the acid rain game as a resource allocation process with an application to the international cooperation among finland russia and estonia we consider optimal cooperation in transboundary air pollution abatement among several countries under incomplete information i e local information only on marginal emission abatement costs and damage costs directions of emission abatement in each country are determined that generate a succession of emissions programs shown to converge to an economic optimum a cost sharing scheme that results from appropriately designed international transfers guarantees that the individual costs of all parties are nonincreasing along the path towards the optimum a version of maler s 1989 acid rain game is used for a numerical application

quality competition with motivated providers and sluggish demand we study incentives for quality provision in markets where providers are motivated semi altruistic prices are regulated and firms are funded by a combination of block grants and unit prices competition is based on quality and demand adjusts sluggishly health or education are sectors in which the mentioned features are the rule we show that the presence of motivated providers makes dynamic competition tougher resulting in higher steady state levels of quality in the closed loop solution than in the benchmark open loop solution if the price is sufficiently high however this result is reversed if the price is sufficiently low and below unit costs sufficiently low prices also imply that a reduction in demand sluggishness will lead to lower steady state quality prices below unit costs will nevertheless be welfare optimal if the providers are sufficiently motivated

transfers to sustain dynamic core theoretic cooperation in international stock pollutant control international environmental agreements aiming at correcting negative externalities generated by transboundary pollution are difficult to achieve for many reasons important obstacles arise from asymmetry in costs and benefits and instability may occur due to the fact that coalitions of countries may attempt to do better for themselves outside of any proposed agreement in a static context it has already been shown that it is possible to achieve stability in the sense of the core of a co operative game by means of appropriately defined transfers between the countries involved however the transboundary pollution problems that are most important are caused by accumulated pollutants so that a dynamic analysis is required this paper provides a transfer scheme that yields a core property in a dynamic context the possibility of computing such transfers numerically is discussed

buying cooperation in an asymmetric environmental differential game abstract we consider a two player asymmetric differential game of pollution control one player is non vulnerable to pollution or unwilling to consider damages when choosing her production policy in a non cooperative game we characterize the feedback nash equilibrium and the cooperative solution we establish conditions under which the vulnerable player can buy the cooperation of the non vulnerable player to control her emissions we further use the nash bargaining solution to allocate the total cooperative dividend between the two players and propose a time consistent decomposition overtime of the total payoff

comparative statics analysis of a fully closed city abstract this paper extends the existing comparative statics analysis about open or semiclosed cities notably that of w wheaton j econom theor 9 2 223 237 1974 to a fully closed city where urban land rent is redistributed to the city population specifically we examine the effects on changes in exogenous variables such as population size agricultural rent and initial endowments on endogenous variables such as welfare level city size and rent schedule most but not all of the existing results are reestablished surprisingly it is shown that in contrast to the existing literature and perhaps to intuition the city area may shrink when the city population increases the paper also extends the existing literature by analyzing the effect of the exogenous variables on the endogenous income and the demand for transportation it is shown that under plausible assumptions the quantity of transportation demanded declines with its price

from welfare to work does the neighborhood matter abstract this paper investigates whether individual transition rates from welfare to work are influenced by neighborhood effects we use a unique administrative database on welfare recipients in rotterdam the second largest city of the netherlands we find that conditional on personal characteristics there is a negative relationship between the neighborhood unemployment rate and the transition rate from welfare to work of young dutch welfare recipients we do not find any neighborhood effects for older dutch welfare recipients and non dutch welfare recipients when performing some sensitivity analyses this result is robust to different specifications

a finnish soviet acid rain game noncooperative equilibria cost efficiency and sulfur agreements abstract this study analyzes cost effectiveness in environmental cooperation between finland and the soviet union it is assumed that the aim of both countries is to attain a given target deposition level at minimum possible sulfur abatement costs cost effective cooperation is compared to noncooperative equilibrium and to the agreement on sulfur emissions between these two countries it is shown that the agreement is not cost effective implies higher abatement costs than under noncooperation and is strategically unstable however the cost differences and the incentives to cheat are small the computations reveal that the main source of potential cooperation benefits is not asymmetrical emission transportation or differences in abatement costs but rather different target deposition levels for finland and the soviet union

