a bayesian model of voting in juries abstract we model voting in juries as a game of incomplete information allowing jurors to receive a continuum of signals we characterize the unique symmetric equilibrium of the game and give a condition under which no asymmetric equilibria exist under unanimity rule we offer a condition under which unanimity rule exhibits a bias toward convicting the innocent regardless of the size of the jury and give an example showing that this bias can be reversed we prove a jury theorem for our general model as the size of the jury increases the probability of a mistaken judgment goes to zero for every voting rule except unanimity rule for unanimity rule the probability of making a mistake is bounded strictly above zero if and only if there do not exist arbitrarily strong signals of innocence our results explain the asymptotic inefficiency of unanimity rule in finite models and establishes the possibility of asymptotic efficiency a property that could emerge only in a continuous model journal of economic literature classification numbers c72 d72

uncertainty and incentives in crisis bargaining game free analysis of international conflict we study two different varieties of uncertainty that countries can face in international crises and establish general results about the relationship between these sources of uncertainty and the possibility of peaceful resolution of conflict among our results we show that under some weak conditions there is no equilibrium of any crisis bargaining game that has voluntary agreements and zero probability of costly war we also show that while uncertainty about the other side s cost of war may be relatively benign in peace negotiations uncertainty about the other side s strength in war makes it much more difficult to guarantee peaceful outcomes along the way we are able to assess the degree to which particular modeling assumptions found in the existing literature drive the well known relationship between uncertainty the incentive to misrepresent and costly war we find that while the theoretical connection between war and uncertainty is quite robust to relaxing many modeling assumptions whether uncertainty is about costs or the probability of victory remains important

viewpoint decision making in committees this article reviews recent developments in the theory of committee decision making a committee consists of self interested members who make a public decision by aggregating imperfect information dispersed among them according to a pre specified decision rule we focus on costly information acquisition strategic information aggregation and rules and processes that enhance the quality of the committee decision seeming inefficiencies of the committee decision making process such as over cautiousness voting and delay emerge as partial remedies to these incentive problems cet article passe en revue certains developpements recents dans la theorie de la prise de decision en comite un comite est defini comme un groupe de membres qui ont des interets particuliers et qui prennent une decision publique en agregeant une information imparfaite et dispersee a travers le groupe selon une regle de decision pre etablie les auteurs portent leur attention sur l acquisition couteuse d information l agregation de l information strategique et les regles et procedures qui accroissent la qualite de la decision en comite ce qui apparait comme des inefficacites du processus de prise de decision en comite sur precaution votes delais s avere etre des remedes partiels aux problemes d incitation

empirical of the taiwan stock index option price forecasting model applied artificial neural network this work presents a novel neural network model for forecasting option prices using past volatilities and other options market factors out of different approaches to estimating volatility in the option pricing model this study uses backpropagation neural network to forecast prices for taiwanese stock index options the ability to develop accurate forecasts of grey prediction volatility enables practitioners to establish an appropriate hedging strategy at in the money option

the conservation reserve program as a least cost land retirement mechanism mechanism design theory is used to characterize the properties of a least cost crp if marginal land rents decrease with acres farmed then a least cost crp is a set of nonlinear price schedules if marginal land rents are independent of acres farmed then an offer system constitutes a least cost crp the least cost offer system gives a useful estimate of the upper bound of a least cost crp empirical results suggest that a 34 million acre crp should have cost no more than 1 billion per year

optimal voting schemes with costly information acquisition a group of individuals with identical preferences must make a decision under uncertainty about which decision is best before the decision is made each agent can privately acquire a costly and imperfect signal we discuss how to design a mechanism for eliciting and aggregating the collected information so as to maximize ex ante social welfare we first show that of all mechanisms a sequential one is optimal and works as follows at random one agent at a time is selected to acquire information and report the resulting signal agents are informed of neither their position in the sequence nor of other reports acquiring information when called upon and reporting truthfully is an equilibrium we next characterize the ex ante optimal scheme among all ex post efficient mechanisms in this mechanism a decision is made when the precision of the posterior exceeds a cut off that decreases with each additional report the restriction to ex post efficiency is shown to be without loss when the available signals are sufficiently imprecise on the other hand ex post efficient mechanisms are shown to be suboptimal when the cost of information acquisition is sufficiently small

