do soccer players play the mixed strategy nash equilibrium mixed strategy nash equilibrium msne is a commonly used solution concept in game theoretic models in various fields in economics management and other disciplines but the experimental results whether the msne predicts well actual play in games is mixed consequently the evidence for naturally occurring games in which the msne predicts the outcome well is of great importance as it can justify the vast use of msne in models the game between the kicker and the goalkeeper in soccer penalty kicks is a real world game that can be used to examine the application of the msne concept or its accuracy because payoffs are a common knowledge the players have huge incentives to play correctly the game is simple enough to analyse its nash equilibrium is in mixed strategies and players actions can be observed we collected and analysed the data on the direction of kicks and jumps in penalty kicks in various top leagues and tournaments our analysis suggests that the msne predictions are the closest to the act

time is money time pressure incentives and the quality of decision making many decisions in economics and finance have to be made under severe time pressure furthermore payoffs frequently depend on the speed of decision making as for instance when buying and selling stocks in this paper we examine the influence of time pressure and time dependent incentive schemes on the quality of decision making in an experimental beauty contest game we find that convergence to equilibrium is faster and payoffs are higher under low time pressure than under high time pressure interestingly time dependent payoffs under high time pressure lead to significantly quicker decision making without reducing the quality of decisions

political motivations and electoral competition equilibrium analysis and experimental evidence we study both theoretically and experimentally the complete set of nash equilibria of a classical one dimensional majority rule election game with two candidates who might be interested in power as well as in ideology but not necessarily in the same way apart from obtaining the well known median voter result and the two sided policy differentiation outcome the paper uncovers the existence of two new equilibrium configurations called one sided and probabilistic policy differentiation respectively our analysis shows how these equilibrium configurations depend on the relative interests in power resp ideology and the uncertainty about voters preferences the theoretical predictions are supported by the data collected from a series of laboratory experiments as we observe convergence to the nash equilibrium values at the aggregate as well as the individual levels in all treatments and the comparative statics effects across treatments are as predicted by the theory

reconsidering the impact of national soccer results on the ftse 100 in past decades many empirical studies revealed return anomalies in many different asset classes and markets very recent publications have however even found evidence that stock markets react to the results of soccer matches in this article we argue that such empirical studies should be analysed carefully we thus endorse the use of replication studies to verify results consequently by rebuilding the study of ashton et al 2003 we are able to detect mistakes in the empirical set up based on these findings we demonstrate how even minor flaws can have a crucial influence on the results of such studies and point out pitfalls that are frequently encountered we furthermore emphasize the importance of robustness checks to validate the results of empirical studies

the role of economic and policy variables in energy efficient retrofitting assessment a stochastic life cycle costing methodology abstract energy saving is a major policy objective worldwide and in the eu in particular evaluating the convenience of energy efficient investments however is complex this paper aims to apply stochastic life cycle costing to assess the economic value of energy efficient building retrofitting investments the proposed approach investigates how macroeconomic variables affect such an evaluation by explicitly taking into account their interdependent stochastic nature consequently the economic evaluation of an investment is itself stochastic thus expressing both its expected value and its inherent uncertainty and risk on this basis an illustrative case study is presented where alternative designs of the energy saving intervention are compared and a sensitivity analysis performed to identify the determinants of the lcc outcome and of its variability in terms of policy implications a tool providing a sounder evaluation of the convenience of such investments can suggest when and to what extent incentives may be appropriate to facilitate these investments and what possible financial instruments could be put forward in order to reduce the associated risk

reconciling sustainability and discounting in cost benefit analysis a methodological proposal abstract the incorporation of the intergenerational equity objective has rendered the traditional cost benefit analysis cba approach obsolete for the evaluation of projects presenting an important number of environmental externalities and for those whose impacts extend throughout a long period of time based on the assumption that applying a discount rate rewards current consumption and therefore that it is only possible to introduce a certain intergenerational equity in a cost benefit analysis in this work we propose an approach to discounting based on a different rationale for tangible and intangible effects we designed two indicators of environmental profitability a the intergenerational transfer amount ita which quantifies in monetary units what the current generation is willing to pass on future generations when an environmental restoration project is carried out and b the critical environmental rate cer measures the implicit environmental profitability these concepts were tested through an empirical case study pertaining to the assessment of an erosion control project in the southeast of spain the results yield traditional profitability indicators that are higher and probably closer to the real values set by the contemporary society the information provided by the environmental profitability indicators proposed renders more transparency to the quantification of the levels of intergenerational equity applied thereby facilitating the difficult reconciliation of the cba technique with the objective of sustainability

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

close but no cigar the bimodal rewards to prize seeking this article examines the economic effects of prizes with implications for the diversity of market positions especially in cultural fields many prizes have three notable features that together yield an emergent reward structure 1 consumers treat prizes as judgment devices when making purchase decisions 2 prizes introduce sharp discontinuities between winners and also rans and 3 appealing to prize juries requires costly sacrifices of mass audience appeal when all three conditions obtain winning a prize is valuable but seeking it is costly so trying and failing yields the worst outcome a logic we characterize as a tullock lottery we test the model with analyses of oscar nominations and hollywood films from 1985 through 2009 we create an innovative measure of prize seeking or oscar appeal on the basis of similarity to recent nominees in terms of such things as genre plot keywords and release date we then show that oscar appeal has no effect on profitability however this zero order relationship conceals that returns to strong oscar appeals are bimodal with super normal returns for nominees and large losses for snubs we then argue that the effect of judgment devices on fields depends on how they structure and refract information

the response of worker effort to piece rates we measure the elasticity of worker effort with respect to changes in the piece rate using panel data collected from the payroll records of a british columbia tree planting firm our data contain information on daily worker productivity and the piece rate received over a five month period using a structural model to control for the endogeneity of the piece rate we estimate this elasticity to be approximately 2 14 we also calculate a nonstructural lower bound to this elasticity equal to 0 77 structural estimation also allows us to perform policy experiments and to compare firm profits under alternative compensation systems our results suggest that profits would increase by at least 17 percent were the firm to implement the optimal static contract as predicted by principal agent theory this increase in profits would be due to capturing worker rents after the revelation of private information over ability yet only a negligible proportion of these rents could be captured while inducing workers to reveal ability truthfully suggesting that dynamic considerations were important in determining the firm s actual choice of contract