cooperation through imitation abstract this paper characterizes long run outcomes for broad classes of symmetric games when players select actions on the basis of average historical performance received wisdom suggests that when agent s interests are partially opposed behavior is excessively competitive keeping up with the jones lowers everyones welfare here we study the long run consequences of imitative behavior when agents have sufficiently long memories and evaluate past actions in terms of weighted average payoff imitation robustly leads to cooperative outcomes with highest symmetric payoffs in the long run furthermore lengthening memory reinforces this effect this provides a rationale for example for collusive cartel like behavior without collusive intent

the exponential density function first principles comparative statics and empirical evidence abstract it is well known that the exponential density function can be derived using a compensated demand for bousing with a unitary price elasticity we investigate how such an elasticity can arise from first principles and are thus able to identify the determinants of the density gradient we then use these determinants together with existing comparative statics to examine unambiguously the relation between the density gradient and some exogenous variables we conclude that our results are closely supported by existing empirical evidence except for the effect of urban population size on the density gradient

equilibrium selection and the dynamic evolution of preferences abstract a population of fully rational agents plays a symmetric 2 player game in biological fitnesses but each agent s play is determined by his payoffs which are free to evolve according to survival of the fittest pressures an equilibrium selection mechanism is assumed to exist and deliver a unique outcome for any given profile of payoffs this allows the evolution of payoffs to be modeled as a well defined replicator dynamics the existing static stability results that efficient strict nash implies stability and stability implies efficiency are translated to this dynamic context although the latter gives way to indeterminacy in the absence of a specific equilibrium selection mechanism a strong form of stability is established for the efficient outcome of games with common interests whilst a weaker stability result is provided for efficient mixed strategy equilibria of doubly symmetric games the results are illustrated using the equilibrium selection mechanism provided by global games

the acid rain differential game this paper considers an acid rain differential game countries emit sulphur which is partly transferred to other countries depositions above critical loads ultimately destroy the soil countries face a trade off between the costs of emission reductions and the damage to the soil due to the depletion of the acid buffers because of the transboundary externalities the outcome will depend on whether the countries cooperate or not this paper presents the cooperative outcome and the open loop and markov perfect nash equilibria of the acid rain differential game it will be shown that the depositions always converge to the critical loads but the steady state levels of the buffer stocks differ the theory is used to analyse the acid rain differential game for sulphur between great britain and ireland finally some results are given for the whole of europe

efficient equilibria in a differential game of capitalism abstract one considers a differential game of capitalism a la lancaster feedback nash equilibria and pareto optimal solutions are characterized under the assumption that the planning horizon is infinite it is then shown that by combining a pareto optimal solution with the nash feedback equilibrium strategy pair which plays the role of a threat one can obtain an efficient equilibrium which is also subgame perfect in the sense of selten this result modifies sensibly the previous interpretation of the inherent inefficiency of capitalism

altruistic versus egoistic behavior in a public good game this paper analyzes an evolutionary version of the public good game in which boundedly rational agents can use imitation and best reply decision rules several possibilities for both decision rules to be present in the population are considered i show that altruistic behavior might survive if switching between the decision rules occurs less often than the probabilities of errors in choosing a strategy and if local neighborhoods are not too small or too large

network structure and strategic investments an experimental analysis abstract this paper experimentally analyzes the effect of network structures on individuals decisions in a game of strategic substitutes the theoretical basis for our experiment is the model of bramoulle and kranton 2007 as predicted we find that individuals are able to coordinate on equilibria but that coordination strongly depends on the network structure despite frequent coordination failures in graphs of size n 4 equilibrium play seems easier on network architectures with high low density and low high centrality if play converges it almost exclusively does so towards the predicted equilibria theoretical results with respect to welfare are also confirmed next to global graph structural properties we also explore the effects of local and individual factors we find that behavior on networks is affected by the number of direct neighbors but not by individuals risk attitudes apparently the global and the local structure of a network does not leave much explanatory room for individual effects that pertain to risk taking

social cohesion and the evolution of altruism abstract in this paper we propose a stylized model to study how cohesion may affect the spread and consolidation of altruism in a large population where agents are involved in a local public good contribution game with their neighbors we show that if the contribution cost is moderate neither too high nor too low cooperation can invade and dominate the population if and only if group cohesion displays an intermediate value this reflects an interesting non monotonicity of cohesion in the evolution of altruism while some of it is needed to internalize the benefits of cooperation too much cohesion prevents the spread of altruism among the population at large

