ten little treasures of game theory and ten intuitive contradictions this paper reports laboratory data for games that are played only once these games span the standard categories static and dynamic games with complete and incomplete information for each game the treasure is a treatment in which behavior conforms nicely to predictions of the nash equilibrium or relevant refinement in each case however a change in the payoff structure produces a large inconsistency between theoretical predictions and observed behavior these contradictions are generally consistent with simple intuition based on the interaction of payoff asymmetries and noisy introspection about others decisions

analyst reputation communication and information acquisition earlier studies have shown that reputational concerns tend to reduce agents opportunistic behavior however a recent study by morris argued that analysts experts reputational concerns may discourage truthful communication when they try to avoid being perceived as being misaligned with investors in this paper i examine the effect of reputational concerns on communication in a setting where analysts can choose their precision endogenously because both misaligned and aligned analysts want investors to trust their reports in the future both will aim to build a reputation for being aligned in equilibrium aligned analysts will acquire more information than misaligned analysts as a result investors may favorably update their beliefs about the analysts type when the report is proven to be accurate therefore both types of analysts will have reputational incentives to communicate truthfully the paper also derives conditions under which the analysts reputational concerns have a nonmonotonic impact on aligned analysts equilibrium precision choices and investors welfare

strikes and holdouts in wage bargaining theory and data we develop a private information model of union contract negotiations in which disputes signal a firm s willingness to pay previous models have assumed that all labor disputes take the form of a strike yet a prominent feature of u s collective bargaining is the holdout negotiations often continue without a strike after the contract has expired production continues with workers paid according to the expired contract we analyze the union s decision to strike or hold out and highlight its importance to strike activity strikes are more likely to occur after a drop in the real wage or a decline in unemployment

on the industrial ecology potential in asian developing countries abstract this paper focuses on the current situation in the adaptation and adoption of industrial ecology in asian developing countries adcs the objective of this paper is to consider the possibilities to develop an eco industrial development eid strategy for these developing countries we review the regional indigenous resources of adcs and use the strengths weaknesses opportunities and threats swot grouping to classify the preconditions of industrial ecology in adcs the authors of this paper argue that unlike the usual way of applying industrial ecology as a technical tool or a practical instrument adcs need to adopt industrial ecology as a strategic vision and as a strategic approach to plan the economic social and ecological development of their national economies in this way it can be possible for the adcs to avoid the same problems that occurred when the developed countries experienced industrialization and rapid economic growth and move toward more sustainable development

how do scholars approach the circular economy a systematic literature review abstract circular economy ce aims to overcome the take make dispose linear pattern of production and consumption proposing a circular system in which the value of products materials and resources is maintained in the economy as long as possible in recent years there has been a proliferation of scholars publications on the topic this study presents the results of a systematic literature review exploring the state of the art of academic research on ce the paper examines the ce body of literature with a systematic approach to provide an exhaustive analysis of the phenomenon with rigorous and reproducible research criteria the revisited material consists of 565 articles collected through the web of science and scopus databases and has been evaluated using specific structural dimensions to group literature into analytical categories starting from being a concept studied in connection with industrial ecology ce has slowly acquired its independent role in academic research framed mainly into environmental sustainability related studies as a result of policies implementation academic production is mainly concentrated in china and europe employing tools and methods for modelling processes and supporting decision making for ce implementation e g life cycle assessment and material flow analysis ce studies follow three main lines of action the first aims to change the social and economic dynamics at macro and administrative level the second to support firms in circular processes implementation at micro level to spread new forms of consumption and product design the third developed at meso level discusses industrial symbiosis experiences ce is associated with a variety of concepts and waste management emerges as the most relevant sub sector ce is also strongly connected with the concept of sustainability proposing ways to operationalize its implementation at the environmental and economic level while scholars only marginally consider social and institutional implications the most explored practices are those related to cleaner production aiming at reducing environmental impact and waste production along the life cycle of a product and optimizing the performance and efficiency of processes conversely studies on ce may devote greater attention to strategies for social and institutional changes able to transform the upstream process of production and consumption considering business model strategies scholars mainly focus on studying closing material loops strategy while slowing the loops which requires a radical change of consumption and production patterns is only marginally included with respect to ce implementation this study s findings highlight ce as an evolving concept that still requires development to consolidate its definition boundaries principles and associated practices

could a monetary base rule have prevented the great depression abstract this paper continues an ongoing investigation of the properties of a policy rule that specifies settings of the monetary base that are designed to keep nominal gnp growing smoothly at a noninflationary rate counterfactual historical simulations for 1923 1941 are conducted with the rule and a small model of nominal gnp determination estimated with u s quarterly data with residuals fed in as estimates of the behavioral shocks that occurred the simulation results indicate that nominal gnp would have been kept reasonably close to a steady three percent path over 1923 1941 if the rule had been in effect

