decentralized matching and social segregation social segregation is a ubiquitous feature of human life people segregate along the lines of income religion ethnicity language and other characteristics this study provides the first experimental examination of decentralized matching with search frictions and institutionalized segregation the findings indicate that without a segregation institution high types over segregate relative to the equilibrium prediction we observe segregation attempts even when equilibrium suggests that everyone should accept everyone else in the presence of a segregation institution we find that while the symmetric segregation institution increases matching success rate and efficiency in one environment it has weak or no effect in a steep incentive environment by adding an entry cost to a flat incentive market however the asymmetric segregation institution leads to an increased matching success rate and efficiency in both environments which underscores the importance of a coordination device

we the rich inequality identity and cooperation abstract inequality not only generates status differentials between rich and poor individuals it also generates status differentials between groups of different composition and income level we organise the social structure within which groups are embedded to manipulate their composition and relative status thus inducing weaker or stronger group identities in their members via the processes of social categorization identification and comparison we therefore manipulate the fundamental components of group identity rather than resorting to ad hoc identity reinforcement tasks how strongly individuals identify with each group will ultimately determine the degree of cooperativeness within the group and the whole society we find that the impact of inequality on social cooperativeness is not trivial cooperation varies with the strength of the group s identity as predicted by social identity theory in particular high endowment homogeneous groups cooperate most and increasingly over time low endowment homogeneous groups display intermediate levels of cooperation heterogeneous groups cooperate least a result driven by lack of cooperation on behalf of the rich as endowment sizes and groups are exogenously allocated we argue that our findings are a lower bound for the effects generated where endowments and groups are endogenously determined in or outside of the laboratory

analysts gaap earnings forecasts and their implications for accounting research abstract we use newly available gaap forecasts to document that traditionally identified gaap forecast errors contain 37 measurement error correcting for this measurement error we settle a long standing debate regarding investor preference for gaap versus non gaap earnings and provide strong evidence of a preference for non gaap earnings we also revisit the use of non gaap exclusions to meet analysts forecasts when gaap earnings fall short results indicate that 34 of these traditionally identified meet or beat firms are misidentified due to measurement error and this error masks evidence that firms more frequently exclude transitory rather than recurring expenses for meet or beat purposes

social identity and social free riding abstract we model individual identification choice as a strategic group formation problem when choosing a social group to identify with individuals appreciate high social status and a group stereotype to which they have a small social distance a group s social status and stereotype are shaped by the exogenous individual attributes of its members and hence endogenous to individuals choices unless disutility from social distance is strong enough this creates a strategic tension as individuals with attributes that contribute little to group status would like to join high status groups thereby diluting the latters status and changing stereotypes such social free riding motivates the use of soft exclusion technologies in high status groups which provides a unifying rationale for phenomena such as hazing rituals charitable activities or status symbols that is not taste based or follows a standard signaling mechanism

sentiments and aggregate demand fluctuations we formalize the keynesian insight that aggregate demand driven by sentiments can generate output fluctuations under rational expectations when production decisions must be made under imperfect information about demand optimal decisions based on sentiments can generate stochastic self fulfilling rational expectations equilibria in standard economies without persistent informational frictions externalities nonconvexities or strategic complementarities in production the models we consider are deliberately simple but could serve as benchmarks for more complicated equilibrium models with additional features

a discussion of assessing the relative informativeness and permanence of pro forma earnings and gaap operating earnings abstract by analyzing a carefully constructed earnings announcements sample that discloses a pro forma earnings number bhattacharya et al j account econom 36 1 3 2003 contribute to recent research documenting increasing differences between earnings as defined by generally accepted accounting principles gaap and alternative earnings definitions followed by capital markets the paper provides interesting descriptive data on pro forma earnings per share relative to both gaap earnings per share and actual earnings per share as tracked by i b e s also the authors conduct tests of the relative informativeness and persistence of these three earnings measures econometric and data limitations inhibit the inferences that can be drawn from some of these tests

sacrifice and stigma reducing free riding in cults communes and other collectives this paper presents an economic analysis of religious behavior that accounts for the continuing success of groups with strange requirements and seemingly inefficient prohibitions the analysis does not presuppose any special motives for religious activity rather religion is modeled as a club good that displays positive returns to participatory crowding the analysis demonstrates that efficient religions with perfectly rational members may benefit from stigma self sacrifice and bizarre behavioral restrictions the model also addresses sacrifice in nonreligious social clubs fraternities communes political parties work groups and families