the evolution of hyperbolic discounting implications for truly social valuation of the future abstract we explore the standard expected utility model and alternatives to it we then examine the behavioral and neurological evidence for hyperbolic discounting we discuss evidence related to the neurological and behavioral evolution of discounting in non human animals and in humans we explore new findings about the importance of sociality in human behavior and the implications for truly social time preference finally we discuss the implications of the neurological evidence on discounting for social environmental valuation in particular the implications for very long run decisions such as those involved in climate change mitigation and biodiversity preservation

trust trustworthiness and business success lab and field findings from entrepreneurs this article contributes to the literature on trust and small businesses in developing countries by linking the level of trust in others that entrepreneurs display in a lab setting to sales data outside of the lab the results show a robust positive correlation between trust and business success with sales used as a measure of success the successful entrepreneurs invested in trust more than the less successful ones did in the lab trusting in others is highly profitable with successful entrepreneurs doing so to the degree required to maximize revenue however i found no association between trustworthiness and business success jel o17 l26 c91

nerves of steel stress work performance and elite athletes there is a notable shortage of empirical research directed at measuring the magnitude and direction of stress effects on performance in a controlled environment one reason for this is the inherent difficulties in identifying and isolating direct performance measures for individuals additionally most traditional work environments contain a multitude of exogenous factors impacting individual performance but controlling for all such factors is generally unfeasible omitted variable bias moreover instead of asking individuals about their self reported stress levels we observe workers behaviour in situations that can be classified as stressful for this reason we have stepped outside the traditional workplace in an attempt to gain greater controllability of these factors using the sports environment as our experimental space we empirically investigate the relationship between stress and performance in an extreme pressure situation football penalty kicks in a winner take all sporting environment

scoring on the stock exchange the effect of football matches on stock market returns an event study we analyse the effect of results of football matches on the stock market performance of football teams we analyse 1274 matches of eight teams in the national and european competition during 2000 2004 we find that the stock market response is significant and positive for victories and negative for defeats the response is significantly stronger in the case of defeat the response is stronger for matches in the european competition than for those in the national competition unexpected results have a stronger impact for european matches than expected ones but this is not the case in the national competition

testing mixed strategy equilibria when players are heterogeneous the case of penalty kicks in soccer the concept of mixed strategy is a fundamental component of game theory and its normative importance is undisputed however its empirical relevance has sometimes been viewed with skepticism the main concern over the practical usefulness of mixed strategies relates to the indifference property of a mixedstrategy equilibrium in order to be willing to play a mixed strategy an agent must be indifferent between each of the pure strategies that are played with positive probability in the mixed strategy as well as any combination of those strategies given that the agent is indifferent across these many strategies there is no bene t to selecting precisely the strategy that induces the opponent to be indifferent as required for equilibrium why an agent would in the absence of communication between players choose exactly one particular randomization is not clear of course whether agents in real life actually play nash equilibrium mixed strategies is ultimately an empirical question the evidence to date on this issue is based almost exclusively on laboratory experiments e g barry o neill 1987 amnon rapoport and richard b boebel 1992 dilip mookherjee and barry sopher 1994 jack ochs 1995 kevin a mccabe et al 2000 the results of these experiments are mixed o neill 1987 concludes that his experimental evidence is consistent with nash mixed strategies but that conclusion was contested by james n brown and robert w rosenthal 1990 with the exception of mccabe et al 2000 which looks at a three person game the other papers generally reject the nash mixedstrategy equilibrium while much has been learned in the laboratory there are inherent limitations to such studies it is sometimes argued that behavior in the simpli ed arti cial setting of games played in such experiments need not mimic real life behavior in addition even if individuals behave in ways that are inconsistent with optimizing behavior in the lab market forces may discipline such behavior in the real world finally interpretation of experiments rely on the assumption that the subjects are maximizing the monetary outcome of the game whereas there may be other preferences at work among subjects e g attempting to avoid looking foolish that distort the results tests of mixed strategies in nonexperimental data are quite scarce in real life the games played are typically quite complex with large strategy spaces that are not fully speci ed ex ante in addition preferences of the actors may not be perfectly known we are aware of only one paper in a similar spirit to our own research using data from classic tennis matches mark walker and john wooders 2001 test whether the probability the player who serves the ball wins the point is equal for serves to the right and chiappori department of economics university of chicago 1126 east 59th street chicago il 60637 levitt department of economics university of chicago groseclose graduate school of business stanford university 518 memorial way stanford ca 94305 the paper was presented at games 2000 in bilbao and at seminars in paris and chicago we thank d braun j m conterno r guesnerie d heller d mengual p reny b salanie and especially j l ettori for comments and suggestions and m mazzocco and f bos for excellent research assistance any errors are ours 1 the theoretical arguments given in defense of the concept of mixed strategy equilibria relate either to puri cation john c harsanyi 1973 or to the minimax property of the equilibrium strategy in zero sum games for recent elaborations on these ideas see authur j robson 1994 and phil reny and robson 2001 2 the ultimatum game is one instance in which experimental play of subjects diverges substantially from the predicted nash equilibrium robert slonim and alvin e roth 1998 demonstrate that raising the monetary payoffs to experiment participants induces behavior closer to that predicted by theory although some disparity persists

what shapes player performance in soccer empirical findings from a panel analysis in this article we investigate the pay performance relationship of soccer players using individual data from eight seasons of the german soccer league bundesliga we find a nonlinear pay performance relationship indicating that salary does indeed affect individual performance the results further show that player performance is affected not only by absolute income level but also by relative income position an additional analysis of the performance impact of team effects provides evidence of a direct impact of team mate attributes on individual player performance

