minimum effort coordination games stochastic potential and logit equilibrium abstract this paper revisits the minimum effort coordination game with a continuum of pareto ranked nash equilibria noise is introduced via a logit probabilistic choice function the resulting logit equilibrium distribution of decisions is unique and maximizes a stochastic potential function in the limit as the noise vanishes the distribution converges to an outcome that is analogous to the risk dominant outcome for 2 2 games in accordance with experimental evidence logit equilibrium efforts decrease with increases in effort costs and the number of players even though these parameters do not affect the nash equilibria journal of economic literature classification numbers c72 c92

boundedly rational nash equilibrium a probabilistic choice approach we propose an equilibrium for n person finite games based on bounded rationality using the legit model of discrete choice theory at equilibrium each player uses appropriate choice probabilities given those used by the others rationality is parameterized on a continuum from complete rationality to uniform random choice results on the existence of equilibrium and on convergence to nash as rationality becomes perfect are similar to results due to mckelvey and palfrey we identify conditions such that for a given rationality parameter range the path of choices over time when the players use fictitious play converges to equilibrium c 1997 academic press

a theoretical analysis of altruism and decision error in public goods games abstract we formalize an equilibrium model in which altruism and decision error parameters determine the distribution of contributions for linear and quadratic public goods games the equilibrium density is exponential for linear games and normal for quadratic games our model implies i contributions increase with the marginal value of the public good ii total contributions increase with the number of participants iii mean contributions lie between the nash prediction and half the endowment these predictions which are not implied by a nash analysis are consistent with laboratory data maximum likelihood estimates of altruism and error parameters are significant and plausible

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

secondary forests as temporary carbon sinks the economic impact of accounting methods on reforestation projects in the tropics abstract tropical forestry is often not competitive with agricultural land uses such as pasture for cattle ranching additional revenues from carbon sequestration generated by the clean development mechanism cdm of the kyoto protocol can change this situation in three different zones of north western ecuador minimum compensation payments for carbon sequestration were determined which would make reforestation a feasible land use alternative based on our findings that these minimum prices depend on the net benefit of the respective land use alternatives and on the accounting regimes for cdm sink projects we applied the accounting rules for temporary and long term certified emission reductions cer to two reforestation projects forest plantation and natural regrowth of secondary forest a comparison of these alternatives showed that secondary forest is an attractive alternative under both accounting regimes because of its low establishment costs and relative early timber revenues after identifying the zone most suitable for carbon sink projects we calculated net benefits of land use changes in the event that certain prices for emission reductions were actually paid we found that secondary forest becomes economically attractive if the price of permanent credits is above 4 5 tco 2 whereas forest plantations require permanent cer prices of 7 0 tco 2 in both cases the results are within the price margins forecasted by various institutions for the first commitment period of the kyoto protocol the presented methodology is meant to support the decision making process on the supply side of a future cer market opportunity costs of land use changes have to be analyzed carefully before deciding in favor of long binding forestry projects assigning temporary credits to naturally regrown secondary forests could although excluded from cdm during the first commitment period combine the advantages of a flexible accounting regime with the positive economic and ecological effects of this competitive land use

games with unique mixed strategy equilibria an experimental study abstract the results of an experiment studying the choices of subjects playing mixed extensions of three variants of simple 2 2 non constant sum strictly competitive games of the same form matching pennies are presented subjects exhibited a variety of behavioral adaptive learning strategies this heterogeneity of individual behavior produced aggregate dynamics whose estimated steady states are quite different from those predicted by the nash equilibria of those stage games with asymmetrical payoff functions the observed aggregative dynamics are well accounted for both by a quantal equilibrium model of mckelvey and palfrey and by a learning model of roth and erev journal of economic literature classification number c72

trends in the development of ecological economics from the late 1980s to the early 2000s abstract as the contributions to ecological economics are very diverse recent years have seen some discussion on both how to delimit the field and in which direction it should develop the intention with this paper is to contribute to the discussion by outlining important trends in the development of the field from the late 1980s to the early 2000s the study is inspired by other studies in the sociology and history of science in particular by the theoretical framework regarding scientific fields as reputational organizations which draws attention to both cognitive and social aspects of the formation of a field the basis for the paper is a combination of literature studies interviews with key researchers in the field and participant observations the paper outlines the characteristic cognitive features of ecological economics at the time of the birth of the field it is then described how the development in ecological economics was influenced by broader social factors during the following years and how the field was shaped by the inflow and outflow of different groups of researchers the emergence of different research programmes is outlined as is the organizational development finally the characteristics of ecological economics are summarized and the future prospects are briefly assessed