information aggregation rationality and the condorcet jury theorem the condorcet jury theorem states that majorities are more likely than any single individual to select the better of two alternatives when there exists uncertainty about which of the two alternatives is in fact preferred most extant proofs of this theorem implicitly make the behavioral assumption that individuals vote sincerely in the collective decision making a seemingly innocuous assumption given that individuals are taken to possess a common preference for selecting the better alternative however in the model analyzed here we find that sincere behavior by all individuals is not rational even when individuals have such a common preference in particular sincere voting does not constitute a nash equilibrium a satisfactory rational choice foundation for the claim that majorities invariably do better than individuals therefore has yet to be derived

minority voting rights can maximize majority welfare i use condorcet s information aggregation model to show that sometimes the best possible decision procedure for the majority allows the minority to enforce its favored outcome even when overruled by a majority special voting power gives the minority an incentive to participate meaningfully and more participation means more information is aggregated which makes the majority better off this result can be understood as a mathematical corroboration of lani guinier s arguments that voting procedures can be designed to encourage minority participation benefitting everyone

optimal voting rules modern social choice theory following kenneth arrow treats voting as a method for aggregating diverse preferences and values an earlier view initiated by marquis de condorcet is that voting is a method for aggregating information voters opinions differ because they make errors of judgment absent these errors they would all agree on the best choice the goal is to design a voting rule that identifies the best choice with highest probability this paper examines maximum likelihood estimation surprisingly the optimal rule can also be axiomatized by variations of arrow s axioms

voting behavior and information aggregation in elections with private information we analyze two candidate elections in which voters are uncertain about the realization of a state variable that affects the utility of all voters each voter has noisy private information about the state variable we show that the fraction of voters whose vote depends on their private information goes to zero as the size of the electorate goes to infinity nevertheless elections fully aggregate information in the sense that the chosen candidate would not change if all private information were common knowledge equilibrium voting behavior is to a large extent determined by the electoral rule i e if a candidate is required to get at least x percent of the vote in order to win the election then in equilibrium this candidate gets very close to x percent of the vote with probability close to one finally if the distribution from which preferences are drawn is uncertain then elections will generally not satisfy full information equivalence and the fraction of voters who take informative action does not converge to zero

the additionality problem with offsets optimal contracts for carbon sequestration in forests abstract carbon offsets are a frequently discussed tool for reducing the costs of an emissions reduction policy however offsets have a basic problem stemming from asymmetric information sellers of offsets have private information about their opportunity costs leading to concerns about whether offsets are additional non additional offsets can undermine a cap and trade program or if the government purchases them directly result in enormous government expenditures we analyze contracts for carbon sequestration in forests that mitigate the asymmetric information problem landowners are offered a menu of two part contracts that induces them to reveal their type under this scheme the government is able to identify ex post how much additional forest each landowner contributes and minimize ex ante its expenditures on carbon sequestration to explore the performance of the contracting scheme we conduct a national scale simulation using an econometric model of land use change the results indicate that for an increase in forest area of 61 million acres government expenditures are 5 3 billion lower under the contracting approach compared to a uniform subsidy offered to all landowners this compares to an increase in private opportunity costs of just 110 million dollars under the contracts thus the contracting scheme is preferable from society s perspective

correlated equilibrium as an expression of bayesian rationality if it is common knowledge that the players in a game are bayesian utility maximizers who treat uncertainty about other players actions like any other uncertainty then the outcome is necessarily a correlated equilibrium random strategies appear as an expression of each player s uncertainty about what the others will do not as the result of willful randomization use is made of the common prior assumption according to which differences in probability assessments by different individuals are due to the different information that they have where information may be interpreted broadly to include experience upbringing and genetic makeup copyright 1987 by the econometric society

asymmetric tournaments equal opportunity laws and affirmative action some experimental results this paper assesses whether affirmative action programs and equal opportunity laws affect the output of economic agents more precisely we find that equal opportunity laws and affirmative action programs always benefit disadvantaged groups equal opportunity laws also increase the effort levels of all subjects and hence the profits of the tournament administrator usually the firm the effects of affirmative action programs depend on the severity of a group s cost disadvantage when the cost disadvantage is severe these programs significantly increase effort levels and hence profits the opposite is true when the disadvantage is slight

the economics of schooling production and efficiency in public schools n recent years public and professional interest in schools has been heightened by a spate of reports many of them critical of current school policy these policy documents have added to persistent and long standing concerns about the cost effectiveness and fairness of the current school structure and have made schooling once again a serious public issue as in the past however any renewed interest in education is likely to be short lived doomed to dissipate as frustration over the inability of policy to improve school practice sets in this frustration about school policy relates directly to knowledge about the educational production process and in turn to underlying research on schools although the educational process has been extensively researched clear policy prescriptions flowing from this research have been difficult to derive 2 there exists however a consistency to the research findings that does have an immediate application to school policy schools differ dramatically in quality

