages including remarriage means that many families form with no intention of producing children moreover increases in female labor force participation suggest that household specialization has either declined or at least taken on a different meaning these changes have come about as what is produced in the home has been dramatically altered both by the emergence of labor saving technology in the home and by the development of service industries that allow much of what was once provided by specialized homemakers to be purchased in the market the availabil

action characteristics as predictors of competitive responses a central question in competitive dynamics is whether a competitive response can be predicted this study links various characteristics of actions with the total number and the time lag of competitors responses the hypothesized relationships were tested with a sample of competitive moves among u s airlines the results suggested that responses are influenced by the characteristics of the actions that evoked them specifically the total number of competitors affected by an action and the importance to these competitors of the markets under attack by the action increase the number of competitive responses strategic as opposed to tactical actions or actions which require substantial implementation efforts reduce the number and delay the timing of rivals counteractions finally contrary to prediction competitors who have a high stake in the markets under attack by a competitive move react slowly

competitiveness of nations a knowledge discovery examination this paper presents the insights gained from the use of data mining and multivariate statistical techniques to identify important factors associated with a country s competitiveness and the development of knowledge discovery in databases kdd models to predict it in addition to stepwise regression and weighted non linear programming techniques intelligent learning techniques artificial neural networks and inferential techniques classification and regression trees were applied to a dataset of 43 countries from the world competitiveness yearbook wcy the dataset included 55 variables on economic internationalization governmental financial infrastructure management science and technology as well as demographic and cultural characteristics exploratory data analysis and parameter calibration of the intelligent method architectures preceded the development and evaluation of reasonably accurate models mean absolute error 5 5 and subsequent out of sample validations the strengths and weaknesses of each of the kdd techniques were assessed along with their relative performance and the primary input variables influencing a country s competitiveness our analysis reveals that the primary drivers of competitiveness are lower country risk rating and higher computer usage in entrepreneurial urbanized societies with less male dominance and basic infrastructure with higher gross domestic investment savings and private consumption more imports of goods and services than exports increased purchase power parity gdp larger and more productive but not less expensive labor force and higher r d expenditures without diminishing the role and importance of wcy reports our approach can be useful to estimate the competitiveness of many countries not included in wcy while our findings may benefit policy makers and international agencies to expand their own abilities insights and establish priorities for improving country competitiveness

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

female labor supply and divorce new evidence from ireland if participation in the labor market helps to secure women s outside options in the case of divorce separation an increase in the perceived risk of marital dissolution may accelerate the increase in female labor supply this simple prediction has been tested in the literature using time and or spatial variation in divorce legislation e g across us states leading to mixed results in this paper we suggest testing this hypothesis by exploiting a more radical policy change i e the legalization of divorce in ireland the right to divorce was introduced in 1996 followed by an acceleration of marriage breakdown rates we use this fundamental change in the irish society as a natural experiment we follow a difference in difference approach using families for whom the dissolution risk is small as a control group our results suggest that the legalization of divorce contributed to a significant increase in female labor supply mostly at the extensive margin results are not driven by selection and are robust to several specification checks including the introduction of household fixed effects and an improved match between control and treatment groups using propensity score reweighting

unions and cooperative behavior the effect of discounting using union contract and industry wage survey data this article examines the effect of discounting on cooperative bargaining behavior by unions and firms game theory predicts that higher discount rates raise the temptation to defect from cooperation measures of cooperative behavior included the presence of merit pay incentive pay wage employment guarantees or labor management study committees discount rates were proxied by the relevant industry s failure rate failure rates generally had negative effects on cooperation industry wage survey results showed larger effects for union than non union establishments providing support for the union bargaining framework

peer induced fairness in games people exhibit peer induced fairness concerns when they look to their peers as a reference to evaluate their endowments we analyze two independent ulti matum games played sequentially by a leader and two followers with peer induced fairness the second follower is averse to receiving less than the first follower using laboratory experimental data we estimate that peer induced fairness between followers is two times stronger than distributional fairness between leader and follower allowing for heterogeneity we find that 50 per cent of subjects are fairness minded we discuss how peer induced fairness might limit price discrimination account for low variability in ceo compensa tion and explain pattern bargaining

the macroeconomic implications of rising wage inequality in the united states in recent decades american workers have faced a rising college premium a narrowing gender gap and increasing wage volatility this paper explores the quantitative and welfare implications of these changes the framework is an incomplete markets life cycle model in which individuals choose education intrafamily time allocation and savings given the observed history of the u s wage structure the model replicates key trends in cross sectional inequality in hours worked earnings and consumption recent cohorts enjoy welfare gains on average as higher relative wages for college graduates and for women translate into higher educational attainment and a more even division of labor within the household

