reputation formation in economic transactions abstract we investigate patterns of information transmission and the evolution of behaviour in standard trust games where reputational information can be exchanged between individual agents within a population but does not become public we vary the nature of information that could be transmitted either a subjective rating or the objective details of a transaction as well as the cost of information transmission either zero or positive we find that information transmission is heavily used if it is costless but only moderately if it has positive cost objective information effectively increases the average amount sent in the trust game and thus efficiency and average profits as well as the return rate only if transmission is costless and therefore is heavily used subjective information a rating only increases transfer and return rates in a control treatment where it becomes publicly available but not for private communication a detailed analysis of the determinants of information transmission shows a positive influence of a the transfer made to a receiver b experience of exploitation and c points to reciprocity in information transmission

trust reputation and relationships in grazing rights markets an experimental economic study abstract trust is frequently a requirement for economic exchanges and the management of natural resources providing public information on past actions can promote trust through the formation of reputations we developed an economic experiment to test whether a formal reputation mechanism could facilitate trusting relationships in the tradable grazing rights markets providing information to create formal public reputations for market participants did not increase the overall efficiency of the market however it did result in greater equality of income between partners suggesting that participants showed more concern for their partners when they knew they would be rated even with public reputation information bilateral relationships remained central to the market market failures in existing grazing rights markets may be better addressed by measures to increase communication between partners rather than simply relying on a formal reputation mechanism

does child labor decline with improving economic status between 1993 and 1997 child labor in vietnam declined by nearly 30 percent while the country s gdp grew by nearly 9 percent per year on average using a simple nonparametric decomposition i investigate the relationship between improvements in per capita expenditure and child labor with a panel data set that spans this episode of growth in vietnam improvements in per capita expenditure can explain 80 percent of the decline in child labor that occurs in households whose expenditures improve enough to move out of poverty this finding suggests a previously undocumented role for economic growth in the amelioration of child labor

does resorting to online dispute resolution promote agreements experimental evidence abstract this paper presents an experiment performed to test the properties of an innovative bargaining mechanism called automated negotiation used to resolve disputes arising from internet based transactions the main result shows that the settlement rule tends to chill bargaining as it creates incentives for individuals to misrepresent their true valuations which implies that automated negotiation is not able to promote agreements however this perverse effect depends strongly on the conflict situation when the threat that a disagreement occurs is more credible the strategic effect is reduced since defendants are more interested in maximizing the efficiency of a settlement than their own expected profit the implications of these results are then used to discuss the potential role of public regulation and reputation mechanisms in cyberspace

perfect and imperfect strangers in social dilemmas abstract this paper focuses on social dilemma games in which players may or may not meet the same partner again in the future a novel prisoner s dilemma experiment a meta analysis of public goods experiments and a meta analysis of previous prisoner s dilemma experiments document high cooperation rates if the likelihood to meet the same partner again in the future is high

fairness versus efficiency abstract fairness is a strong concern as shown by dictator and ultimatum experiments efficiency measured by the sum of individual payoffs is a potentially competing concern in games such as the prisoners dilemma in our experiment the participants can increase efficiency by giving gifts in the one sided treatment this is only possible for one of the two partners the two sided treatment allows for mutual gift giving in both cases decisions can be conditioned on whether there is or there is not an efficiency gain by gift giving our results indicate that efficiency concerns are dominated by fairness concerns that are less stringent in mutual exchanges than in one sided gift relationships

the economics of child labor if child labor as a mass phenomenon occurs not because of parental selfishness but because of the parents concern for the household s survival the popular argument for banning child labor loses much of its force however this assumption about parental decision making coupled with the assumption of substitutability in production between child and adult labor could result in multiple equilibria in the labor market with one equilibrium where children work and another where adult wage is high and children do not work the paper establishes this result and discusses its policy implications copyright 1998 by american economic association

competition vs communication an experimental study on restoring trust trust is fragile it is hard to build but easy to destroy in this paper we explore the fragility of trust in a stylized laboratory environment we ask whether transgression outside a direct send and return relationship destroys trust and if so whether a competition against outsiders or an apology for misdeeds helps restore it we find that transgression significantly reduces trust and that the broken trust can be greatly restored by group competition communication via an apology impersonal or not has an insignificant impact by contrast offering explanations for misbehavior is as effective as group competition