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

a theory of credibility this paper presents models in which one agent must decide whether to trust another whose motives are uncertain reliability can only be communicated through actions in this context it pays for people to build a reputation based on reliable behaviour someone becomes credible by consistently providing accurate and valuable information or by performing useful services the theory provides a justification for long term arrangements without binding contracts it also describes those situations where it pays an agent to cash in on his reputation many decisions depend on trusting someone consumers must decide whether to believe advertisements banks need to judge the reliability of loan applicants and employers must decide how much responsibility to delegate to their employees this paper attempts to model situations that arise when someone is uncertain about whether to trust the people he deals with in this context reputations for reliability are valuable an agent becomes credible by consistently providing accurate valuable information or by always acting responsibly i analyse a series of simple abstract models of information transmission in the basic model there are two agents the sender s and the receiver r who are to play the game a known finite number of times at each stage both players learn the value of a parameter measuring the importance of that period s play of the game that is the value of making a correct decision and s obtains payoff relevant information s then sends a signal to r who makes a decision that affects the welfare of both players after both players learn the consequences of r s decision the process repeats at each stage r must decide what action to take in order to do that he must assess the credibility of s the difficulty arises because r is uncertain about s s preferences when play begins i model this by assuming that with positive probability s has identical preferences to r s is a friend and with positive probability s has completely opposed preferences to r s is an enemy this uncertainty creates a trade off for enemy senders at each stage providing honest information enhances s s reputation but only at the expense of foregoing an opportunity for immediate gain by duping r the possibility that s is a friend lends credibility to what he says but this credibility may also be exploited by an enemy s the principal equilibrium has the following form in the basic model where s has no control over the importance of a given play s typically conveys accurate information for the first several periods r raises the probability he places on s being friendly after receiving accurate information if he believes that an enemy would have lied to him with positive probability the more important the information the more likely an enemy will attempt to deceive r an enemy will eventually take advantage of r by misleading him when this happens the sender loses all opportunities for deception in the future i

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

do countries falsify economic data strategically some evidence that they might we find evidence supporting the hypothesis that countries at times misreport their economic data in a strategic manner among those suspected are countries with fixed exchange rate regimes high negative net foreign asset positions or negative current account balances which corroborates the intuition developed with a simple economic model we also find that countries with bad institutional quality rankings and those in africa middle east eastern europe and latin america release economic data of questionable veracity our evidence calls for models with public signals to consider strategic misinformation and for establishing independent statistical agencies to assure the delivery of high quality economic data

persuasive communication when the sender s incentives are uncertain abstract we study persuasion in a modified crawford sobel sender receiver game in which the receiver makes a binary decision to accept or reject a good recommended by the sender the good s quality and the sender s type neutral or biased are not observable to the receiver these alterations yield a simple model and a unique truth telling equilibrium in which neutral senders who observe different qualities fully separate but can only communicate low quality levels accurately biased senders adopt a mixed strategy that can successfully persuade the receiver to accept the good most of the time when the sender s degree of bias is continuously distributed a truth telling equilibrium does not exist nonetheless a partition equilibrium exists for any given number of partitions on the message space

sources of panics evidence from the weekly data abstract we use weekly data 1867 1933 to investigate the sources of banking and financial panics we find that while a panic s exact starting date is unpredictable one can identify environments conducive to panics a lack of liquidity in financial markets seems to be a key source results also reveal the effectiveness of the aldrich vreeland act inelastizing the money supply and shortening the panic of 1914 and suggest that the panic of 1933 may have been caused by a speculative attack on the gold backed us dollar via the banks as opposed to a run on the banks directly

forward guidance communication commitment or both abstract forward guidance has been suggested as a form of commitment odyssean by the policymaker or as a way of conveying information delphic i analyze the interaction between households and the central bank as a game in which the central bank sends messages without private information the set of equilibrium payoffs is independent of any announcements pure odyssean forward guidance is redundant with private information communication can have social value forward guidance is well suited to leverage preexisting credibility to communicate a central bank s private information about its own preferences or beliefs

repeated games with long run and short run players this paper studies the set of equilibrium payoffs in repeated games with long and short run players and little discounting because the short run players are unconcerned about the future each equilibrium outcome is constrained to lie on their static reaction best response curves the natural extension of the folk theorem to games of this sort would simply include this constraint in the definitions of the feasible payoffs and minmax values in fact this extension does obtain under the assumption that each player s choice of a mixed strategy for the stage game is publicly observable but in contrast to standard repeated games the set of equilibrium payoffs is different if players can observe only their opponents realized actions