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

on private charity and altruism if well off persons were to voluntarily engage in significant transfers of income to the poor the rationale and need for recourse to state measures to redistribute income and impose taxes would weaken it is thus not surprising that a good many social scientists have been fascinated by private charity which they usually explain is motivated by altruism this note looks further into the role of altruism in private charity demonstrating first that altruism can be consistent with no transfers from the altruists to the poor and second that a special form of altruism a dose of mutual altruism amongst the altruists suffices to ensure charitable transfers reference to means designed to bring about mutual altruism and their role in a number of empirical contexts concludes this note prior to proceeding along these lines a brief remark seems appropriate a recurrent and appropriate reference is made to the act of transferring as such for example roberts 1984 points out that if altruists receive utility from the act of transferring then private charity would be positive in equilibrium emphasis added this may but need not be the case two well off altruists can exchange some given income rather than transfer income to the poor unless we admit that the act of receipt of income creates suffering which is highly unrealistic such reciprocal transfers imply that the altruists end up with exactly the same income plus the satisfaction derived from having engaged in an enjoyable act this pareto dominates transfers to the poor that people indeed derive joy from such exchanges can be readily observed my inviting you to lunch this week your inviting me to lunch next week is more enjoyable than both of us sharing the bill at each of the two lunches or my sending you a bouquet for your birthday your sending me one for mine is more gratifying than each of us buying flowers for his own birthday 2

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

is more information always better a case in credit markets this paper studies the impact of behavioral and non behavioral information contained in consumer credit reports on the credit market a repeated game of incomplete information between a borrower and a sequence of lenders is considered lenders beliefs regarding the borrower s type depend on the borrower s historical loan performance and other informative signals it is established that for low beliefs strategic defaults occur in equilibrium as the borrower defaults on his loans despite having the ability to repay them further as the ancillary signals become increasingly informative of the borrower s type the range of beliefs over which strategic defaults occur expands this increase in strategic defaults highlights an unintended negative effect of allowing informative signals to influence beliefs on the upside the informative signals allow lenders to learn the borrower s type more quickly

a behavioural foundation for models of evolutionary drift abstract binmore and samuelson binmore k samuelson l 1999 evolutionary drift and equilibrium selection review of economic studies 66 363 393 have shown that perturbations drift are crucial to study the stability properties of nash equilibria we contribute to this literature by providing a behavioural foundation for models of evolutionary drift based on the similarity theory introduced by tversky tversky a 1977 features of similarity psychological review 84 327 352 the innovation is that we derive the similarity relations from the perception that each agent has about how well he is playing the game we obtain different models of drift depending on how we model that perception and show the conditions for each model to stabilize elements in components of nash equilibria that are not subgame perfect

rising power on the mind a prominent explanation of war claims that international conflict can result when shifts in bargaining power induce the declining power to behave aggressively today because the rising power cannot credibly commit to not behave aggressively tomorrow this paper asks whether individuals respond to shifting power in ways assumed by these models rather than use abstract laboratory based bargaining games as in other work i use vignettes describing the united states in an international bargaining situation to explore the microfoundations of power transitions models empirically the vignettes vary whether the individual is a member of a declining or a rising power and whether there are previous public commitments to the status quo division of territory subjects propose a response the united states should make and then explain their decision in their own words i apply new methods for analyzing these open ended responses consistent with predictions from the behavioral literature i find important asymmetries in behavior across these conditions as well as substantial heterogeneities in individuals motivations for their decisions the results of the experiments suggest potential ways that power transition models should be refined to have a firmer behavioral basis

a referendum on trade theory voting on free trade in costa rica research on mass opinion in international political economy overwhelmingly relies on survey data this poses problems of external validity especially for a frequently low salience issue such as trade policy to examine whether survey findings about attitudes toward economic openness apply outside of surveys this note considers patterns of voting in the 2007 costa rican plebiscite about joining the central american free trade area several extant theories appear to explain voting patterns but the results are less in line with traditional economic models based on locally important economic sectors

predation asymmetric information and strategic behavior in the classroom an experimental approach to the teaching of industrial organization abstract classroom market experiments can complement the theoretical orientation of standard industrial organization courses this paper describes various experiments designed for such courses and presents details of a multi market game with entry and exit in this experiment incumbents have a cost advantage in their home markets and mobile firms decide which market to enter after entry decisions are made firms choose prices and quantities to offer for sale predatory pricing is possible with this setup and the experiment can be used to motivate discussions of monopoly competition entry and efficiency other classroom experiments with an industrial organization focus are surveyed