the principle of minimum differentiation holds under sufficient heterogeneity the so called principle of minimum differentiation stated by hotelling has been challenged by many authors this paper restores the principle by showing that n firms locate at the center of the market and charge prices higher than the marginal cost of production when heterogeneity in consumers tastes is large enough

fertilizer adoption by smallholders in the brazilian amazon farm level evidence multiple constraints prevent smallholders from adopting fertilizers even with regional supply of agricultural inputs expanding and soils being weared out using comprehensive farm level data from the eastern brazilian amazon we found that market proximity had a significant positive correlation with fertilizer adoption even after controlling for liquidity land tenure education experience and access to rural extension services nevertheless few smallholders completely replaced nutrients from vegetation with fertilizers instead we found that a hybrid system that combines nutrients from vegetation and fertilizers was approximately twice as common as exclusive fertilizer use we suggest that the option for this diversified nutrient portfolio may result not only from a lack of capital or knowledge regarding return on fertilizer use but also from the need to adapt to the economic constraints facing smallholders and minimize risk results indicate that a rural extension program aimed at supporting a rapid and complete replacement of ashes from vegetation by fertilizers could prove unsuccessful for amazonian smallholders

internationalization of western venture capitalists into emerging markets risk assessment and information in india this paper provides the first analysis of the internationalization of venture capital firms through an examination of risk assessment and information usage by firms in india personal interviews were conducted with executives in 31 84 of the active venture capital firms the paper extends previous research by comparing perceptions of the behavior of domestic venture capital firms in india foreign primarily u s venture capital firms in india and u s venture capital firms in their domestic markets foreign firms in india place significantly greater emphasis on product market factors and accountants reports than domestic firms in india they place significantly less emphasis on financial contributions of management in assessing risk and own due diligence and information from entrepreneurs than do u s firms in their domestic market they make more use of information from trade publications and relating to production capacity and technology and information from accountants reports than do domestic venture capital firms in india the evidence is consistent with venture capital firms adapting to local market conditions rather than implementing recipes from their domestic markets

impulse balance in the newsvendor game abstract one striking behavioral phenomenon is the pull to center bias in the newsvendor game facing stochastic demand subjects tend to order quantities between the expected profit maximizing quantity and mean demand we show that the impulse balance equilibrium which is based on a simple ex post rationality principle along with an equilibrium condition predicts the pull to center bias and other more subtle observations in the laboratory newsvendor game

costs and benefits of livestock systems and the role of market and nonmarket relationships in developing countries livestock are kept not only for their physical products but also for insurance financing and to display status though this range of purposes is acknowledged livestock policies nevertheless often emphasize physical production a limited perspective that hampers the formulation and implementation of effective livestock policies this article presents a comprehensive appraisal of costs and benefits of livestock systems that takes into account the institutional environment of livestock keepers indicators are developed that capture quantify and organize not only the benefits resulting from the physical production but also those from the intangible functions the method is illustrated by an analysis of cattle in the western province of zambia the results indicate that the perspective on livestock systems developed more closely reflects the observed decisions of the livestock keepers

what does an oligopoly maximize a monopolist maximizes a well defined objective function monetary profit in a competitive industry although each individual pursues selfish objectives the market behaves as if an agent was maximizing an objective function social welfare can we say the same for an oligopoly do firms pursuing selfish objectives and behaving strategically act as if an agent was maximizing a fictitious objective function necessary and sufficient conditions for nash equilibria of static and state space games to be observationally equivalent to single optimization problems are derived nash equilibria of the game that are not maxima of the function are shown to be generically unstable copyright 1994 by blackwell publishing ltd

a quantal response equilibrium model of order statistic games abstract this paper applies mckelvey and palfrey s games econ behav 10 1995 6 notion of quantal response equilibrium to a class of order statistic coordination games closely related to those studied by van huyck et al am econ rev 80 1990 234 quart j econ 106 1991 885 and van huyck et al evidence on learning in coordination games manuscript texas a m university 1996 and those recently analyzed by anderson et al games econ behav 34 2001 177 with quadratic effort costs the limiting qre as the noise goes to zero in their games is the most efficient equilibrium this result contrasts with anderson et al s conclusion for order statistic games with linear effort costs and allows a fuller assessment of the qre s success in describing the limiting outcomes in van huyck et al s experiments