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

does political reservation for minorities affect child labor evidence from india summary this paper examines the impact of state level political reservation for two minority groups scheduled castes and scheduled tribes on the incidence of child labor in india we estimate the effect of political reservation on the incidence of child labor by exploiting the state variation in the share of seats reserved for the two minority groups in state legislative assemblies mandated by the constitution of india using data from state and household level surveys on fifteen major indian states we find that at the household level schedule tribe reservation decreases the incidence of child labor while scheduled caste reservation increases the total number of children working we examine these impacts on the general as well as the disadvantaged group population independently and across the gender of children we also explore potential explanations for the differential impact of sc and st political reservation including geographic isolation caste fragmentation support for the congress party and decentralization of power our results survive a variety of robustness checks

small distributed generation versus centralised supply a social cost benefit analysis in the residential and service sectors abstract this paper aims at measuring the social benefits of small chp distributed generation dg in the residential and service sectors we do this by comparing the social costs of decentralised and centralised supplies simulating ideal situations in which any source of allocative inefficiencies is eliminated this comparison focuses on assessing internal and external costs the internal costs are calculated by simulating the optimal prices of the electricity and gas inputs the external costs are estimated by using and elaborating the results of the dissemination process of the externe project one of the most recent and accurate methodologies in this field the analysis takes into account the main sources of uncertainty about the parameter values including uncertainty about external cost estimations despite these sources of uncertainty the paper concludes that centralised supply is still preferable to small dg in fact the overall range of dg social competitiveness is restricted even considering further remarkable improvements in dg electrical efficiency and investment costs the results are particularly unfavourable for the residential sector whereas in the service sector the performance of dg technologies is slightly better

child labor in the global economy few issues in developing countries draw as much popular attention as child labor this paper begins by quantifying the extent and main characteristics of child labor it then considers the evidence on a range of issues about child labor fundamentally child labor is a symptom of poverty low income and poor institutions are driving forces behind the prevalence of child labor worldwide this study concludes by assessing the policy options to reduce worldwide child labor

social norms and random matching games abstract nash equilibrium has been tremendously useful in understanding economic problems in which strategic behavior is important the theoretical foundations of the solution concept often include the assumption that the game to be played is common knowledge an unrealistic assumption in games with many players we introduce the concept of norm equilibrium for random matching games a norm equilibrium is a nash equilibrium that relies on substantially less information than common knowledge of the game we use norm equilibria to provide a folk theorem for random matching games and to analyze increasing numbers of players in a random matching game journal of economic literature classification numbers c70 c72

evolution of cooperation in asymmetric commons dilemmas abstract field experiments with asymmetric commons dilemmas have shown that groups who are able to derive high social efficiency also had higher equity compared to groups who were not able to derive significant levels of social efficiency these findings resemble the high productivity in long lasting irrigation systems based on self governance we present an agent based model based on cultural group selection that shows that the patterns observed in the field experiments can be evolved in cases where agents participate regularly in less challenging symmetric public good dilemmas these results indicate that cooperation in asymmetric dilemmas can evolve and persist when the agents contend with other social dilemmas than the asymmetric dilemmas

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

is product boycott a good idea for controlling child labor a theoretical investigation abstract a popular form of action to curb child labor and uphold international labor standards in general is a product boycott by consumers there are labeling agencies that inform us if for instance a carpet or a hand stitched soccer ball is free of child labor the presence of a consumer boycott will typically mean that products tainted by child labor will command a lower price on the market than ones certified to be untainted it is popularly presumed that such consumer activism is desirable the paper formally investigates this presumption and shows that consumer product boycotts can in a wide class of situations have an adverse reaction that causes child labor to rise rather than fall this happens under weak and plausible assumptions hence there has to be much greater caution in the use of consumer activism and one has to have much more detailed information about the context where child labor occurs before using a boycott