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

a dispositional theory of reputation costs politicians frequently turn to reputational arguments to bolster support for their proposed foreign policies yet despite the prevailing belief that domestic audiences care about reputation there is very little direct evidence that publics care about reputation costs and very little understanding of how we propose a dispositional theory of reputation costs in which citizens facing ill defined strategic situations turn to their core predispositions about foreign affairs in order to weigh competing reputational dimensions employing a diverse array of methodological tools from vignette based survey experiments to automated text analysis we show that the mass public has a taste for reputation but understands it in fundamentally different ways with hawks concerned about the negative reputational consequences of inconsistency and doves equally concerned with the negative reputational consequences of belligerence and interventionism in illustrating how reputation costs are in our heads our findings offer both good and bad news for theories of reputation in ir

general managers control new and existing products differently abstract this article presents some initial findings from an ongoing research project on the way that divisional general managers of targe organizational units control new product innovations control in this instance refers to the set of procedures systems and actions that general managers use to monitor evaluate influence or define what subordinates are doing the research presented here focuses on three broad questions 1 1 do divisional general managers of large organizational units control their new product activities differently from their more established operations 2 2 is a new product s innovation strategy related to the nature and degree of divisional general manager control and if so in what way 3 3 is a divisional general manager s choice of control methods related to his her unit s new product output the results were based on in depth interviews with the general managers of 26 large canadian based divisions in 12 firms all the firms were significant competitors in the north american market and all were actively engaged in new product activities firm size ranged from 210 million to 5 billion in sales the following is a summary of the study s principal findings and conclusions 1 1 control varies among dimensions the study measured the degree of control exercised by divisional general managers over new and established products on 14 control variables it was found that none of the new products relative to established brands was controlled in the same fashion by the managers instead new products were always managed through a variety of loose and tight controls in so doing it appeared that the divisional general managers were trying to balance the control and freedom required by subordinates with new products 2 2 control varies with strategy both theory and empirical research generally support the notion of linkage between a unit s strategy and its organizational eg design reward placement information etc practices the results of this study strengthen this line of thinking the data show that both the nature and degree of divisional general manager control vary with three dimensions of product strategy i e familiarity uniqueness and advancement 3 3 control varies with output the analysis highlighted the pivotal relationship between divisional general manager control and new product output both the nature and degree of control were found to be associated with new product output in each strategic category although there does not appear to be one best way to control all types of new products some divisional general management approaches to control were more preferred than others 4 4 loose formal tight informal the general managers control patterns showed that formal control dimensions were usually managed more loosely than informal ones that tighter informal controls were used to off set or balance the more relaxed formal dimensions and that the observed reduction in formal control should not be interpreted to mean either the absence of bureaucracy or the absence of formal control indeed some formal bureaucratic control was always found in the high output strategic categories thus rather than being considered or labeled as typically bad bureaucracy may in fact be beautiful provided of course that it is appropriately used the article concludes by arguing that a divisional general manager s approach to controlling new products seems to make a difference in terms of performance as such the control approach chosen should not be made haphazardly or with abandon

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

revisiting reputation how past actions matter in international politics policy makers and political scientists have long believed that states must make policy with an eye to maintaining a good reputation especially a good reputation for resolve recent work however has argued that reputations for resolve do not form and hence that past actions do not influence observers behavior in subsequent interactions this conclusion is theoretically problematic and unsupported by the evidence offered by reputation critics in particular juxtaposing reputation for resolve to power and interests is misleading when past actions influence observers beliefs about interests while the common approach of looking at crisis decision making misses the impact of reputation on general deterrence we thus derive hypotheses about conflict onset from both the arguments of reputation critics and the logic of more standard reputation arguments which we put to statistical test we find that past action is closely connected to subsequent dispute initiation and that the effects of reputation generalize beyond the immediate circumstances of the past dispute although reputation is not all important leaders are well advised to consider the reputational implications of policy decisions in international conflict

families as shocks in this paper we show the quantitative importance of the process that determines changes in family composition to determine the main macroeconomic magnitudes we do so by modelling family type as a stochastic process that affects households in a way similar to shocks to earnings agents respond to these process by optimally choosing savings we show that the size of savings differs dramatically depending on the details of the stochastic process the model is quantitative its fundamental parameters are estimated using u s data

the effect of repeated play on reputation building an experimental approach what effect does repeated play have on reputation building the liter ature on international relations remains divided on whether when and how reputa tion matters in both interstate and intrastate conflict we examine reputation building through a series of incentivized laboratory experiments using comparative statics from a repeated entry deterrence game we isolate how incentives for reputation build ing should change as the number of entrants changes we find that subjects in our experiments generally build reputations and that those investments pay off but we also find that some subjects did not react to incentives to build reputation in ways our model had predicted in order to explain this we focus on the heterogeneity of preferences and cognitive abilities that may exist in any population our research suggests that rational choice scholars of international relations and those using more psychologically based explanations have more common ground than previously articulated