strategic interaction and the statistical analysis of international conflict although strategic interaction is at the heart of most international relations theory it has largely been missing from much empirical analysis in the field typical applications of logit and probit to theories of international conflict generally do not capture the structure of the strategic interdependence implied by those theories i demonstrate how to derive statistical discrete choice models of international conflict that directly incorporate the theorized strategic interaction i show this for a simple crisis interaction model and then use monte carlo analysis to show that logit provides estimates with incorrect substantive interpretations as well as fitted values that can be far from the true values finally i reanalyze a well known game theoretic model of war bueno de mesquita and lalman s 1992 international interaction game my results indicate that there is at best modest empirical support for their model

toward a theory of international new ventures the formation of organizations that are international from inception international new ventures is an increasingly important phenomenon that is incongruent with traditionally expected characteristics of multinational enterprises a framework is presented that explains the phenomenon by integrating international business entrepreneurship and strategic management theory that framework describes four necessary and sufficient elements for the existence of international new ventures 1 organizational formation through internalization of some transactions 2 strong reliance on alternative governance structures to access resources 3 establishment of foreign location advantages and 4 control over unique resources

the logit equilibrium a perspective on intuitive behavioural anomalies costs associated with deviations from the nash equilibrium these payoff asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function in the resulting logit equilibrium behavior is characterized by a probability distribution that satisfies a rational expectations consistency condition the beliefs that determine players expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs we prove existence of a unique symmetric logit equilibrium and derive comparative statics results the paper provides a unified perspective on many recent laboratory studies of games in which nash equilibrium predictions are inconsistent with both intuition and experimental evidence

homogeneity bias in models of discrete choice with bounded rationality abstract quantal response equilibrium captures bounded rationality in a strategic game by adopting a stochastic model of discrete choice along with the traditional rational expectation framework we examine the use of a single agent homogeneous parametric quantal response model e g logit response to describe the aggregate behavior of heterogeneous agents sharing the same parametric form for their quantal response functions but having individual rationality parameters in a symmetric population game for any parametric quantal response function arising from a unimodal distribution of exchangeable payoff disturbances we find that a mis specified homogeneous rationality parameter will have downward bias logit response is one such specification this result implies that empirical work that disregards heterogeneity underestimates subjects rationality

the internationalization of venture capital abstract u ntil a few years ago venture capital was as american as apple pie w e had the money the entrepreneurial tradition the over the counter market and the tax structure to make venture capital practically an american monopoly today venture capital is increasingly a conduit for the flow of capital and ideas on a global basis in 1987 according to the european venture capital association more money was raised for venture capital in europe than in the united states 5 1 billion versus 4 9 billion though activity is greatest in france and the united kingdom there are now venture capital associations throughout western europe japan has venture capital firms and even china has started to think of ways risk capital can help solve its development problems

quantal response methods for equilibrium selection in 2 2 coordination games abstract the notion of quantal response equilibrium qre introduced by mckelvey and palfrey 1995 has been widely used to explain experimental data in this paper we use quantal response equilibrium as a homotopy method for equilibrium selection and study this in detail for 2 2 bimatrix coordination games we show that the risk dominant equilibrium need not be selected in the logarithmic game the limiting qre is the nash equilibrium with the larger sum of square root payoffs finally we apply the quantal response methods to the mini public goods game with punishment a cooperative equilibrium can be selected if punishment is strong enough

noisy directional learning and the logit equilibrium we specify a dynamic model in which agents adjust their decisions toward higher payoffs subject to normal error this process generates a probability distribution of players decisions that evolves over time according to the fokker planck equation the dynamic process is stable for all potential games a class of payoff structures that includes several widely studied games in equilibrium the distributions that determine expected payoffs correspond to the distributions that arise from the logit function applied to those expected payoffs this logit equilibrium forms a stochastic generalization of the nash equilibrium and provides a possible explanation of anomalous laboratory data