the impact of group membership on cooperation and norm enforcement evidence using random assignment to real social groups due to incomplete contracts efficiency of an organization depends on willingness of individuals to take non selfish actions such as cooperating when there is no incentive to do so or punishing inefficient actions by others organizations also constitute a social boundary or group we investigate whether this social aspect of organizations has an important benefit fostering unselfish cooperation and norm enforcement within the group but also whether there is a dark side in the form of hostility between groups our experiment provides the first evidence free from the confounding effect of self selection into groups individuals are randomly assigned to different platoons during a four week period of officer training in the swiss army we conduct choice experiments simultaneous prisoner s dilemma games with and without third party punishment in week three random assignment significantly increases willingness to cooperate with fellow platoon members assignment does not lead to hostility in the sense of vindictive punishment of outsiders but does affect norm enforcement enhancing willingness to enforce a norm of cooperation towards fellow platoon members this suggests that the social aspect of organizations motivates efficient behavior even when ordinary incentives fail and helps to explain practices designed to foster social ties or group identification within an organization this abstract was borrowed from another version of this item

rational choice a survey of contributions from economics and philosophy this paper looks at the philosophical foundations of rational choice theory it is argued that l savage s expected utility axioms cannot be defended as requirements of instrumental rationality in part because of their implications for the description of consequences then it is argued that common knowledge of rationality does not imply that rational game players must be in nash equilibrium and for some games is an incoherent concept finally the suggestion that rational choice theory is self defeating is examined in relation to coordination games where the theory cannot explain the role of salience and the concept of resolute choice copyright 1991 by royal economic society

distinguishing trust from risk an anatomy of the investment game the role of trust in promoting economic activity and societal development has received considerable academic attention by social scientists a popular way to measure trust at the individual level is the so called investment game berg dickhaut and mccabe 1995 it has been widely noted however that risk attitudes can also affect decisions in this game and thus in principle confound inferences about trust we provide novel evidence shedding light on the role of risk attitudes for trusting decisions to the best of our knowledge our data are the first rigorous evidence that i aggregate investment distributions differ significantly between trust and risk environments and ii risk attitudes predict individual investment decisions in risk games but not in the corresponding trust games our results are convergent evidence that trust decisions are not tightly connected to a person s risk attitudes and they lend support to the trust interpretation of decisions in investment games

endogenous timing in duopoly games stackelberg or cournot equilibria abstract simultaneous versus sequential play is studied in an extended game in a preplay stage players decide whether to select actions in the basic game at the first opportunity or to wait until observing their rivals first period actions in one extended game players first decide when to select actions without committing to actions in the basic game the equilibrium has a simultaneous play subgame unless payoffs in a sequential play subgame pareto dominate those payoffs in another extended game deciding to select at the first turn requires committing to an action both sequential play outcomes are the equilibria only in undominated strategies

rational behaviour in extensive form games it is argued that subgame perfect equilibrium behavior is not an inevitable consequence of common belief of rationality among players in noncooperative extensive form games the argument centers around a particular extensive form game with perfect information in the context of this game it is argued that if rationality is not common belief throughout play of the game then it can be perfectly rational to play contrary to subgame perfection even if rationality is common belief at the beginning of the game it is then shown that it is impossible for rationality to be common belief throughout every play of the game

rationally justifiable play and the theory of non cooperative games noncooperative game theory is often interpreted as a theory of how games would be played if players were rational on this view its central project is to discover which strategies are rationally justifiable and which are not in any game in this paper we consider whether the conventional assumptions of modern game theory equip it to fulfil this project we present an impossibility result which concerns the extent to which they can do so the result can be seen as strengthening a claim established by borgers and samuelson 1992 and samuelson 1992