financial market activity under capital controls lessons from extreme events abstract we investigate the contemporaneous relation between return and transaction volume in distribution tails under the restrictions on transactions due to the capital controls implemented on the athens stock exchange in july 2015 we use bivariate extreme value theory to model the tail dependence structure we show that restrictions on transactions have an impact on the activity of market participants

exploitable actions of believers in the law of small numbers in repeated constant sum games abstract in repeated fixed pair constant sum games with unique equilibria in mixed strategies such as matching pennies the subgame perfect equilibrium is repeating the stage game mixed strategy equilibrium action in such games rational players avoid strategies that are exploitable in that current actions either deviate systematically from the equilibrium action probabilities or fail to be serially independent of past actions i revisit classic experiments and find that subjects actions are sometimes exploitable because they are serially dependent subjects have difficulty in producing serially independent actions and in recognizing serially dependent sequences due to a bias called local representativeness

stopping on nine evidence of heuristic managerial decision making in major league baseball pitcher substitutions economic agents who exhibit left digit bias over emphasize round numbers using data on managers pitcher substitution decisions in major league baseball i find that managers remove starting pitchers more often when the next pitch will result in a pitch count ending in zero unlike counts ending in nine pitch counts ending in eight do not exhibit higher substitution rates despite the fact that pitchers usually throw multiple pitches before the manager s next decision opportunity managers apparently use rules of thumb that emphasize leftmost digits and ignore at least some future consequences of present actions however these significant biases disappear when the stakes are high i find no evidence of disproportionate substitutions on the nine s in close games and the final digit of the pitch count does not discontinuously affect the probability of winning managers act in a manner consistent with rational inattention using heuristics only when the stakes are low

entry in monopoly market this paper develops new empirical models of market concentration from game theoretic models of entry we construct our models from inequality conditions that describe entrants equilibrium strategies in simultaneous move and sequential move games and use them to study the effects of entry in isolated monopoly markets for new automobiles from estimates of the market size necessary to support one and two dealers we conclude that monopoly dealers do not block the entry of a second dealer we also find that entry does not cause price cost margins to fall by much

correlated payoffs in the inspection game some theory and an application to corruption the inspection game as formulated by tsebelis am polit sci rev 83 77 91 1989 has the counterintuitive implication that crime is unaffected by the magnitude of the penalty this paper demonstrates that to attain this outcome it is necessary to assume independence of enforcer and offender payoffs given correlated payoffs the comparative statics of the equilibrium yield an inverse relationship between crime and the severity of the sanction in an application we enrich the framework of tsebelis by adding corruption stages and show that this can imply such a correlation of payoffs another interesting finding is that harsher anticorruption measures can increase crime incentives

an empirical study of an auction with asymmetric information this paper examines federal auctions for drain age leases on the outer continental shelf from 1959 to 1969 these are leases that are adjacent to tracts on which a deposit has been discovered the authors find that the data strongly support the hypotheses that neighbor firms are better informed about the value of a lease than nonneighbor firms that neighbor firms coordinate their bidding decisions and that both types of firms bid strategically in accordance with the bayesian nash equilibrium model for first price sealed bid auctions with asymmetric information

do professionals choke under pressure high rewards or the threat of severe punishment provide strong motivation but also create psychological pressure which might induce performance decrements by analyzing the performance of professional football players in penalty kick situations the paper provides empirical evidence for the existence of detrimental incentive effects two pressure variables are considered in particular 1 the importance of success and 2 the presence of spectators there are plenty of situations in which pressure arises in the workplace knowing how individuals perform under pressure conditions is crucial because it has implications for the design of the workplace and the design of incentive schemes

professionals play minimax the implications of the minimax theorem are tested using natural data the tests use a unique data set from penalty kicks in professional soccer games in this natural setting experts play a one shot two person zero sum game the results of the tests are remarkably consistent with equilibrium play in every respect i winning probabilities are statistically identical across strategies for players ii players choices are serially independent the tests have substantial power to distinguish equilibrium play from disequilibrium alternatives these results represent the first time that both implications of von neumann s minimax theorem are supported under natural conditions during the last few decades game theory has contributed to a reshaping of important aspects of the methodology of economics and other social sciences in a large part this is because the language concepts and techniques of non cooperative game theory have become central to many areas of the discipline undoubtedly studying the interaction of ideally rational players greatly aids our understanding of the behaviour of real individuals firms and other agents moreover as kreps 1991 remarks studying the former should aim at understanding the latter the point of game theory is to help economists understand and predict what will happen in economic social and political contexts theoretical contributions should thus feed back to empirical analysis however testing the implications of the theory has proven extremely difficult in the literature the primary reason is that many predictions often hinge on properties of the utility functions and the values of the rewards used even when predictions are invariant over classes of preferences data on rewards are seldom available in natural settings moreover there is often great difficulty in determining strategy sets and in measuring individuals choices effort levels and the incentive structures they face as a result even the most fundamental predictions of game theoretical models have not yet been supported empirically in real situations in view of the substantial problems associated with testing theoretical predictions using natural data many authors have been compelled to test them in experimental settings interestingly enough despite the controlled structure of experiments the results of many experiments during the last few decades typically reject the assumption that subjects are playing according to the theoretical implications of equilibrium play for instance a number of experiments have evaluated the empirical validity of von neumann s minimax theory for two person zero sum games a theory that occupies a central position in our understanding of strategic situations the results have been mixed and are often rather negative see for instance brown and rosenthal 1990 rapoport and boebel 1992 camerer 2003 and the references therein