more neighbors more efficiency abstract this paper considers a finite population of agents located within an arbitrary fixed network every agent plays a coordination game with his neighbors if one neighbor s payoff from a specific interaction exceeds his average payoff per interaction the neighbor is perceived as better performing over time agents imitate the strategies of their better performing neighbors occasionally they make mistakes sufficient conditions for emergence of pareto efficient and risk dominant conventions are provided the paper also illustrates the main results through relevant examples

can sustainable consumption be learned a model of cultural evolution abstract this paper shows how sustainable consumption patterns can spread within a population via processes of social learning even though a strong individual learning bias may favor environmentally harmful products we present a model depicting how the biased transmission of different behaviors via individual and social learning influences agents consumption behavior the underlying learning biases can be traced back to evolved cognitive dispositions challenging the vision of a permanent transition toward sustainability we argue that green consumption patterns are not self reinforcing and cannot be locked in permanently

the evolution of cooperation through imitation we study evolutionarily stable outcomes for a class of games that admit cooperation and conflict as possible nash equilibria we make use of two ideas existing strategies are more likely to be imitated than new strategies are to be introduced players are able to identify opponents behavior prior to interaction the long run evolutionary limit is efficient for the case of perfect recognition of opponents behavior for the case of imperfect recognition efficiency is not achieved and long run outcomes are more efficient the more accurate is the information strategies that emerge in the long run are those where players reward opponents who are likely to play the same way and punish opponents who are likely to play differently

coalitions tipping points and the speed of evolution this study considers pure coordination games on networks and the waiting time for an adaptive process of strategic change to achieve ecient coordination although it is in the interest of every player to coordinate on a single globally ecient norm coalitional behavior at a local level can greatly slow as well as hasten convergence to eciency

interaction and imitation with heterogeneous agents a misleading evolutionary equilibrium abstract in a two population evolutionary game we analyze the interaction between individuals belonging to two populations with the same strategy set but different payoffs a game is played among individuals in the two populations they imitate agents belonging to the same and also the alternative population when a revising agent is matched with someone in the alternative population who plays differently his expected payoff and the observed payoff of his partner diverge hence he conjectures the payoff from switching to the other strategy by weighing what he expected and what he observes the evolutionary dynamics has a unique locally asymptotically stable fixed point which typically differs from the evolutionary stable equilibrium without inter population imitation for a collective action game we analyze to what extent the compliance rate and the social welfare differ from the nash equilibrium and how these gaps depend on the confidence that agents assign to what they see

income distribution and the residential density gradient abstract w c wheaton journal of economic theory 9 223 237 1974 asserted that an increase in incomes lowers central densities raising suburban densities in closed monocentric cities with identical resident incomes and tastes we show that with identical cobb douglas tastes and identical incomes a sufficient condition for densities to fall everywhere when incomes rise is that the land rent bill of the innermost resident be larger than the commuting bill of the outermost resident estimating this model using data in e s mills studies in the structure of the urban economy johns hopkins press baltimore london 1972 we show that densities are predicted to fall everywhere in baltimore denver milwaukee philadelphia rochester and toledo when income is increased by 10 circa 1960 but when we disaggregate the model using the 1960 census income distribution keeping tastes identical a 10 increase in incomes rotates densities around distances which vary from 3 3 miles in toledo to 9 8 miles in philadelphia in addition to empirically vindicating wheaton s assertion the disaggregated model gives approximately negative exponential densities consistent with spatial equilibrium and without resorting to r f muth s cities and housing university of chicago press 1969 assumption of a unitary compensated price elasticity of demand

constrained interactions and social coordination we consider a co evolutionary model of social coordination and network formation where agents may decide on an action in a 2x2 coordination game and on whom to establish costly links to we find that a payoff domination convention is selected for a wider parameter range when agents may only support a limited number of links as compared to a scenario where agents are not constrained in their linking choice the main reason behind this result is that whenever there is a small cluster of agents playing the efficient strategy other players want to link up to those layers and choose the efficient action