identity and the economics of organizations on plebes first day at west point called r day they strip down to their underwear their hair is cut off they are put in uniform they then must address an older cadet with the proper salute and with the statement sir new cadet doe reports to the cadet in the red sash for the first time as ordered plebes must stand and salute and repeat and stand and salute and repeat until they get it exactly right all the while being reprimanded for every tiny mistake in the summary of david lipsky 2003 pp 145 154 who spent four years tracking a company of cadets at west point on r day you surrender your old self in stages but r day is just the beginning of the training and personal re engineering that is to come so that west point graduates emerge four years later as loyal officers in the u s army lipsky shows that despite some failure this tough program is remarkably successful in creating officers with the will to lead in battle economists current picture of organizations and work incentives has no place for the west point program and the motivations it seeks to inculcate in recruits in a standard economic model an individual s preferences are fixed and utility depends only on pecuniary variables the army s aim at west point is to change cadets preferences they wish to inculcate non economic motives in the cadets so that they have the same goals as the u s army alternatively stated the goal of west point is to change the identity of the cadets so they will think of themselves above all else as officers in the u s army they will feel bad about themselves they will lose utility if they fall short of the ideals of such an officer this change in identity

all stage strong correlated equilibrium abstract a strong correlated equilibrium is a strategy profile that is immune to joint deviations different notions of strong correlated equilibria were defined in the literature one major difference among those definitions is the stage in which coalitions can plan a joint deviation before ex ante or after ex post the deviating players receive their part of the correlated profile in this paper we show that an ex ante strong correlated equilibrium is immune to deviations at all stages thus the set of ex ante strong correlated equilibria of moreno wooders games econ behav 17 1996 80 113 is included in all other sets of strong correlated equilibria

choosing the joneses endogenous goals and reference standards a growing economic literature stresses the importance of relative comparisons e g for savings and consumption or happiness in this literature it is usually assumed that reference standards against which people compare themselves are exogenously given in contrast findings from social psychology suggest that people play an active role in determining their reference standards we introduce a social comparison model where people choose their reference standards to serve motives of self improvement and self enhancement the model predicts that reference standards increase in individuals abilities and that people thus tend to compare themselves to similar others the results of a questionnaire study confirm the prediction of the model

competition policy collusion and tacit collusion in this paper i pursue three goals the first is to model collusion in a way that is distinct from noncooperative collusion the second and third are to develop a particular specification of a standard model of noncooperative collusion that permits explicit solution for equilibrium outputs and reversion thresholds and to extend this analysis to allow for a deterrence based competition policy that investigates conduct based on observed high prices investigation thresholds

trade with heterogeneous prior beliefs and asymmetric information no trade theorems have shown that new information will not lead to trade when agents share the same prior beliefs this paper explores the structure of no trade theorems with heterogeneous prior beliefs it is shown how different notions of efficiency under asymmetric information ex ante interim ex post are related to agents prior beliefs as well as incentive compatible and public versions of those efficiency concepts these efficiency results are used to characterize necessary and sufficient conditions on agents beliefs for no trade theorems in different trading environments

the bayesian foundations of solution concepts of games abstract we transform a noncooperative game into a bayesian decision problem for each player where the uncertainty faced by a player is the strategy choices of the other players the priors of other players on the choice of other players the priors over priors and so on we provide a complete characterization between the extent of knowledge about the rationality of players and their ability to successively eliminate strategies which are not best responses this paper therefore provides the informational foundations of iteratively undominated strategies and rationalizable strategic behavior b d bernheim econometrica 52 1984 1007 1028 d pearce econometrica 52 1984 1029 1050 sufficient conditions are also found for nash equilibrium behavior and a result akin to r j aumann econometrica 55 1987 1 18 on correlated equilibria is derived with different hypotheses

the information content of losses abstract this study hypothesizes that because shareholders have a liquidation option losses are not expected to perpetuate they are thus less informative than profits about the firm s future prospects the results are consistent with the hypothesis they also show that the documented increase in the earnings response coefficent as the cumulation period increases appears to be due exclusively to the effect of losses the liquidation option effect extends to profitable cases where earnings are low enough to make the option attractive alternating explanations for the low informativeness of losses such as mean reversal of earnings are not supported by the tests