zero discounting can compensate future generations for climate damage abstract in cost benefit analysis of climate policy there are two main approaches to discounting each with implications conflicting with our moral intuitions thus discounted utilitarianism implies that we hardly need to protect future generations against climate change while classical utilitarianism implies that we should reduce our consumption across the board to benefit future generations the insolubility of the debate derives from the fact that both classical and discounted utilitarianism permit only a single discount rate for all consequences occurring in the same future year while our intuitions clearly do distinguish between consequences depending on whether we cause adverse effects on other people s interests and violate their rights most people share the moral intuition that we ought to refrain from harming others and ought to compensate them if we were unable to prevent harm to regain a reflective equilibrium between such deontological intuitions and economic theory there is a need to accept different discount rates for different situations a zero consumption discount rate in the case of cost benefit analysis of measures to prevent wrongful harm to future generations and standard discounting in all other cases applying a zero consumption discount rate means that future generations are automatically largely compensated for climate damage that remains unmitigated

search and price dispersion in online grocery markets abstract consumers often purchase multiple products at a time from retailers creating multi product incentives for search in this paper we consider how product variety affects consumer search intensity and the dispersion of prices in multi product retail markets we employ online grocery pricing data from four large retailers in the uk to estimate search costs and equilibrium price dispersion for food products under circumstances where i consumers search for single products and ii consumers search for multiple products at once we compare estimates in each case between a model in which utility increases with product variety and a model in which utility is not a function of variety relative to our preferred specification with variety effects in utility we find estimates of both search cost and search frequency to be biased upwards in single product settings when variety effects are ignored however we find estimates of search costs are biased upwards while search frequency is biased downwards in multi product settings when variety effects in utility are ignored

incentives and outcomes in a strategic setting the 3 points for a win system in soccer i introduction the behavior of agents in a strategic contest is a central concern of economic models and the notion of nash equilibrium and various extensions and refinements thereof is the guiding principle of analysis results in this setting are often sensitive to the structure of the interaction and taking models predictions to an empirical test is a notoriously difficult task contests are the quintessential characteristic of sport and thus sport situations share a number of features with economic problems that arise in many other contexts because sport competitions have clear cut rules competitors are strongly motivated and relevant data are often observable sport settings are proving to be a fruitful area of empirical inquiry to test important tenets of economic models for example the notion of nash equilibrium has been put to a direct test by using data on serve choices in tennis matches in walker and wooders 2001 and hsu huang and tang 2007 soccer penalty kicks data in chiappori levitt and grose close 2002 and palacios huerta 2003 and near post far post soccer goals in moschini 2004 the results of these studies are both interesting and encouraging and broadly support the notion that players choices are in accord with equilibrium predictions in this article i propose to use soccer association football data in a new direction to investigate the impact of a major structural change in the organization of soccer competitions that took place in the mid 1990s most national soccer competitions are typically organized as double round robin tournaments in which every team plays all others in its league twice at home and away points earned in every match are added together and rewards are assigned according to the totals earned in the entire competition 1 unlike some other sports drawn matches are common in soccer and the point system determines their importance relative to victories the traditional way to handle that was the 2 l 0 system whereby a tie was worth half as much as a victory and a loss was worth nothing england first replaced that with a 3 1 0 system 3 points for a win and 1 point for a tie starting in the 1981 1982 season in an effort to promote a more attacking brand of soccer a few other countries followed suit in the years that followed but the new system became widespread after it was embraced by federation internationale de football association fifa the game s world governing body to structure the initial round robin phase of the 1994 world cup in the years that followed virtually every country adopted the new 3 point system the widespread and systematic introduction of the 3 point system in soccer provides an interesting natural experiment to investigate the effects of changing rewards and incentives on outcomes in a tournament setting did the increased weight given to victories translate into more attacking play and goals as per the hopeful expectation and is that really what one should expect from such a structural change anyway a few studies that have investigated such questions have stressed some negative results brocas and carrillo 2004 develop a conceptual model of a soccer match as a two stage game and cast doubts on the expectation that the rule change in question necessarily induces more attack their main point is that the new system while encouraging more attack toward the end of the game may also induce teams to play more defensively at the beginning of the game correira guedes and machado 2002 similarly note possible unintended effects of the point system change due to asymmetric abilities underdogs facing rivals of superior abilities may actually reduce their level of offense garicano and palacios huerta 2005 emphasize the added incentive for sabotage tactics that the new point system may induce in this article i reconsider the question of whether the introduction of the 3 1 0 point system in soccer actually has had significant effects

does player specialization predict player actions evidence from penalty kicks at fifa world cup and uefa euro cup penalty kicks are analysed in the literature as real life experiments for assessing the use of rational mixed strategies by professional players however each penalty kick cannot be considered a repetition of the same event because of the varying background conditions in particular the heterogeneous ability of different players consequently aggregate statistics over data sets composed of a large number of penalty kicks mediate the behaviour of the players in different games and the properties of optimal mixed strategies cannot be tested directly because of aggregation bias in this article we model the heterogeneous ability of players we then test the hypothesis that differently talented players randomize over different actions to achieve this aim we study a data set that collects penalties kicked during shoot out series in the last editions of fifa world cup and uefa euro cup 1994 2012 where kickers are categorized as specialists and non specialists the results support our theoretical predi

do firms maximize evidence from professional football this paper examines a single narrow decision the choice on fourth down in the national football league between kicking and trying for a first down as a case study of the standard view that competition in the goods capital and labor markets leads firms to make maximizing choices play by play data and dynamic programming are used to estimate the average payoffs to kicking and trying for a first down under different circumstances examination of actual decisions shows systematic clear cut and overwhelmingly statistically significant departures from the decisions that would maximize teams chances of winning possible reasons for the departures are considered

offensive performance omitted variables and the value of speed in baseball abstract this paper critiques from an economic perspective published results on the value of base stealing in baseball augmenting previous specifications for the production function for runs parallels the control a simulation study imposed on teams overall footspeed recovering economically sensible results

equilibrium selection payoff or risk dominance the case of the weakest link abstract when a game has more than one nash equilibrium a coordination issue arises pareto and risk dominations are two available criteria to select one of them there is a debate on how to use these criteria when they point in different directions we study the first wave of the weakest link show broadcast in france to generate field data on this issue observed behavior can be rationalized in terms of pareto and risk domination the payoff dominant equilibrium is selected if it is not too risky otherwise players coordinate themselves according to risk dominance this rationalization is in line with the experimental literature