get rid of unanimity rule the superiority of majority rules with veto power we study unanimous decision making under incomplete information we argue that unanimous decision rules are not all equivalent we show that majority rules with veto power are i pareto superior to commonly used unanimous rules and ii ex ante efficient in a broad class of situations

pluralism and social choice pluralist political theory identifies certain patterns of political preferences as promoting the stability of democratic political systems and others as threatening to such stability social choice theory likewise identifies certain patterns of political preferences as leading to stability in social choice under majority rule and related collective decision rules and other patterns as leading to unstable social choice but the preference patterns identified by pluralist theory as promoting stability are essentially those identified by social choice theory as entailing instability thus the notions of stability and the implicit normative criteria associated with the two theories are very close to being logically incompatible this incompatibility suggests that the social choice ideal of collective rationality may not be one that we should endorse indeed the generic instability of the pluralist political process and its consequent collective irrationality may contribute to the stability of pluralist political systems

simple cost sharing contracts we extend rogerson s 2003 intriguing analysis of the performance of simple procurement contracts to consider settings where the supplier s innate production cost is not necessarily distributed uniformly although the simple contract that rogerson analyzes performs remarkably well when the smaller cost realizations are relatively likely it can perform poorly when the larger cost realizations are relatively likely we show that in all settings under consideration though a fairly simple pair of contracts one that involves linear cost sharing and one that involves full cost reimbursement can always secure more than 73 of the gain achieved with a fully optimal contract

incentive regulatory policies the case of public transit systems in france we assess the empirical relevance of the new theory of regulation using a principal agent framework to study the regulatory schemes used in the french urban transport industry taking the current regulatory schemes as given the model of supply and demand provides estimates for the firms inefficiency the effort of managers and the cost of public funds it allows us to derive the first best and second best regulatory policies for each network and compare them with the actual situation in terms of welfare loss or gain fixed price policies lie between fully informed and uninformed second best schemes cost plus contracts are dominated by any type of second best contract from these results we may conjecture that fixed price contracts call for better informed regulators

costly participation and heterogeneous preferences in informational committees informational committees are groups of people who are designated to gather information this article develops a simple model of committee size based on costly participation and preference heterogeneity in a setting in which the information structure and policy preferences are both represented by normal random variables i characterize an equilibrium under the mean decision rule and derive the optimal committee size i show that when effort costs are sufficiently high preference heterogeneity can provide members additional incentives to gather information and thus the optimal committee size and the principal s expected payoff can increase in the heterogeneity of committee members policy preferences

committee design with endogenous information this paper is concerned with the arrangements for collective decision making in a world where agents must be motivated to acquire information the analysis identifies some basic forces shaping the design of panels of decision makers referees managers jurors etc in situations where decision makers are useful only in so far as they expend some effort to gain information about the alternatives at hand these situations are common one being the refereeing process where an editor requires the opinions of a number of experts who must read the paper acquire information in order to give an opinion as to publication analogously in committees which screen applicants to a programme the committee members must gain information about the applicant s qualifications and likelihood of success in order to evaluate whether to admit him her finally in trial juries it is important that jurors pay attention to the evidence in order to make an informed judgement 1 we focus on environments where information is a public good in the sense that the social benefits of one decision maker acquiring information exceed the private benefits a good mechanism in this environment must not only aggregate information efficiently but also induce the decision makers to acquire information we analyse the design of voting mechanisms our problem is to choose two parameters which determine both the incentive to acquire information and the efficiency with which information is aggregated the first parameter is the size of the decision making unit the number of committee members the second is the plurality required to overturn the status quo the voting rule our main result is this a voting rule that requires a large plurality in the extreme unanimity to upset the status quo can be optimal only if the information available to each committee member is sufficiently accurate when individual information is noisy the drawback

technological inefficiency and the skewness of the error component in stochastic frontier analysis this paper concentrates on negatively skewed one sided distributions as an explanation of the occurrence of positive negative skewness in the case of stochastic production cost frontier analysis it takes as an example the binomial distribution that can have negative or positive skew and derives the method of moments estimators

optimal forestry contracts under asymmetry of information in this paper i analyze optimal royalty contracts in forestry when the harvesting firm has private information on the cost of harvesting this infinite horizon forest rotation model with asymmetry of information on the cost parameter results in a dynamic incentive problem depending on whether the costs are correlated over time or not the firm either receives rent or receives no rent associated with the continuation part of the rotation choice i characterize the optimal contract explicitly in both cases i also examine the loss in expected welfare surplus resulting from the use of a linear contract instead of the more general non linear contract