social choice uncertainty about external costs and trade off between intergenerational environmental impacts the emblematic case of gas based energy supply decentralization abstract the performance of the small natural gas fired power technologies has improved remarkably over the last decade this has aroused the interest of operators regulators and legislators in natural gas fired distributed generation gas fired dg namely the integrated or stand alone use of small modular gas fired power generation close to the point of consumption as an alternative to large power generation and electricity transport over long distances gas fired dg can provide an important benefit from the environmental point of view customer proximity in fact greatly increases the potential for combined heat and power generation involving energy saving and reduced greenhouse gas ghg emissions unfortunately this kind of decentralized supply also determines higher non ghg emissions mainly nox compared to the best available central power technology which occur in urban areas high populated instead of extra urban areas where large power plants are generally located it is therefore difficult to make a reliable evaluation of gas fired dg environmental benefits without comparing centralized and decentralized models in terms of external costs that is without an analysis which allows us to compare the extent of global and local regional impacts in terms of monetary damage if on the one hand this underlines the potential importance of the methods adopted to assess the economic value of environmental externalities even for policy decisions that are binary i e the choice between different energy technologies on the other it raises the crucial question of the uncertainty about the economic estimates this article aims at demonstrating that the uncertainty about external costs even if large does not undermine the possibility of verifying whether gas fired dg is preferable or not to centralized supply the paper compares centralized and decentralized models in terms of the external environmental costs which are calculated by using the results of the available studies in this field in particular the results of the dissemination process of the so called externe project one of the most recent and accurate methodologies and the results of a meta analysis with regard to the marginal cost of ghg emissions the uncertainty about external costs is substantial but not so large that it is not possible to say anything about the environmental raking of alternative technology solutions involving trade off between the impacts of different pollutants or between different kinds of impacts the literature on external costs provides several studies accounting for a large part of uncertainty by means of appropriate statistical and sensitive analysis by using and elaborating these results the analysis described in this paper seems to support the conclusion that centralized supply and especially the completely electric solution based on the reversible electric heat pump is still preferable to natural gas fired chp distributed generation this is not a definitive conclusion but we hope a useful scientific based contribution for policy decisions under the state of the art in fact this result has an interesting policy implication it suggests unless questioning the current enthusiasm on natural gas fired chp distributed generation deployment e g the european commission is indeed advocating dg as a contribution to ghg emission reduction and helps us to reflect upon gas fired dg supporting environmental policies which focus on the reduction of ghg emissions and totally disregard the possible trade off between the impacts of global and local regional pollutants unless one denies the rationality attributed to making tradeoffs on the basis of ethical limits of economic valuations even in this case however cost benefit analysis seems to be legitimate and a necessary step of the public discourse we think that the results of this paper are emblematic from this point of view

are people inequality averse or just risk averse individuals preferences for risk and inequality are measured through choices between imagined societies and lotteries the median relative risk aversion which is often seen to reflect social inequality aversion is between 2 and 3 most people are also found to be individually inequality averse reflecting a willingness to pay for living in a more equal society left wing voters and women are both more risk and inequality averse than others the model allows for non monotonic swfs implying that welfare may decrease with an individual s income at high income levels which is illustrated in simulations based on the empirical results

endogenous reputation formation under the shadow of the future recent research has shown that making people s decisions known to others may enhance cooperation in infinitely repeated prisoner s dilemma games with random matching this paper experimentally studies whether people can cooperate with each other by endogenously showing their identities and building cooperative reputations when there is an option to hide the identities our experiment shows that a non negligible fraction of subjects choose to conceal their identities and accordingly subjects fail to cooperate with each other in communities if hiding is cost free however almost all subjects disclose their identities and successfully achieve cooperation if a cost is charged for the act of hiding this finding has a broad methodological implication for the study of reputation mechanisms when infinitely repeated games are used in an experiment as people s behavior may be determined by their ability to hide identities

testing beliefs about social preferences evidence from an experimental coordination game we report experimental results on a simple coordination game in which two players can coordinate either on an equal distribution of payoffs or on a pareto superior but unequal distribution of payoffs we find that the higher the difference in individual payoffs the less likely is a successful coordination on the pareto superior distribution while this is well in line with the recent models of inequity aversion our results are best explained not by a preference for equality per se but rather by the belief that the opponent has such a preference

pennies from ebay the determinants of price in online auctions this paper presents an exploratory analysis of the determinants of prices in online auctions for collectible united states one cent coins at the ebay web site starting with an initial data set of 20 000 auctions we perform regression analysis on a restricted sample of 461 coins for which we obtained estimates of book value we have three major findings first a seller s feedback ratings reported by other ebay users have a measurable effect on her auction prices negative feedback ratings have a much greater effect than positive feedback ratings do second minimum bids and reserve prices have positive effects on the final auction price in particular minimum bids appear only to have a significant effect when they are binding on a single bidder as predicted by theory third when a seller chooses to have her auction last for a longer period of days this significantly increases the auction price on average