an examination of the influence of theory and individual theorists on empirical research in microeconomics most economists would concur that an important role of economic theory is to influence the direction of empirical research either by posing new questions or by suggesting new answers to old questions whether or not modem theory should be judged to be a success on that metric is a frequently debated question but one on which there has been little systematic investigation in this paper we provide some preliminary empirical evidence on the extent to which various fields of economic theory as well as specific theorists have succeeded in influencing the path followed by empirical research in the area of microeconomics based on our analysis of all empirical microeconomics papers published in three leading journals over a three year period we arrive at a number of conclusions concerning the impact of theory on empirical research our first finding is that the set of theory papers cited as the primary motivation for leading empirical work is surprisingly dispersed very few individual works of theory seem to have exerted a great influence in the 149 empirical papers we consider one author gary becker is cited 15 times but no other author is cited more than 10 times no single paper is cited more than five times a second finding is that empirical researchers behave as if they are heavily influenced by recent theoretical contributions among the theory pa

on discounting and voting in a simple growth model abstract in dynamic resource allocation models the non existence of voting equilibria is a generic phenomenon due to the multi dimensionality of the choice space even if agents are heterogeneous only in their discount factors nevertheless at each point in time there may exist a median voter whose preferred instantaneous consumption rate is supported by a majority of agents based on this observation we propose an institutional setup intertemporal majority voting in a ramsey type growth model with common consumption and heterogeneous agents and show that it provides a microfoundation of the choice of the optimal consumption stream of the median agent while the corresponding intertemporal consumption stream is in general not a condorcet winner among all feasible paths its induced instantaneous consumption rates receive a majority at each point in time in the proposed intertemporal majority voting procedure we also provide a characterization of stationary voting equilibria in the case where agents may differ not only in their time preferences but also in their felicity functions

psychological pressure in competitive environments new evidence from randomized natural experiments dynamic competitive settings may create psychological pressure when feedback about the performance of competitors is provided before the end of the competition such psychological pressure could produce a first mover advantage despite a priori equal winning probabilities using data from a randomized natural experiment penalty shootouts in soccer we reexamine evidence by apesteguia and palacios huerta apesteguia j palacios huerta i 2010 psychological pressure in competitive environments evidence from a randomized natural experiment amer econom rev 100 5 2548 2564 they report a 21 percentage point advantage for first movers over second movers in terms of winning probabilities extending their sample of 129 shootouts to 540 we fail to detect any significant first mover advantage our results are fully consistent with recent evidence from other sports contests this paper was accepted by teck ho behavioral economics

assessing the economic viability of alternative water resources in water scarce regions combining economic valuation cost benefit analysis and discounting abstract this paper demonstrates a comprehensive methodology for assessing the viability of an environmental management plan that has long run economic and ecological impacts the case study under consideration is the implementation of a water resource management plan in a water scarce region of the world namely cyprus specifically this plan proposes to replenish a depleting aquifer with treated wastewater the proposed methodology first identifies the key stakeholder groups farmers and the general public who are hypothesized to derive economic values benefits from implementation of this plan and then uses stated preference methods to capture the total economic value of these benefits benefits are aggregated over the relevant populations of these stakeholder groups and weighed against the total costs of implementing the plan in a long run cost benefit analysis cba an econometrically estimated time declining trajectory of discount rates is used for the cba in order to assess the long run sustainability of the plan the results reveal that the net benefit trajectory estimated with the time declining discount rate takes one and a half to three times as long to come to a plateau compared to the constant discount rates of 3 5 and 6 emphasizing the importance of using declining discount rates and capturing the entirety of the benefits generated by such plans this methodology is particularly recommended for providing much needed information to support the implementation of the eu water framework directive which advocates the use of cba with consideration of the notion of sustainability for achieving the good water status for all european waters

coordination focal points and voting in strategic situations a natural experiment this paper studies coordination in a multi stage elimination tournament with large monetary incentives and a diversified subject pool drawn from the adult british population in the tournament members of an ad hoc team earn money by answering general knowledge questions and then eliminate one contestant by plurality voting without prior communication we find that in the early rounds of the tournament contestants use a focal principle and coordinate on one of the multiple nash equilibria in pure strategies by eliminating the weakest member of the team however in the later rounds contestants switch to playing a mixed strategy nash equilibrium

decision time and steps of reasoning in a competitive market entry game entry decisions in market entry games usually depend on the belief about how many others are entering the market the belief about the own rank in a real effort task and subjects risk preferences in this paper i am able to replicate these basic results and examine two further dimensions i the level of strategic sophistication which has a positive impact on entry decisions and ii the impact of time pressure which has a partly negative influence on entry rates furthermore when ranks are determined using a real effort task differences in entry rates are explainable by higher competitiveness of males additionally i show that individual characteristics are more important for the entry decision in more competitive environments

environmental liability law and induced technical change the role of discounting we analyse the incentives of environmental liability law for inducing progress to emission abatement technology we consider three liability rules strict liability a negligence rule with an emission norm as the due care standard and a double negligence rule which combines the emission standard with an abatement technology norm in the case of distortive discounting i e where the private discount rate deviates from the social one we show how the level of distortion influences the ranking of liability rules according to the criterion of generated social cost

valuing the future one of the most controversial areas of economics is the practice of discounting attaching a lower weight to future costs and benefits than present costs and benefits discounting appears to offend notions of sustainable development and the interests of future generations recent advances in the theory of discounting hold out strong hope that the tyranny of discounting can be avoided through the use of time varying discount rates tvdrs this paper reviews the recent rationales for tvdrs and applies the results to issues such as nuclear power and global warming control

liquidity matters after all asymmetric news and stock market volatility before and after the global financial crisis employing an augmented univariate egarch model we estimate the dynamic impact of information arrival as measured by volume on asymmetric news in the pre and post 2009 global financial crisis in the athens stock exchange ase our results reveal that trading volume appears to capture a significant part of volatility asymmetric behavior in general our results provide evidence in favor of the mixture of distribution hypothesis mdh our results contain significant policy implications for investors and regulatory authorities