bayesian learning in social networks we study the perfect bayesian equilibrium of a sequential learning model over a general social network each individual receives a signal about the underlying state of the world observes the past actions of a stochastically generated neighbourhood of individuals and chooses one of two possible actions the stochastic process generating the neighbourhoods defines the network topology we characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning convergence in probability to the right action as the social network becomes large we show that when private beliefs are unbounded meaning that the implied likelihood ratios are unbounded there will be asymptotic learning as long as there is some minimal amount of expansion in observations we also characterize conditions under which there will be asymptotic learning when private beliefs are bounded

information aggregation in standing and ad hoc committees this paper reports results from a laboratory experiment comparing voting behavior and decision making efficiency in standing and ad hoc committees where decisions are made by unanimity rule we also compare sequential and simultaneous secret ballot voting procedures the data are remarkably consistent across treatments in both qualitative comparative statics and quantitative terms the different procedures and the ad hoc or standing nature of the committees generally do not seem to lead to the selection of different equilibria with the exception of some evidence of bandwagon effects in the sequential procedure

a complete solution to a class of principal agent problems with an application to the control of a self managed firm this paper considers a class of principal agent problems which have the following features 1 there is adverse selection because the principal ignores the value of one parameter of the agent s true characteristics 2 leaving aside the information parameter the principal s welfare as well as the agent s welfare depend on two types of variables observable to both of them the first ones possibly multidimensional are called action variable s and the second one which is one dimensional has in general the meaning of a money transfer 3 the principal is a stackelberg leader of the two person game he can commit himself to decision rules which are admissible on informational grounds he optimizes within the adequate class taking into account besides the agent s reaction one constraint which has generally the meaning of an individual rationality constraint and sometimes of a feasibility constraint the optimization is limited to the class of non stochastic mechanisms 4 the problem can also receive an alternative interpretation the principal faces a continuum of agents of unknown characteristics the distribution being known however stylized principal agent problems of this type have often been considered in the economic literature in particular the reader will later be able to recognize that the standard income tax model a la mirrlees 1971 the quality or quantity choice model of the monopolist a la mussa and rosen 1978 or maskin and riley 1982 and the model of government regulation of the private monopolist of baron and myerson 1982 all belong to

convergence results for unanimous voting abstract this paper derives a necessary condition for unanimous voting to converge to the perfect information outcome when voters are only imperfectly informed about the alternatives under some continuity assumptions the condition is also sufficient for the existence of a sequence of equilibria that exhibits convergence the requirement is equivalent to that found by milgrom 1979 econometrica47 679 688 for information aggregation in single prize auctions an example illustrates that convergence may be reasonably fast for small committees however if voters have common preferences unanimity is not the optimal voting rule unanimity rule makes sense only as a way to ensure minority views are respected journal of economic literature classification numbers d72 d82 d44

continuous decisions by a committee median versus average mechanisms abstract a group of strategic agents with diverse private information and interdependent preferences has to take a continuous collective decision i study the design of the decision making procedure from the viewpoint of a utilitarian social planner for uniformly distributed information the implementation of the average report as decision dominates the implementation of the median report when the set of admissible reports is optimally designed this is true for any number of agents and for any degree of interdependence the result extends to a general class of distributions when the number of agents is large

implementing second best environmental policy under adverse selection abstract a key obstacle to practical application of mechanism design theory to regulation is the difficulty of obtaining consistent beliefs regarding information that theoretical models assume to be commonly held this article presents a solution to this problem by developing an easily implemented empirical methodology with which the government can use available data to develop beliefs regarding the technology and distribution of types in a regulated sector characterized by hidden information results are used to calibrate a second best land conservation mechanism and evaluate its cost relative to simpler alternatives

estimating cost functions in regulated industries characterized by asymmetric information abstract in this paper a structural model is developed to estimate a cost function that includes both an adverse selection and a moral hazard variable it is shown how traditional cost function estimates may produced biased results if moral hazard is present this gives an alternative reason to feinstein and wolak the econometric implications of incentive compatible regulation in g f rhodes ed advances in econometrics vol 9 159 204 jai press greenwich ct 1991 of why scale economics may be overestimated in regulated industries parameter estimates from our model can be used to design an optimal contract or any other regulatory mechanism we illustrate our approach using data from the norwegian bus transport industry