rational cooperation in the finitely repeated prisoner s dilemma experimental evidence this paper presents experiments designed to examine the sequential equilibrium reputation hypothesis in the finitely repeated prisoner s dilemma the authors test the hypothesis by controlling the subjects ability to build reputations and by manipulating their beliefs that their opponent is irrational or altruistic the responses of subjects strongly support the sequential equilibrium prediction the results also suggest an important role for homemade altruism that is a natural tendency to cooperate that subjects bring to the experiment from the outside the authors find that there may be no difference between the beliefs that an opponent is altruistic and the actual chance it is so copyright 1993 by royal economic society

consumption and risk sharing over the life cycle a striking feature of u s data on income and consumption is that inequality increases with age this paper asks if individual specific earnings risk can provide a coherent explanation we find that it can we construct an overlapping generations general equilibrium model in which households face uninsurable earnings shocks over the course of their lifetimes earnings inequality is exogenous and is calibrated to match data from the u s panel study on income dynamics consumption inequality is endogenous and matches well data from the u s consumer expenditure survey the total risk households face is decomposed into that realized before entering the labor market and that realized throughout the working years in welfare terms the latter is found to be more important than the former

strategic implications of market share attraction models market share attraction models which specify that a firm s market share is equal to the ratio of its attraction to the total attraction for all firms have received increasing attention in recent years however there has been little research investigating the practical implications of such models this paper presents a game theoretic analysis of such a model and deduces the strategic implications of a nash equilibrium solution to the model it is shown that these implications are consistent with previous empirical research in marketing and business policy

a methodology for competitive advantage analysis and strategy formulation an example in a transitional economy industrial competitiveness has become the focal point of study in recent years as global competition has intensified although many studies are devoted to the topic they remain largely conceptual and descriptive and thus it is difficult to make them operational very recently several studies were conducted to model industrial competitiveness through quantitative analysis but few consider how to combine the degree and scope of determinant factors of competitive advantages dfcas and competitive strategic goals csgs to maximize a firm s competitiveness or how to analyze the main problems of creating competitive advantage the present study proposes a model based approach to competitive analysis and discusses its multi phased implementation in a large electronic plant in china the proposed model can provide a comprehensive analytical tool for industrial competitiveness and can yield useful insights for competitive strategy formulation

labor supply and marital separation panel data are used to estimate the effect of marital separation on labor supply female labor supply increases substantially and male labor supply declines marginally lending support to the theory of specialization within the household the most interesting finding is that women began to increase their labor supply well before the actualsplit occurs suggesting either that shocks to labor supply change divorce probabilities or that women with a higher likelihood of divorcework more this argument is pursued by constructing and estimating a simultaneous model of labor supply and divorce risk copyright 1986 by american economic association

female labor supply as insurance against idiosyncratic risk in this paper we explore the role of female labor supply as an insurance mechanism against idiosyncratic earnings risk within the family we use a life cycle model in which a unitary family makes consumption saving and labor supply decisions additional uncertainty increases female participation rates this effect on participation is greatest when the ability to borrow and hence to smooth consumption is limited we calculate the welfare cost of increases in uncertainty and show that the welfare cost is greater when households are unable to adjust female labor supply jel j22 d91

high profit strategies in mature capital goods industries a contingency approach high profit and low profit strategic gestalts in two different types of mature capital goods industries are examined multiple avenues to high profits are found within both types but they differ

market structure and incomplete information price formation in a real world repeated english auction abstract this paper examines the effect of buyer size on price formation in an english auction of used state police cars while open auctions generally favor competitive pricing bikhchandani 1988 develops a model of a second price common value auction in which bidders can use strategic behavior based on repeated sales to develop an aggressive reputation and as a result pay lower prices in equilibrium the paper tests this hypothesis by examining sales of 340 used automobiles sold at 13 public auctions conditional on the volume of purchases made by the three largest buyers at the auctions the empirical results show that the number of buyers plays a stronger role in price formation than does buyer size

marriage divorce and interstate risk sharing in this paper we study the importance of marriage for interstate risk sharing in the us we find that us federal states in which married couples account for a higher share of the population are less exposed to state specific output shocks thus in addition to improving the allocation of risk at the individual level marriage also has implications for risk sharing at the more aggregated state level quantitatively the impact of marriage on interstate risk sharing varies over divorce regimes

the risk of divorce and household saving behavior we analyze the causal impact of an increase in the risk of marital dissolution on the saving behavior of married couples we use the legalization of divorce in ireland in 1996 as an exogenous shock to the risk of divorce we propose several comparison groups unaffected by the law change that allow us to use a difference in differences approach our findings suggest that the legalization of divorce led to a significant increase in the propensity to save by married individuals which is consistent with individuals saving more as a response to the increase in the probability of marital breakup