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

the reeded edge and the phillips curve money neutrality common knowledge and subjective beliefs abstract i present a simple two person auction model in which a seller and a buyer make bids in terms of money however the value of a unit of money is uncertain i show 1 a monetary revaluation has purely nominal effects if and only if it is common knowledge 2 if seller and buyer have identical beliefs making the value of money common knowledge maximizes total gains from trade 3 if seller and buyer are equally well informed and have identical beliefs then monetary revaluations have no net effect 4 when the seller knows the value of money but the buyer does not the expected utilities of both seller and buyer are proportional to 1 1 2 where is the standard deviation of the value of money expressed as a fraction of the mean and 5 when beliefs are subjective monetary policy can improve total gains from trade as in friedman s explanation of the phillips curve and an optimal level of inflation can be determined journal of economic literature classification numbers c78 e52

perfect equilibria in sequential bargaining games with nonlinear utility functions bargaining over a price between a seller and a buyer is analyzed as a noncooperative sequential game the perfect equilibrium of the game depends on the shape of the players utility functions which may be nonlinear it also depends on the discount rates of the two players if discount rates approach zero and the ratio between them equals one the equilibrium price will correspond to the nash bargaining solution a bargaining game with a finite number of potential bargaining periods is also studied the equilibrium price approaches the nash bargaining price when the number of potential periods becomes large

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

quick responses in duopoly ensure monopoly pricing if firms in a homogeneous duopoly game can respond with negligible delay to their rival s price changes equilibrium is unique at the monopoly price

is comprehensive income superior to net income as a measure of firm performance abstract with the exception of financial firms we find no evidence that comprehensive income is more strongly associated with returns market value or better predicts future cash flows income than net income moreover the only component of comprehensive income that improves the association between income and returns is the marketable securities adjustment our results do not support the claim that comprehensive income is a better measure of firm performance than net income our results also raise questions about the appropriateness of items included in sfas 130 comprehensive income as well as the need for mandating uniform comprehensive income disclosures for all industries

asymptotic efficiency in large exchange economies with asymmetric information the authors provide conditions on an exchange economy with asymmetric information that guarantee that when the economy is replicated sufficiently often there will be an allocation that is incentive compatible individually rational and nearly efficient the main theorem covers both the case in which aggregate uncertainty remains when the economy is replicated and the case in which replication eliminates aggregate uncertainty in addition the authors demonstrate how their theorem does or does not apply to standard asymmetric information problems such as the buyer s bid double auction problem akerlof s lemons problem and insurance with asymmetric information copyright 1992 by the econometric society

an exploration of the eductive justifications of the rational expectations hypothesis this paper examines justifications of the rational expectations hypothesis that rely on the analysis of the agents mental forecasting educing activity which involves forecasting the forecasts of others etc the corresponding concept of eductive learning stability based on the game theoretical concept of rationalizability is primarily used within the classical muth model conditions for coordination of beliefs are interpreted and discussed they are robust to the introduction of noise more generally eductive stability fits economic intuition on coordination stability increases when the industry product differentiation increases and when decisions are sequential and observable copyright 1992 by american economic association

gaap versus the street an empirical assessment of two alternative definitions of earnings managers security analysts investors and the press rely increasingly on modified definitions of gaap net income known by such names as operating and pro forma earnings we document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where gaap and street earnings differ further there is a very strong bias toward the reporting of a street earnings number that exceeds the gaap earnings number we also show that the market response to the street earnings number has displaced gaap earnings as a primary determinant of stock prices finally through an analysis of earnings releases we show that management has taken a proactive role in defining and emphasizing the street number when communicating to analysts and investors

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

the political economy of scandinavian neutrality the article examines whether three of the neutral nations of eu rope sweden switzerland and finland have adhered to their choice of armed neu trality by being self reliant on their own defenses using a joint product model the authors specify a reduced form equation for a nation s demand for military expenditures empirical estimates of these demands suggest that sweden free rod e on nato after institution of the doctrine of flexible response however the o thertwo netural nations have been self reliant throughout the period 1957 82 w ith pooled data cross equation restrictions highlight theessential differences between nato and nonaligned scandinavian countries copyright 1986 by the editors of the scandinavian journal of economics

on noncooperative oligopoly equilibrium in the multiple leader follower game abstract in this paper we provide new proofs of existence and uniqueness of a stackelberg market equilibrium for a multiple leader follower noncooperative oligopoly model in which heterogeneous firms compete on quantities to this end we consider a two stage game of complete and perfect information in which many leaders interact strategically with many followers the stackelberg market equilibrium constitutes a pure strategy subgame perfect nash equilibrium of this game existence and uniqueness are more difficult to handle in this framework insofar as the presence of several leaders and followers displays a richer set of strategic interactions then to prove existence we notably provide a new procedure to determine the conditions under which the optimal behavior of the followers may be written as functions of the sole strategy profile of the leaders some examples outline our procedure and discuss our assumptions