discrete choice and variable returns to scale in previous studies of the probabilistic theory of qualitative choice e g marschak 1960 and mcfadden 1974 it has been assumed that an individual chooses among various alternatives with their utility levels independent of the number of individuals who choose each alternative there are however many examples in which the utility of a choice depends on the number of individuals who make the same choice for instance the utility of a given spatial choice may depend upon the number of others who choose neighboring locations neighborhood utility may decrease crowding or it may increase agglomerative economies with population size a second example is the automobile traveler s choice of routes the benefit of one route choice over another due to congestion depends on the number of drivers who choose the same route both of the examples suggested above deal with spatial choices of a particular kind but there are even examples from the more traditional macroeconomic theory one such example is of a product produced under variable returns to scale by a number of different sellers the price that each seller charges will depend upon the number of his customers if a buyer must choose to purchase from only one seller the price paid and thus utility will depend upon the total number of buyers choosing the same seller in all of the examples cited a reasonable model of choice is one that postulates uncertainty about the actual utility of each alternative the point of view is that a chooser s notional utility about each choice is a random variable in this case it is not certain which alternative will be chosen but the chosen alternative is the one with the greatest perceived utility it follows therefore that the probability that a given alternative is chosen is the probability that the utility perceived to be associated with it is larger than the utility perceived to be associated with any other alternative

economics for sustainable rural systems abstract critics often reproach the discipline of economics for supporting developments that result in environmental and social degradation this article identifies where such censure is valid but proceeds to argue that the rationale underlying economic techniques is at fault rather than the techniques themselves within the rural context we suggest that economics can make a valuable contribution to the design and achievement of sustainable ways of living valid criticism of economics focuses on its assumptions about value since this has led to emphasis of favourable effects of markets and laissez faire policies exposing rural areas to more rigorously competitive market conditions encourage their transformation by increasing mechanisation industrialisation and a less sustainable use of resources new approaches and policies are required if different outcomes are to be achieved an initial step is to identify desirable outcomes a matter of social choice however society makes multiple demands on rural resources and such issues cannot be adequately captured within a neo classical welfare model an alternative hierarchical framework in the tradition of systems thinking capable of analysing the complex relations associated with rural resource use provides appropriate emphasis to the economic links between goals at different levels within the system and appears to have some heuristic value an empirical counterpart of the hierarchical framework input output analysis generates information to support social choices and can also contribute to the understanding of economic systems and their interaction with the wider social cultural ethical and environmental universe the article concludes with some revised economic policy prescriptions to promote rural sustainability

the evolution of walrasian behavior consider an evolutionary context where a given number of quantity setting oligopolists tend to mimic successful behavior occasionally experimenting with some small probability in this context it is shown that the unique long run outcome of the process has all firms playing walrasian i e choosing an output that maximizes profits when taking the market clearing price as given

limited foresight may force cooperation this paper considers discounted repeated games with boundedly rational players in each period player i chooses his current action on the basis of his forecast about the forthcoming n i action profiles his assessment of the payoffs he will obtain next depends on his state of mind which is non deterministic a limited forecast equilibrium is such that after every history the limited horizon forecasts formed by the players are correct the set of all limited forecast equilibria is characterized and constructed application to the repeated prisoner s dilemma shows that limited foresight may sometimes induce purely cooperative paths while purely non cooperative paths cannot arise

anomalous behavior in a traveler s dilemma the notion of a nash equilibrium has joined supply and demand as one of the two or three techniques that economists instinctively try to use first in the analysis of economic interactions moreover the nash equilibrium and closely related game theoretic concepts are being widely applied in other social sciences and even in biology where evolutionary stability often selects a subset of the nash equilibria many people are uneasy about the stark predictions of the nash equilibrium in some contexts where the extreme rationality assumptions seem implausible kaushik basu s 1994 traveler s dilemma is a particularly convincing example of a case where the unrelenting logic of game theory is at odds with intuitive notions about human behavior the story associated with the dilemma is that two travelers purchase identical antiques while on a tropical vacation their luggage is lost on the return trip and the airline asks them to make independent claims for compensation in anticipation of excessive claims the airline representative announces

an experimental study of jury decision rules we present experimental results on groups facing a decision problem analogous to that faced by a jury we consider three treatment variables group size three or six number of votes needed for conviction majority or unanimity and pre vote deliberation we find evidence of strategic voting under the unanimity rule a large fraction of our subjects vote for a decision analogous to conviction even when their private information indicates a state analogous to innocence this is roughly consistent with the game theoretic predictions of feddersen and pesendorfer although individual behavior is explained well by the game theoretic model there are discrepancies at the level of the group decision contrary to feddersen and pesendorfer in our experiments there are fewer outcomes analogous to incorrect convictions under unanimity rule than under majority rule in the case of no deliberation we simultaneously account for the individual and group data using quantal response equilibrium