trust trustworthiness and the consensus effect an evolutionary approach abstract people often form expectations about others using the lens of their own attitudes the so called consensus effect we study the implications of this for trust and trustworthiness in an evolutionary model where social preferences are endogenous trustworthy individuals are more optimistic than opportunists and are accordingly less afraid to engage in market based exchanges where they may be vulnerable to cheating depending on the distribution of social preferences in the population the material benefits from greater participation may compensate for the costs of being trustworthy by providing an explicit account of how individuals form and revise their beliefs we are able to show the existence of a polymorphic equilibrium where both trustworthiness and opportunism coexist in the population we also analyze the effect of enforcement distinguishing between its role as deterrence of future misbehavior and as retribution for past misbehavior we show that enforcement aimed at deterring opportunistic behavior has ambiguous effects on social preferences it may favor the spreading of trustworthiness crowding in but the opposite crowding out may also occur by contrast crowding out never occur when punishment is merely intended as retribution

economics an emerging small world we study the evolution of social distance among economists over the period 1970 2000 while the number of economists has more than doubled the distance between them which was already small has declined significantly the key to understanding the short average distances is the observation that economics is spanned by a collection of interlinked stars a star is an economist who writes with many other economists most of whom have few coauthors and generally do not write with each other

imitation local interactions and efficiency abstract we consider a circular city model as in ellison ellison g 1993 learning local interaction and coordination econometrica 61 1047 1071 where agents follow imitation rules rather than myopic best response if interactions are neither global nor limited to the immediate neighbors payoff efficient equilibria and not risk dominant ones can be uniquely selected

time consistent shapley value allocation of pollution cost reduction we study the problem of allocation over time of total cost incurred by countries in a cooperative game of pollution reduction we compute the characteristic function for all possible coalitions and apply the shapley value to determine a fair distribution of the total cooperative cost among players we design a mechanism for allocation over time of total individual cost so that the initial agreement remains valid for the whole duration of the game

family ownership altruism and agency costs in australian small and medium sized enterprises given the continuing uncertainty about whether family firms enjoy lower agency costs this article hypothesizes that a combination of the effects of family ownership altruism and self control is instead at play to begin with family ownership can indeed reduce agency costs through better aligning the interests of owners and managers this is a determining effect in that it independently mitigates one source of agency problems however altruism combined with self control problems arising from the highly concentrated ownership often found in family firms can also increase agency costs this is an embedding effect as it is rooted in the personal relationships within the family firm using the business longitudinal database compiled by the australian bureau of statistics on small and medium sized enterprises smes we find that for larger smes those with 20 200 employees the gains in lower agency costs arising from family ownership are almost completely offset by the losses from altruism and the l

toward a theory of agency and altruism in family firms surprisingly the majority of u s family firms offer employed family members short and long term performance based incentive pay we draw on the household economics and altruism literatures to explain why family firms might feel compelled to do so and develop theory that predicts when this practice will be beneficial results based on data obtained from 883 family firms show that altruism as reflected by the parents estate and share transfer intentions moderates the effect of these pay incentives as our theory predicts as such this article helps explain both how altruism influences agency relationships in family firms and why business practice in family firms differs from those found in other types of firms

grouping in group bias and the cost of cheating abstract the tendency of people to divide into groups and to show in group bias preferential treatment for insiders is widely observed this paper shows that it arises naturally when people incur a moral cost when defecting against cooperators provided that this cost is concave in the number of such defections if some people are asocial i e insusceptible to the moral cost then under incomplete information free riding and cooperation can coexist within groups costly signaling of sociality enables groups to screen out free riders but its availability may decrease the welfare of all individuals in society finally the concave moral cost is shown to be evolutionary stable with respect to an invasion by a convex mutation

altruists egoists and hooligans in a local interaction model the authors study a population of agents each of whom can be an altruist or an egoist altruism is a strictly dominated strategy agents choose their actions by imitating others who earn high payoffs interactions between agents are local so that each agent affects and is affected by only his neighbors altruists can survive in such a world if they are grouped together so that the benefits of altruism are enjoyed primarily by other altruists who then earn relatively high payoffs and are imitated altruists continue to survive in the presence of mutations that continually introduce egoists into the population copyright 1998 by american economic association