a translog cost function analysis of u s agriculture 1939 77 over the past four decades major changes have occurred in u s agriculture a new era in agricultural production in the united states began in 1939 world war ii gave a boost to agriculture still bogged in the depression productivity increases over the period 1939 77 have been quite impressive measured crudely by the ratio of the indices of output and input the productivity index 1967 100 increased from 59 in 1939 to 119 in 1977 to study this phenomenon a multi input translog cost function incorporating hicks neutral technical change hntc was specified annual timeseries data for the united states was used to estimate the model neoclassical duality theory provides an approach for computing the pairwise elasticities of substitution between inputs for each year as well as the annual own and cross price elasticities of demand for inputs

cluster sample methods in applied econometrics inference methods that recognize the clustering of individual observations have been available for more than 25 years brent moulton 1990 caught the attention of economists when he demonstrated the serious biases that can result in estimating the effects of aggregate explanatory variables on individual specific response variables the source of the downward bias in the usual ordinary least squares ols standard errors is the presence of an unobserved state level effect in the error term more recently john pepper 2002 showed how accounting for multi level clustering can have dramatic effects on t statistics while adjusting for clustering is much more common than it was 10 years ago inference methods robust to cluster correlation are not used routinely across all relevant settings in this paper i provide an overview of applications of cluster sample methods both to cluster samples and to panel data sets

protecting the environment when costs and benefits are privately known in this survey i analyze different approaches for protecting the environment when stakeholders are privately informed about the costs and benefits of pollution reduction the presence of asymmetric information calls for some important departures from the textbook prescriptions of marketable permits and emission taxes for controlling pollution for instance it may no longer be optimal to equate the social marginal benefits to the marginal cost of cleanup in determining appropriate abatement levels i conclude this review with some suggestions for future research in this area

information aggregation in polls we study information transmission via polling a policymaker polls constitu ents who differ in their information and ideology to determine policy full rev elation is an equilibrium in a poll with a small sample but not with a large one in large polls full information aggregation can arise in an equilibrium where constituents endogenously sort themselves into centrists who respond truth fully and extremists who do not we find polling statistics that ignore strate gic behavior yield biased estimators and mischaracterize the polvs margin of error we construct estimators that account for strategic behavior finally we compare polls and elections jel c42 d83

the measurement of technical efficiency a neural network approach the main purpose of this paper is to provide an introduction to artificial neural networks anns and to review their applications in efficiency analysis finally a comparison of efficiency techniques in a non linear production function is carried out the results suggest that anns are a promising alternative to traditional approaches econometric models and non parametric methods such as data envelopment analysis to fit production functions and measure efficiency under non linear contexts

regulating pollution under asymmetric information the case of industrial wastewater treatment abstract we present in this paper an empirical evaluation of a contract based environmental regulation under asymmetric information an imperfect pollution tax results in the necessity of regulating industrials by a contract based policy in order to promote a higher level of pollution removal the local regulatory agency has imperfect information on costs of abatement and must design a feasible mechanism providing incentives for industrials to extend their wastewater treatment plant capacity the optimal policy consists in regulating only the most efficient industrials in the abatement activity empirical evidence reveals that the pollution tax should be more than twice its present level to attain the fully internalizing pigouvian tax level

incentives for wetland creation abstract when information about soil quality is complete wetland creation with a take it or leave it contract which specifies wetland size and transfer yields higher social benefits than if a uniform contract which offers a payment proportional to the wetland size had been used this result points to a paradox because uniform contracts have been used a lot in practice this article concentrates on the presence of asymmetric information about soil quality as a possible explanation for this paradox it shows that the choice of instrument for wetland creation has welfare implications different contracts typically yield quite different social welfare surpluses and distribution between interest groups it is not obvious which of four contracts studied dominates when a farm characteristic affecting costs is unknown to the social planner the probability distribution of the characteristic the size of the excess burden the elasticity of costs and benefits to wetland size and the cost of acquiring missing information influence the outcome

the swing voter s curse the authors analyze two candidate elections in which some voters are uncertain about the realization of a state variable that affects the utility of all voters they demonstrate the existence of a swing voter s curse less informed indifferent voters strictly prefer to abstain rather than vote for either candidate even when voting is costless the swing voter s curse leads to the equilibrium result that a substantial fraction of the electorate will abstain even though all abstainers strictly prefer voting for one candidate over voting for another copyright 1996 by american economic association

insurance companies in mozambique a two stage dea and neural networks on efficiency and capacity slacks this article analyses the efficiency of mozambique insurance companies using a dea model two dea models are used and a bootstrap approach adopted furthermore the efficiency scores are predicted based on neural networks the results reveal that mozambique insurance companies output increasing potentials are severely constrained particularly in terms of the ceded reinsurance increasing potentials policy implications are derived

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had