card games and economic behavior we wonder whether different game experiences are associated with significant differences in experimental behavior and more specifically whether expert bridge players due to their habit of playing with partners and seldom for money are more likely to adopt cooperative behavior than expert poker players evidence from trust games shows that bridge players make more polarized choices and choose the maximum trustor contribution significantly more often our findings are similar across incentivized and non incentivized experiments and thereby support the hypothesis that behavior in simulated experiments resembles that in experiments with monetary payoffs

mixed strategy play in single stage first price all pay auctions with symmetric players abstract we consider sealed bid first price all pay auctions with complete information discrete strategy space budget constraint and symmetric players and then construct the equilibrium solution in mixed strategies for both fixed and variable prizes the equilibrium solution yields predictions concerning the effects of group size and value of the prize that are tested experimentally the experimental results support equilibrium play on the aggregate but not individual level adaptive learning on the individual level accounts for the major trends in the aggregate expenditures over time

current issues in the economics of groundwater resource management the issue of groundwater management remains a practical concern in many regions throughout the world while water managers continue to grapple with the question of how to manage this resource in this article we attempt to bring the most advanced and appropriate tools to bear on the issue of resource allocation involving groundwater our objective is to demonstrate the state of the art in the literature on ways to think about this complex resource and to deal with the important economic issues emanating from its complexity we present the conceptual framework within which economists examine the elements interacting in the management of groundwater resources indicate why the role of the market is limited with respect to the price of this very complex resource and point to the mechanisms that can pull competitive groundwater price and quality graded quantity of groundwater in line with their equilibrium levels in particular we critically review economic models of groundwater use examine the potential for groundwater management discuss the difficulties encountered in the estimation of the relevant control variables of such models and identify the advantages and limitations of the instruments devised for the efficient use allocation of this resource finally we argue that devised regulatory schemes usually ignore the information and knowledge needed for their implementation and we suggest a core of conditions necessary for successful groundwater management reforms

backward induction in the wild evidence from sequential voting in the us senate in the us senate roll calls are held in alphabetical order we document that senators early in the order are less likely to vote with the majority of their own party than those whose last name places them at the end of the alphabet to speak to the mechanism behind this result we develop a simple model of sequential voting in which forward looking senators rely on backward induction in order to free ride on their colleagues estimating our model structurally we find that this form of strategic behavior is an important part of equilibrium play we also consider but ultimately dismiss alternative explanations related to learning about common values and vote buying

an economic evaluation of the moneyball hypothesis in his 2003 book moneyball financial reporter michael lewis made a striking claim the valuation of skills in the market for baseball players was grossly inefficient the discrepancy was so large that when the oakland athletics hired an unlikely management group consisting of billy beane a former player with mediocre talent and two quantitative analysts the team was able to exploit this inefficiency and outproduce most of the competition while operating on a shoestring budget the publication of moneyball triggered a firestorm of criticism from baseball insiders lewis 2004 and it raised the eyebrows of many economists as well basic price theory implies a tight correspondence between pay and productivity when markets are competitive and rich in information as would seem to be the case in baseball the market for baseball players receives daily attention from the print and broadcast media along with periodic in depth analysis from lifelong baseball experts and academic economists indeed a case can be made that more is known about pay and quantified performance in this market than in any other labor market in the american economy in this paper we test the central portion of lewis s 2003 argument with elementary econometric tools and confirm his claims in particular we find that hitters salaries during this period did not accurately reflect the contribution of various batting skills to winning games this inefficiency was sufficiently large that knowledge of its existence and the ability to exploit it enabled the oakland athletics to gain a substantial advantage over their competition further we find

the economics of enhanced landfill mining private and societal performance drivers this paper addresses the economics of enhanced landfill mining elfm both from a private point of view as well as from a society perspective the private potential is assessed using a case study for which an investment model is developed to identify the impact of a broad range of parameters on the profitability of elfm we found that especially variations in waste to energy wte efficiency electricity price co2 price wte investment and operational costs and elfm support explain the variation in economic profitability measured by the internal rate of return to overcome site specific parameters we also evaluated the regional elfm potential for the densely populated and industrial region of flanders north of belgium the total number of potential elfm sites was estimated using a 5 step procedure and a simulation tool was developed to trade off private costs and benefits the analysis shows that there is a substantial economic potential for elfm projects on the wider regional level furthermore this paper also reviews the costs and benefits from a broader perspective the carbon footprint of the case study was mapped in order to assess the project s net impact in terms of greenhouse gas emissions also the impacts of nature restoration soil remediation resource scarcity and reduced import dependence were valued so that they can be used in future social cost benefit analysis given the complex trade off between economic social and environmental issues of elfm projects we conclude that further refinement of the methodological framework and the development of the integrated decision tools supporting private and public actors are necessary

incentives performance and choking in darts this paper examines how within match variation in incentives affects the performance of darts players the game of darts offers an attractive naturally occurring research setting because performance can be observed at the individual level and without obscuring effects of risk considerations and behavior of others we analyze four data sets covering a total of 29 381 darts matches of professional amateur and youth players we find that amateur and youth players display a sizable performance decrease at decisive moments professional players appear less susceptible of such choking under pressure our results speak to a growing literature on the limits of increasing incentives as a recipe for better performance

mixed strategy in oligopoly pricing evidence from gasoline price cycles before and under a timing regulation this paper studies oligopoly firms dynamic pricing strategies in a gasoline market before and after the introduction of a unique law that constrains firms to set price simultaneously and only once per day the observed gasoline pricing behavior both before and under the law is well captured by the edgeworth price cycle equilibrium in the maskin and tirole dynamic oligopoly model my results highlight the importance of price commitment in tacit collusion i also find evidence that the price leadership outcome under the law is better predicted by mixed strategies play than by alternative hypotheses