on the dynamic stability of a price dispersion model using gradient dynamics abstract this paper studies the evolutionary stability of a unique nash equilibrium in a price dispersion model burdett and judd 1983 using gradient dynamics the numerical solution to the partial differential equation that governs the evolution of prices shows that the stationary equilibrium is not a nash equilibrium and that it differs from the cyclical behavior predicted by another family of dynamics such as replicator and logit in a continuous action space

an institutional view of china s venture capital industry explaining the differences between china and the west abstract institutional theory argues that institutions in general and culture in particular shape the actions of firms and individuals in a number of subtle but substantive ways the theory has been used to explain a number of significant and substantive managerial differences found in different parts of the world to date the examination of venture capital outside the us and europe however has been rather limited institutional theory also suggests that there would be differences in how venture capital may operate in other parts of the world such as asia where the culture is substantially different from the west based on interviews with 36 venture capitalists in 24 venture capital firms investing in china this exploratory research finds that china s institutional environment creates a number of significant differences from the west the article discusses the impact of these findings on future research on asian venture capital theory development and the activities of venture capital professionals in that region

singapore venture capitalists vcs investment evaluation criteria a reexamination the venture capital vc industry in singapore is of recent origin however funds under management in singapore have grown from s 45 million in 1983 to s 7 86 billion in 1996 these developments together with the recent announcement of government s vision of singapore becoming a hub for venture capital in the region provide an opportunity for an examination of the venture capital industry in singapore the vc industry originated in the western hemisphere in response to the need for risk capital for high technology industries in the light of the differences in investment opportunities around singapore and the nature of industrial developments in south east asia in general the authors anticipated that the investment criteria employed by venture capital firms vcs in singapore would differ the results however reveal that criteria adopted by singapore vcs are not very different from those adopted by vcs in other countries including u s the results also confirm that the entrepreneur s characteristics or the top management s capabilities are seen as being primary indicators of the venture s potential further examination of vcs investment process revealed that the investment criteria adopted by successful vcs were no different from those adopted by less successful vcs this confirms that investment selection is a multi stage process wherein venture assessment is only one of the steps in this process before vcs evaluate a venture they screen investment proposals based on their investment preferences or investment strategies vcs in our sample had definite ideas about where to invest and in what types of firms how do vcs select appropriate investment strategies however has not been adequately dealt in the literature and is a fitting subject for further studies

evolutionary dynamics with aggregate shocks abstract we study the evolution of the continuous time replicator dynamics when payoffs are subject to aggregate shocks that take the form of a wiener process in the absence of mutation the system need not have an ergodic distribution with mutation the system does have an ergodic distribution in the limit as the mutation rate and the variance of the shocks converge to zero this distribution concentrates on the risk dominant equilibrium this result is not however robust to changes in the underlying deterministic dynamics

valuing cattle on mixed smallholdings in the eastern amazon abstract cattle on smallholder farms are kept for socio economic reasons rather than physical production which explains why farmers favour low input and discontinuous management to find out how this form of livestock husbandry relates to the other main farming sub systems cattle keeping was compared with cassava and black pepper production data was collected from 37 cattle keeping mixed smallholdings during 15 visits at monthly intervals the three sub systems were studied in terms of productive efficiency of resource use socio economic contribution and ecosystem friendliness using cash flow non market output and non parametric rankings their relative performances in each domain were ranked and put on an amoeba diagram a general method of system description and assessment the markings connected across functions produced an outline of a polygon reminding the shape of an amoeba it was found that productive efficiency was lowest in cattle benefit cost ratio was highest in cassava while return to labour was especially strong in black pepper production the highest status lowest production risk highest liquidity and ease of sale related to cattle cattle and pastures ranked worst in terms of biodiversity damage to and pollution of water courses nutrient losses were highest in cassava due to the large amount harvested the differences in function meant that the three polygons occupied different segments of the circular diagram nevertheless together they formed a well rounded shape the amoeboid nature of these polygons can be used to predict the effect of a shift of activity on the farm making the diagram a useful illustrative tool for planning and teaching