coalitional stochastic stability abstract this paper takes the idea of coalitional behavior groups of people occasionally acting together to their mutual benefit and incorporates it into the framework of evolutionary game theory that underpins the social learning literature an equilibrium selection criterion is defined which we call coalitional stochastic stability css this differs from existing work on stochastic stability in that profitable coalitional deviations are given greater importance than unprofitable single player deviations a general characterization of css is given together with more detailed characterizations for specific classes of games applications include contracting asymmetric social norms and collusive price setting the latter of which is shown in some circumstances to facilitate competitive outcomes

time consistent side payments in a dynamic game of downstream pollution abstract this note determines a rule to share a surplus gained when two countries or regions agree to coordinate their policies to reduce downstream pollution an intertemporal decomposition scheme for the total side payment is proposed this scheme has the following individual rationality property in each subgame that starts along the cooperative trajectory one country is guaranteed to receive a higher payoff in the cooperative solution than in the disagreement solution for this country another notion of individual rationality obtains this country will at any instant of time during the play of the game receive a higher payoff in the cooperative solution than in the disagreement solution

on the private provision of public goods on networks abstract this paper analyzes the private provision of public goods where consumers interact within a fixed network structure and may benefit only from their direct neighbors provisions we present a proof of the existence and uniqueness of a nash equilibrium for general networks and best reply functions in addition we investigate the neutrality result of warr 38 and bergstrom blume and varian 6 whereby consumers are able to undo the impact of income redistribution as well as public provision financed by lump sum taxes to this effect we show that the neutrality result has a limited scope of application beyond a special network architecture in the neighborhood of the set of contributors

an economic analysis of transboundary air pollution between finland and the former soviet union the net benefits of bilateral cooperation between finland and the former soviet union on reducing sulphur emissions are evaluated for both parties the analysis is based on a sulphur transportation model and on estimated abatement cost functions it is shown that efficient cooperation may entail financial transfers from finland to the soviet union

international environmental problems a simple taxonomy of international environmental problems is developed based on economic considerations the unidirectional externalities are illustrated by the case of one upstream and one downstream country the main problem in this case is an informational one the analysis of regional reciprocal externalities is illustrated by the acid rains in europe it is shown that an efficient solution could be achieved by transferable export rights finally global external problems are discussed with reference to greenhouse effects and extinction of species copyright 1990 by oxford university press

imitation and efficient contagion abstract this paper is about the diffusion of cooperation in an infinite population of networked individuals repeatedly playing a prisoner s dilemma we formulate conditions on payoffs and network structure such that starting from an initial seed group imitative learning results in the overall adoption of cooperation efficient contagion key to this result is the pattern of interaction among players who are at the same distance from the initial seed group we find that the more these agents interact among themselves rather than with players who are closer to or further away from the initial seed group the easier it is for efficient contagion to take place we highlight the importance of cycles for efficient contagion and show that the presence of critical edges prevents it we also find that networks organized as dense clusters sparsely connected to one another tend to resist efficient contagion finally we find that the likelihood of efficient contagion in a network increases when information neighborhoods extend beyond interaction neighborhoods

the panexponential monocentric model abstract we derive declining exponential rent and density functions for a monocentric city from a new set of assumptions which place restrictions on commuting costs rather than on the demand for land the utility function is cobb douglas with unrestricted income expenditure shares for land and for the numeraire good the marginal commuting cost is assumed to be proportional to income earning potential and exponentially declining in distance from the center at a particular constant rate these assumptions capture realistic properties of congested cities under these assumptions equilibrium land rent residential density and numeraire consumption all decline exponentially with distance although at different rates if it is also assumed that traffic speed at the edge of a city is equal to free flow speed then the rates of decline in rent residential density and numeraire consumption all increase with the city s physical size we also suggest a new statistical procedure for estimating negative exponential density functions from a cross section of cities of various sizes

international aspects of pollution control pollution is a by product of production is only gradually dissolved by the environment and crosses national borders the market outcome ignores the adverse effects of pollution and thus yields higher levels of output and pollution than would prevail under a supranational social planner which does care about pollution in practice governments often do not cooperate and this leads to outcomes of pollution and production in between the market outcomes and the outcomes under supra national social planning absence of precommitment leads to lower emission charges less cleaning up activities and more pollution appropriate levels of emission charges under the various outcomes are a result of this analysis attention is also paid to investment in clean technology the debate between optimists who believe that higher production is compatible with sound environmental policy and pessimists can be analysed in this way