first in first win evidence on schedule effects in round robin tournaments in mega events the order of actions in contests may have a significant effect on performance in this study we examine the role of the schedule in round robin tournaments with sequential games between three and four contestants our empirical analysis based on soccer fifa world cups and uefa european championships and on two olympic wrestling events reveals that there is a substantial advantage to the contestant who competes in the first and third matches our findings are in line with the hypothesis that winning probabilities in multi stage contests with sequential games are endogenously depending on the schedule of contests as predicted by game theoretical models we also discuss possible ways to reduce the effect of the schedule

discouragement effect and intermediate prizes in multi stage contests evidence from davis cup abstract the discouragement effect of being the lagging player in multi stage contests is a well documented phenomenon in this study we utilize data from 2447 davis cup matches in team tennis tournaments to test the effect of being behind or ahead on individuals performance with and without intermediate prizes using several different strategies to disentangle the effect of being ahead in the interim score from the effect of selection we find the usual discouragement effect however the discouragement effect disappears after the introduction of intermediate prizes in the form of ranking points the lagging favorite had close to a 20 percentage point greater probability of winning compared to matches without such a prize we show that this result is not driven by the selection of better players into tournaments with intermediate prizes as predicted by previous theoretical studies our empirical findings suggest that intermediate prizes may mitigate or even eliminate the ahead behind effects that arise in multi stage contests

the relation between price changes and trading volume a survey this paper reviews previous and current research on the relation between price changes and trading volume in financial markets and makes four contributions first two empiri cal relations are established volume is positively related to the magnitude of the price change and in equity markets to the price change per se second previous theoretical research on the price volume relation is summarized and critiqued and major insights are emphasized third a simple model ofthe price volume relation is proposed that is consis tent with several seemingly unrelated or contradictory observations and fourth several directions for future research are identified

what s to know about laboratory experimentation in economics abstract experimental economics has grown as a discipline from near non existence 50 years ago to a full fledged field within economics in the present much of experimental economics research involves experimental methods as a tool applied to problems in other fields of economics however some of this research is inward looking focusing on questions of the methodology of experimental economics in this note i briefly discuss two methodological issues in experimental economics that might benefit from meta analysis the pool from which experimental participants are drawn university undergraduate students versus other populations and the scale of monetary incentives faced by participants large small or hypothetical

nash equilibrium in strictly competitive games live play in soccer abstract i model a scoring situation that arises frequently during soccer matches the nash equilibrium solution is shown to be broadly consistent with the conventional wisdom of experts data on goals scored over an entire season in italy s soccer league provide statistical support for a prediction of the model s nash equilibrium

discount rate and the social cost of carbon dioxide a korean forecast this paper is to forecast the korean long term social discount rate of carbon dioxide sdrc and the social cost of carbon dioxide scc it is estimated using the ramsey function savings behavior

an informationally robust equilibrium for two person nonzero sum games abstract this paper considers the implications of explicit slight uncertainty about the strategic sequence of moves that is about the informational structure for a two person nonzero sum game it is shown that the set of associated informationally robust equilibria must be nonempty and must be a subset of the set of nash equilibria although the present approach is conceptually reminiscent of that underlying perfectness the two concepts are shown to be logically unrelated there may exist no equilibrium which is both perfect and informationally robust journal of economic literature classification number c72

psychological pressure in competitive environments evidence from a randomized natural experiment much like cognitive abilities emotional skills can have major eects on performance and economic outcomes this paper studies the behavior of professional subjects involved in a dynamic competition in their own natural environment the setting is a penalty shoot out in soccer where two teams compete in a tournament framework taking turns in a sequence of ve penalty kicks each as the kicking order is determined by the random outcome of a coin ip the treatment and control

minimax after money max why major league baseball players do not follow optimal strategies using real life sports data of major league baseball this paper investigates whether professional players follow the minimax theorem in their strategies our empirical results using the 2010 regul

on the irrelevance of risk attitudes in repeated two outcome games abstract we study equilibrium and maximin play in supergames consisting of the sequential play of a finite collection of stage games where each stage game has two outcomes for each player we show that for two player supergames in which each stage game is strictly competitive in any nash equilibrium of the supergame play at each stage is a nash equilibrium of the stage game provided preferences over certain supergame outcomes satisfy a natural monotonicity condition in particular equilibrium play does not depend on risk attitudes we establish an invariance result for games with more than two players when the solution concept is subgame perfection journal of economic literature classification numbers c72 c9

does better discounting lead to worse outcomes in long run decisions the dilemma of hyperbolic discounting the shortcomings of conventional discounting especially in the context of long run environmental problems have been extensively discussed in the literature recently hyperbolic discounting i e discounting at declining instead of constant discount rates has attracted a lot of interest among both scientists and politicians although there are compelling arguments for employing hyperbolic discounting there are also pitfalls which have to be pointed out in this paper i show that the problem of time inconsistency an inherent characteristics of hyperbolic discounting leads to a potential clash between economic efficiency and intergenerational equity as an example i refer to the weak progress in the controlling of greenhouse gas emissions under the kyoto protocol as the problem of time inconsistency cannot be solved on economic grounds alone there is a need for an intergenerational moral commitment

a component based approach to discounting for natural resource damage assessment abstract the paper proposes a component based approach to guide the choice of the social discount rate in natural resources damage assessment where time and discounting are key features it is a multi rate discounting scheme which draws on concepts from dual rate and time declining approaches each damage component is discounted at a component specific constant rate related to its time trajectory assuming a normatively defined declining schedule of rates as a starting reference components with longer time profiles generally represented by welfare losses are discounted at lower rates than short term damage components mainly remedial costs the rationale behind this choice is that the longer the duration of the damage component the higher the related nonincident specific uncertainty on the resource values and the more relevant the equity issues when estimating the total damage the resulting implicit average discount rate depends on the duration of each component and its relative relevance in the total damage in each moment from an operational point of view anchoring the rates to government prescriptions would support the robustness of the damage estimates in a court of law whereas the dual based environmental discount rate is based on ad hoc assumptions that are more difficult to justify