modelling cognitively bounded rationality an evaluative taxonomy abstract since its origins in the 1950s the notion of bounded rationality has been incorporated into economic theory using an array of methodological approaches this paper presents a taxonomy by which these approaches can be categorized and understood evaluating each approach against a range of important criteria at a time when the foundations of economic theory are being re examined this paper should be viewed as a first step towards an assessment of the appropriate role that this more realistic view of cognition should take in different areas of economic theory and also of the desirable characteristics of models that incorporate it

an experimental study of exclusive contracts abstract this paper reports results from a laboratory experiment based on exclusive contracts that may theoretically lead to inefficient naked exclusion of a potential rival the data indicate that changes in the number of buyers in the market have no significant effect on exclusion rates but the likelihood of inefficient exclusion is decreased both when a larger fraction of signed buyers are needed to deter a rival s entry and when buyers engage in non binding communication these results have antitrust implications both in terms of helping to identify at risk market characteristics and suggesting potential competition enhancing strategies a sub game of the experiment where buyers make signing decisions can be illustrated as a coordination game with the unique feature that payoffs are affected by a separate but interested party the incumbent seller i find that the height of the potential function and relevant basin of attraction especially when combined with quantal response estimation have larger predictive power in this sub game than several other equilibrium selection criteria

venture capital and management led leveraged buy outs a european perspective abstract management and leveraged buy outs became phenomena of the 1980s from beginnings in the u s they quickly traversed the atlantic spreading first to the u k and then throughout europe the venture capital industry has played a crucial role in the development of buy outs in europe particularly in smaller deals in the u k the netherlands and france this paper examines three aspects of the market for venture and development capital funded management led buy outs in europe it provides a framework for analysis of the different levels of development of each country s market it examines performance of u k buy outs and addresses the extent and nature of exits throughout the paper use is made of the extensive database of european buy outs developed by the authors the main conclusions to emerge are as follows european experience can not be compared to that in the u s as a single economy there are important differences between european countries in respect of the level of buy out activity and the extent to which conditions are or will be favourable for the development of such transactions conceptually a buy out market may be considered as requiring three main factors to be present if it is to develop the generation of buy out opportunities the infrastructure to complete a transaction and opportunities for the investors in a buy out to realise their gains these broad groups may be further sub divided the generation of opportunities will be heavily influenced by attitudes to entrepreneurial risk and hence willingness of managers to buy the ownership structure of industry and hence the generation of entities which are for sale and the state of development of mergers and acquisition markets the infrastructure to complete transactions includes sources of funding both in respect of venture capital availability and the ability of banks to fund transactions the nature of legal and taxation regimes and the existence of intermediaries and advisors who can both identify and negotiate buy outs the existence of suitable exit routes comprises stock market flotation sale to another group and recapitalisation possibly through a secondary buy out many of these factors are similar to the conditions necessary for venture capital deals to develop the generation of entities for sale may take various forms with succession issues in family firms divestment of unwanted divisions privatization of public sector activities and going privates of companies quoted on a stock market being the most important this framework was used to analyze european buy out markets through a combination of interview and desk research the evidence shows that the most highly developed buy out markets and those with the greatest short term potential are not necessarily to be found in the largest economies u s investors who turn towards europe to develop their markets at a time when the u s buy out market is experiencing a downturn and european investors seeking to broaden their activities need to be aware of these differences as in comparable studies in the u s u k lbos on the evidence from our survey of 182 buyouts on average produce performance improvements u k lbos appear to undertake a greater level of new product development and asset purchase after buy out than do their counterparts in the u s and have placed less emphasis on asset disposals than u s lbos managers buying out frequently tightened up their control of working capital the results of our survey indicate support for both the entrepreneurial and agency cost reduction perspectives about buy outs with the former perhaps being somewhat more in evidence exit routes are an important aspect of the buy out market but evidence presented here indicates that buy outs are unlikely to exit in the way in which they originally envisaged in particular buy outs that initially were aiming for flotation on a secondary tier stock market have almost invariably been sold to third parties

learning to reoptimize consumption at new income levels a rationale for prospect theory this paper provides a theoretical rationale for three experimental results of prospect theory risk preferences are over gains and losses loss aversion and diminishing sensitivity we consider a boundedly rational decision maker who does not e nd her new optimal consumption bundle with certainty when she is faced with a new income level this alters her indirect utility function and makes her more risk averse at her current reference income level and less risk averse for a range of incomes below her reference income level jel d11