disaster aid and preferences the long run impact of the tsunami on giving in sri lanka summary do natural disasters produce effects on preferences of victims in the long run we test the impact of the tsunami shock on generosity of a sample of sri lankan affected unaffected microfinance borrowers seven years after the event specifically we test the effect of the shock at the extensive margin by comparing damaged with non damaged individuals in terms of giving and expected giving in a dictator game moreover at the intensive margin we compare the participants based on the amount of damage experienced and recovery aid received the advantage of this last comparison is that differences in observables between the groups are minimized we reduce further identification problems by selecting a random sample of damaged and non damaged borrowers belonging to the same microfinance organization who are therefore likely to share some important common traits that are usually unobservable to researchers we complete our identification strategy with weighted least squares instrumental variable estimates and a sensitivity analysis on the exogeneity assumption the main findings of the paper support the hypothesis that the shock affects participants preferences in the long run first the tsunami negatively affects generosity at the extensive margin as those who suffered at least one damage give and expect less than those who did not second while large recovery assistance does not directly affect giving and expected giving it increases especially the latter indirectly i e when interacted with the number of damages our results reconcile that part of the literature showing evidence of natural shocks having a detrimental effect on social preferences fleming chong alberto bejarano 2011 cassar grosjean whitt 2013 with that supporting instead a positive link solnit 2009 whitt wilson 2007 cassar healy von kessler 2011 furthermore since our study focuses on the long run impact of a natural disaster previous results on short run effects are not necessarily inconsistent with ours

play it again partner choice reputation building and learning from finitely repeated dilemma games often the fuller the reputational record people s actions generate the greater their incentive to earn a reputation for cooperation however inability to wipe clean one s past record might trap some agents who initially underappreciate reputation s value in a cycle of bad behaviour whereas a clean slate could have been followed by their reforming themselves in a laboratory experiment we investigate what subjects learn from playing a finitely repeated dilemma game with endogenous symmetric partner choice we find that with a high cooperation premium and good information investment in cooperative reputation grows following exogenous restarts although earlier end game behaviours are observed

flexibility and reputation in repeated prisoner s dilemma games we study how three matching institutions differing in how relationships are dissolved affect cooperation in a repeated prisoner s dilemma and how cooperation rates are affected by the presence of

imperfect public monitoring with costly punishment an experimental study this paper experimentally investigates the effects of a costly punishment option on cooperation and social welfare in long finitely repeated public good contribution games in a perfect monitoring environment increasing the severity of the potential punishment monotonically increases average net payoffs in a more realistic imperfect monitoring environment we find a u shaped relationship access to a standard punishment technology in this setting significantly decreases net payoffs even in the long run access to a severe punishment technology leads to roughly the same payoffs as with no punishment option as the benefits of increased cooperation offset the social costs of punishing jel c92 h41 k42

the economics of child labor comment in a recent paper kaushik basu and pham hoang van bv 1998 develop an important and very interesting model in which a fairly productive economy exhibits multiple equilibria with children working in at least one they identify two assumptions as essential to this result the first which they call the luxury axiom is that a family sends its children to the labor market only if its income from sources other than child labor is very low the second is embodied in their substitution axiom which states that from the point of view of firms child labor is substitutable for adult labor in this comment we show that in addition to these two assumptions about the micro level behavior of households and firms there is also an essential macro level assumption that may be termed the distribution axiom income or wealth from non labor sources must be sufficiently concentrated in the hands of a few agents we establish that if non labor income is distributed with sufficient equality a market equilibrium with child labor cannot exist in the bv model beyond their contribution as an extension of bv s theory our results formalize a proposition implicit in recent policy discussions of child labor christiaan grootaert and ravi kanbur 1995 note that as household level poverty is well known to be the major cause of child labor g eneral economic development equitably distributed is the best and most sustainable way of reducing child labor p 198 emphasis added policy documents from the international labor organization ilo have long conveyed this view and now the world bank appears to as well peter fallon and zafiris tzannatos 1998 there is a growing recognition that while economic development and development policies are necessary to eliminating child labor they are not always sufficient on their own distributional considerations matter indeed in the case in which bv s model yields multiple equilibria th this abstract was borrowed from another version of this item

the intriguing relation between adult minimum wage and child labor because most parents send their children to work when compelled by poverty one would expect a rise in adult wage to lower child labor however if the rise in wage is achieved by a minimum wage law its impact can be intriguing it can for instance cause some adults to be unemployed and send their children to work which in turn displaces more adult labor and sends more children to work the paper solves this process and predicts the incidence of child labor it shows that for appropriate parametric configurations child labor may fall or rise as the adult minimum wage is raised