design innovation and fashion cycles a model of fashion cycles is developed in which designs are used as a signaling device in a dating game a monopolist periodically creates a new design over time the price of the design falls as it spreads across the population once sufficiently many consumers own the design it is profitable to create a new design and thereby render the old design obsolete this paper gives conditions under which all consumers would be better off by banning the use of fashion competition among designers may lead to less frequent changes in fashion and to higher prices than monopoly copyright 1995 by american economic association

equilibrium without independence abstract because players whose preferences violate the von neumann morgenstern independence axiom may be unwilling to randomize as mixed strategy nash equilibrium would require a nash equilibrium may not exist without independence this paper generalizes nash s definition of equilibrium retaining its rational expectations spirit but relaxing its requirement that a player must bear as much uncertainty about his own strategy choice as other players do the resulting notion equilibrium in beliefs is equivalent to nash equilibrium when independence is satisfied but exists without independence this makes it possible to study the robustness of equilibrium comparative statics results to violations of independence

on the status of the nash type of noncooperative equilibrium in economic theory in economic theory the nash type of noncooperative equilibrium is a widely used equilibrium concept nevertheless the concept is frequently misunderstood and misleading explanations and interpretations are often given this paper presents a sample of such frequently appearing misleading explanations and goes on to explain why they are misleading the case for using the nash noncooperative equilibrium concept is stronger than what is implied by the many misleading statements found in the literature a basic issue is whether it can be argued that decisions in accordance with the noncooperative equilibrium theory are individually rational decisions this issue is not covered by the classical rationality postulate in economic theory this problem is tackled by stating certain postulates which may be taken as defining individual rationality in situations of noncooperative interaction it is shown that nash behavior satisfies these postulates

social identity and preferences social identities prescribe behaviors for people we identify the marginal behavioral effect of these norms on discount rates and risk aversion by measuring how laboratory subjects choices change when an aspect of social identity is made salient when we make ethnic identity salient to asian american subjects they make more patient choices when we make racial identity salient to black subjects non immigrant blacks but not immigrant blacks make more patient choices making gender identity salient has no effect on intertemporal or risk choices

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

biased forecasts or biased earnings the role of reported earnings in explaining apparent bias and over underreaction in analysts earnings forecasts the extensive literature that investigates whether analysts earnings forecasts are biased and or inefficient has produced conflicting evidence and no definitive answers to either question this paper shows how two relatively small but statistically influential asymmetries in the tail and the middle of distributions of analysts forecast errors can exaggerate or obscure evidence consistent with analyst bias and inefficiency leading to inconsistent inferences we identify an empirical link between firms recognition of unexpected accruals and the presence of the two asymmetries in distributions of forecast errors that suggests that firm reporting choices play an important role in determining analysts forecast errors r 2003 elsevier b v all rights reserved

flexible and semiflexible consumer demands with quadratic engel curves in this paper we introduce three flexible consumer demand systems in which expenditures on goods are quadratic functions of income we view these alternatives as to the demand systems used heretofore in the empirical modeling of rank three demands namely those in which expenditure shares are quadratic functions of the logarithm of income curvature conditions required by theory can be imposed locally during the estimation for each and a semiflexible version can be estimated for illustrative purposes we estimate various forms of two of the systems using canadian data on seven categories of goods for the period 1947 to 1995

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

axiomatic characterizations of rational choice in strategic environments for more than forty years economists have wrestled with the elusive notion of rational behavior in strategic environments generating a variety of competing approaches even for simple simultaneous move games four distinct solution concepts including the notions of nash equilibria correlated equilibria rationalizability and iterated dominance currently have some standing as theories of strategic rationality here i propose four axioms for rational choice in strategic environments and use these to characterize the sets of pure strategies that players may select under each of the solution concepts mentioned above my results underscore both the similarities and differences between the four concepts

rational expectations in games a player i s actions in a game are determined by her beliefs about other players these depend on the game s real life context not only its formal description define a game situation as a game together with such beliefs call the beliefs and i s resulting expectation rational if there is common knowledge of rationality and a common prior in two person zero sum games i s only rational expectation is the game s value in an arbitrary game g we characterize i s rational expectations in terms of the correlated equilibria of the doubled game 2g in which each of i s strategies in g appears twice