large sport events and unemployment the case of the 2006 soccer world cup in germany this study analyses on the basis of a multivariate analysis ex post the effects on the jobs market of a soccer world cup in this case the 2006 world cup held in germany in addition to three methods already used for other analyses in studies of sporting events an extended difference in difference estimate is used in order to compare the development of the numbers of unemployed in the 12 world cup venues with the development of the numbers of unemployed in 63 other german cities the results demonstrate that in none of the respective match venues did the effect of the sporting event on unemployment differ significantly from zero

discounting the distant future how much does model selection affect the certainty equivalent rate evaluating investment with long term consequences using discount rates that decline with the time horizon declining discount rates of ddrs means that future welfare changes are of greater consequence in present value terms recent work in this area has turned towards operationalising the theory and establishing a schedule of ddrs for use in cost benefit analysis using us data we make the following points concerning this transition i model selectionhas important implications for operationalising a theory of ddrs that depends upon uncertainty ii misspecification testing naturally leads to employing models that account for changes in the interest reat generating medanism lastly we provide an analysis of the policy implications of ddrs in the context of climate change for the us and show that the use of a state space model can increase valuations by 150 compared to conventional constant discounting

pass or run an empirical test of the matching pennies game using data from the national football league this article examines play calling in the national football league nfl it finds that a mixed strategy equilibrium game explains nfl play calling better than standard optimization techniques when a quarterback is injured and replaced with a less capable backup standard optimization theory suggests that the offense will run more often passing less our game theoretic model predicts that the offense will not change its play calling because the defense will play against the run more often using every first half play from the 11 teams that had a starting quarterback miss action because of injury in the 2006 season we find that the injury did not alter the likelihood that the offense would pass we also find that coaches randomly mix passing and running plays as the mixed strategy games predict

an economist s perspective on probability matching the experimental phenomenon known as probability matching is often offered as evidence in support of adaptive learning models and against the idea that people maximise their expected utility recent interest in dynamic based equilibrium theories means the term re appears in economics however there seems to be conflicting views on what is actually meant by the term and about the validity of the data the purpose of this paper is therefore threefold first to introduce today s readers to what is meant by probability matching and in particular to clarify which aspects of this phenomenon challenge the utility maximisation hypothesis second to familiarise the reader with the different theoretical approaches to behaviour in such circumstances and to focus on the differences in predictions between these theories in light of recent advances third to provide a comprehensive survey of repeated binary choice experiments

the cycle of violence an empirical analysis of fatalities in the palestinian israeli conflict thomas c schelling s the strategy of conflict 1960 laid the groundwork for thinking about conflicts as non zero sum games in which each side may choose to exercise or threaten violence in order to deter or incapacitate the opponent or simply to exact revenge it has been difficult however to test many of the predictions formulated by schelling and others because of the lack of data on the strategic choices of the two sides engaged in a conflict observed at a high enough frequency for statistical tests to have any power this paper uses daily frequency data to analyze the dynamics of violence during four years of the second intifada the most recent outburst of the palestinian israeli conflict

expectations as reference points field evidence from professional soccer we show that professional soccer players and their coaches exhibit reference dependent behavior during matches controlling for the state of the match and for unobserved heterogeneity we show on a minute by minute basis that players breach the rules of the game measured by the referee s assignment of cards significantly more often if their teams are behind the expected match outcome measured by preplay betting odds of large professional bookmakers we further show that coaches implement significantly more offensive substitutions if their teams are behind expectations both types of behaviors impair the expected ultimate match outcome of the team which shows that our findings do not simply reflect fully rational responses to reference dependent incentive schemes of favorite teams to falling behind we derive these results in a data set that contains more than 8 200 matches from 12 seasons of the german bundesliga and 12 seasons of the english premier league this paper was accepted by uri gneezy behavioral economics

heteroskedasticity in stock return data volume versus garch effects this paper provides empirical support for the notion that autoregressive conditional heterqskedasticity arch in daily stock return data reflects time dependence in the process generating information flow to the market daily trading volume used as a proxy for information arrival time is shown to have significant explanatory power regarding the variance of daily returns which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns furthermore arch effects tend to disappear when volume is included in the variance equation the autoregressive conditiqnal heteroskedasticity arch process of engle 1982 has been shown to provide a good fit for many financial return time series 1 arch imposes an autoregressive structure on conditional variance allqwing volatility shocks to persist over time this persistence captures the propensity of returns of like magnitude to clu ter in time and can explain the well documented nonnormality and nonstability of empirical asset return distributions see especially fama 1965 an appealing explanation for the presence of arch is based upon the hypothesis that daily returns are generated by a maiture of distributions in which the rate of daily information arrival is the stochastic mixing variable as suggested by diebold 1986 gallant hsieh and tauchen 1988 and stock 1987 1988 arch might capture the time series properties e g serial correlation of this mixing variable hqwever this linkage has not been broadly documented with the datia the objective of this study is to examine the validity of this explanation for daily stock returns the empirical strategy exploits the implication of the mixture model that the variance of daily price increments is heteroskedastic specifically positively related to the rate of daily information arrival using daily trading volume as a proxy for the mixing variable we show that for a sample of 20 common stocks arch effects vanish when volume is included as an explanatory variable in the conditional variance equation

social discounting under uncertainty a cross country comparison recent research suggests that social cost benefit analysis should be conducted with a declining discount rate for instance newell and pizer discounting the distant future how much do uncertain rates increase valuations j environ econ manage 46 2003 52 71 show that the us certainty equivalent discount rate declines through time using a simple autoregressive model of us interest rates this paper extends that line of research estimating both autoregressive and regime switching models of real interest rates to determine certainty equivalent discount rates in australia canada germany and the uk it is found that the regime switching model is a better model of past interest rate behavior for all four countries this model tends to produce a more rapid decline in certainty equivalent discount rates the paper provides applications to the economics of climate change and nuclear power