perverse consequences of well intentioned regulation evidence from india s child labor ban although bans against child labor are a ubiquitous policy tool there is very little empirical evidence on their effectiveness in this paper we examine the consequences of india s landmark legislation against child labor the child labor prohibition and regulation act of 1986 using data from employment surveys conducted before and after the ban and using age restrictions that determined whom the ban applied to we show that the relative probability of child employment increases and child wages relative to adult wages decrease after the ban our main specification relies on comparing changes in work probabilities over time for children of the same age but with siblings who are rendered either eligible or ineligible for legal work when the ban is implemented the increases in the probability of economic activity are largest for children i in areas where the industries targeted by the ban play a larger role in local labor markets ii in areas where the probability of employer inspections is higher and iii in families that are poorer these results are consistent with a theoretical model building on the seminal work of basu and van 1998 and basu 2005 where families use child labor to reach subsistence constraints and where child wages decrease in response to bans leading poor families to utilize more child labor we also find decreases in child participation in schooling for younger children only and no economically meaningful change in household outcomes like assets or calorie intake

is there a child labor trap intergenerational persistence of child labor in brazil this article examines the intergenerational persistence of child labor empirically by looking at household survey data from brazil previous empirical work on child labor has focused primarily on isolating the determinants of child labor using survey data we take a different approach by asking does the child labor status of parents affect the child labor incidence of their children we look at this question in two ways our working assumption is that financial need creates this generational link but we also ask if there exists an intergenerational link over and above that which is transmitted through the production of income perhaps through norms we find strong evidence that this link exists and that it appears to persist even when income is held constant moreover we find that children who did not work as child laborers command higher salaries later in life which suggests that the potential human capital gains through apprenticeship as children are outweighed by the human capital gains children receive through schooling excerpt

will trade sanctions reduce child labour the role of credit markets abstract we examine the interaction between credit markets trade sanctions and the incidence of child labour in a two good two period model with unequally wealthy households both poverty and poor education quality inter alia are important determinants of child labour the incidence of child labour decreases as we move from the case of borrowing constraints to the case in which poor households can borrow freely from rich ones and then to the case of perfect international credit markets trade sanctions can increase child labour especially among poor households a possibility that decreases as their access to credit improves

non cooperative public good provision and productivity differentials we explore the generality of a rotten spouse theorem in konrad and lommerud 1995 while the result holds for an arbitrary number of agents it fails to hold for general technologies some of the implications for models of co emissions are discussed

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

would the right social preference model please stand up abstract a number of competing social preference models have been developed inspired by the evidence from economic experiments we test the relative performance of some of these models using an experimental design that is aimed at capturing pure distributional concerns in a multi person setting we find that the individuals in this study are heterogeneous and that they do not follow any single notion of fairness or inequality aversion in addition the results suggest that efficiency concerns are not confined to students of economics but are important to students of all disciplines

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

child labor and the law notes on possible pathologies abstract the paper demonstrates that the standard policy for controlling child labor by imposing a fine on firms caught employing children can cause child labor to rise this pathological reaction is however reversed as the size of the fine increases

social norms and trust among strangers we study the development of a social norm of trust and reciprocity among a group of strangers via the contagious strategy as defined in kandori 1992 over an infinite horizon the players anonymously and randomly meet each other and play a binary trust game in order to provide the investors with proper incentives to follow the contagious strategy there is a sufficient condition that requires that there exists an outside option for the investors moreover the investors payoff from the outside option must converge to the payoff from trust and reciprocity as the group size goes to infinity we show that this sufficient condition is also a necessary condition to sustain any sequential equilibrium in which the trustees adopt the contagious strategy our results imply that a contagious equilibrium only supports trust if trust contributes almost nothing to the investors payoffs

symposium on global climate change since the industrial revolution increased use of fossil fuels has been strongly linked with economic growth in recent years many scientists have argued that carbon dioxide emissions from fossil fuel combustion are likely to make the earth s climate warmer and some have argued that the consequences could be disastrous global climate change and policies to slow it or adapt to it may be among the primary forces shaping the world s economy throughout the next century and beyond nonetheless popular treatments of this issue commonly ignore economics and assume that if society learns that any warming is likely as a result of human activity we should do whatever is necessary to stop it this seems to reflect the widespread view that environmental issues involve rights and wrongs not costs and benefits and that environmental policy should eliminate contamination not replace missing markets 1 on this view human activity that may alter the earth s climate risks fouling our nest on a massive scale it is simply wrong and must be stopped regardless of cost economics has also been neglected in the pronouncements of the intergovernmental panel on climate change ipcc which was established in 1988 primarily to inform international negotiations on climate change policy 2 the ipcc has produced useful assessments of relevant scientific information but