identity and schooling some lessons for the economics of education abstract this review culls noneconomic literature on education by sociologists anthropologists and practitioners to present a new economic theory of students and schools this theory elaborates two themes that have eluded economic analysis first is the student as decision maker whose primary motivation is her identity second is a conception of the school as a social institution this framework suggests a new perspective on questions such as resource allocation and school reform it explains why some educational policies succeed and others fail we show how sociological variables may affect outcomes and suggest ways economists can incorporate them into theoretical and empirical research

subjective games and equilibria applying the concepts of nash bayesian and correlated equilibria to the analysis of strategic interaction requires that players possess objective knowledge of the game and opponents strategies such knowledge is often not available the proposed notions of subjective games and of subjective nash and correlated equilibria replace essential but unavailable objective knowledge by subjective assessments when playing a subjective game repeatedly subjective optimizers converge to a subjective equilibrium we apply this approach to some well known examples including single and multi person multi arm bandit games and repeated cournot oligopoly games journal of economic literature classification numbers c73 and c83

adverse selection with endogenous information in insurance markets abstract models of adverse selection assume that risk type is known to the consumer but not to the insurer many analyses suggest that information has zero social value and negative prior value why then would consumers become informed what is the incentive to gather information and why does adverse selection arise we show that the private value of information is non negative only if insurers cannot observe consumers information status or if consumers can conceal their informational status we examine the existence and characterization of equilibria under different configurations of information costs and benefits finally we examine some welfare implications of the endogenous information model for public policy regarding genetic testing and for state regulations concerning hiv testing

a signaling explanation for charity this article examines a novel but plausible motive for charitable giving charitable donations which are observable can signal wealth or income the signaling equilibrium of charitable donations has attractive properties donations increase proportionally with population size governmental funding for public goods affects private charity only through an income effect crowding out need not be complete income redistribution is generically nonneutral increasing the spread between the poorest and richest person in a community tends to increase private donations our theory are based on the assumption that people are willing to make charitable donations even if they will not increase provision of the public good the data on charitable giving support the hypothesis that donors donate at least partly for signaling purposes rather than only to aid the recipient or to obtain satisfactions unrelated to status though charitable organizations usually report donations within categories thus not allowing perfect revelation for analytical tractability we shall consider an equilibrium with perfect revelation and a continuum of types as characterized in george j mailath 1987 and norman j ireland 1994

a temporal analysis of earnings surprises profits versus losses i show that median earnings surprise has shifted rightward from small negative miss analyst estimates by a small amount to zero meet analyst estimates exactly to small positive beat analyst estimates by a small amount during the 16 years 1984 to 1999 i show that a rightward temporal shift in median surprise from negative to positive describes earnings but neither profits nor losses median profit surprise shifts within the positive quadrant from zero to one cent per share median loss surprise shifts within the negative quadrant from extreme negative about 33 cents per share to zero i show that the median surprise for profits exceeds that for losses in every year i document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses but i find a greater frequency of profits that either meet or beat analyst estimates in every year i find a significant positive temporal trend in positive profits that are a little bit of good news and a significant negative temporal trend in managers who report losses that are an extreme amount of bad news my results are robust to the four internal validity threats i consider namely temporal changes in 1 analyst forecast accuracy 2 the mix of earnings of one sign preceded by earnings of another sign four quarters ago 3 the timeliness of the most recent analyst forecast and 4 the i b e s definition of actual earnings i find that managers of growth firms are relatively more likely than managers of value firms to report good news profits i show that when they do report positive profit surprises managers of growth firms are more likely to report a little bit of good news in every year

game theoretic models for climate change negotiations abstract negotiations to reduce greenhouse gas accumulation in the atmosphere are modeled as extensive games of perfect information various solution concepts such as nash equilibrium reaction function equilibrium correlated equilibrium and bargaining solutions are applied analyzed and computed special reduction techniques are used when the size of the game tree becomes excessive a new solution concept the tree correlated equilibrium is also introduced main features of an excel add in designed to compute various solutions are briefly described and a sample policy analysis for a special negotiating scenario is discussed