careerist experts and political incorrectness abstract while political correctness is a dominant norm in many public situations we also observe behaviors that are apparently politically incorrect often from professionals and experts this paper examines the flip side of political correctness as analyzed in morris 2001 to shed some light on the elusive notion of political incorrectness and elucidate its equilibrium and welfare properties we show that there are circumstances in which unbiased experts deliberately take a politically incorrect stance out of reputational concerns and identify key elements which give rise to this perverse reputational incentive the results suggest that political incorrectness cannot necessarily be viewed as a sign of blunt honesty when informed experts have long term reputational concerns we also examine the welfare consequences of political incorrectness and argue that this form of information manipulation can be beneficial under some conditions

does insider trading raise market volatility this paper studies the role of insider trading in explaining cross country differences in stock market volatility it introduces a new measure of insider trading the central finding is that countries with more prevalent insider trading have more volatile stock markets even after one controls for liquidity maturity of the market and the volatility of the underlying fundamentals volatility of real output and of monetary and fiscal policies moreover the effect of insider trading is quantitatively significant when compared with the effect of economic fundamentals

waste management policies for industrial symbiosis development case studies in european countries industrial symbiosis is emerged as a self organizing business strategy among firms that are willing to cooperate to improve their economic and environmental performance the adoption of such cooperative strategies relates to increasing costs of waste management most of which are driven by policy and legislative requirements development of is depends on an enabling context of social informational technological economical and political factors the power to influence this context varies among the agents involved such as the government businesses or coordinating entities governmental intervention as manifested through policies could influence a wider range of factors and we believe this is an area which is under researched this paper aims to critically appraise the waste policy interventions from supra national to sub national levels of government a case study methodology has been applied to four european countries i e denmark the uk portugal and switzerland in which is emerged or is being fostered the findings suggest that there are commonalities in policy instruments that may have led to an is enabling context the paper concludes with lessons learnt and recommendations on shaping the policy context for is development

a monopolistic market for information abstract we analyze a model where traders buy information from a monopolistic seller which is subsequently used in a speculative market in order to overcome the dilution in the value of information due to its leakage through informative prices the seller of information may prefer to sell noisier versions of the information he actually has moreover to obtain higher profits it is desirable for the seller to sell different signals to different traders so that the added noise realizations do not affect equilibrium prices one way of doing so which does not require discrimination is to sell identically distributed personalized signals to each of a large number of traders

peddling influence through intermediaries a sender may communicate with a decision maker through intermediaries in this model an objective sender and intermediary pass on information truthfully while biased ones favor a particular agenda but also have reputational concerns i show that the biased sender and the biased intermediary s reporting truthfulness are strategic complements the biased sender is less likely to use an intermediary than an objective sender if his reputational concerns are low but more likely to do so if his reputational concerns are moderate moreover the biased sender may be more likely to use an intermediary perceived to be more biased

timing decisions in organizations communication and authority in a dynamic environment this paper develops a theory of how organizations make timing decisions we consider a problem where an uninformed principal decides when to exercise an option and interacts with an informed but biased agent this problem is common examples include headquarters deciding when to close a plant drill an oil well or launch a product because time is irreversible the direction of the agent s bias is crucial for communication and allocation of authority when the agent favors late exercise centralized decision making where the principal retains authority and communicates with the agent often features full information revelation but ine cient delay delegation is never optimal in this case in contrast when the agent favors early exercise communication under centralized decision making is partial while option exercise is unbiased or delayed delegation is optimal if the bias is small or delegation can be timed thus delegating decisions such as plant closures is never optimal while delegating decisions such as product launches may be optimal

competence implies credibility the credibility of monetary policy under discretion has been traditionally linked to the central bank s conservatism we show that another trait of the central bank cb her competence at doing her job or reputation thereof can be just as important to make her policy credible and transparent we analyze a static barro and gordon 1983 s game where the effects of monetary policy depend on an unknown state of the economy the cb forms her own private and imprecise view of this state that she may announce to p in a cheap talk game to explain and motivate her policy intentions the precision of the noise in the cb s view measures her competence the more accurate her assessment the clearer an idea she has about what to do the fineness of the equilibrium message space measures monetary policy s transparency in any equilibrium of the cheap talk game the cb credibly announces one of finite inflation targets that differ by at least a multiple of the inflation bias competence ratio if this ratio is too large the cb can credibly communicate only the direction of monetary policy as the cb s competence rises and this ratio falls p knows that the cb puts increasing weight on pursuing her objective targets relative to surprising expectations to stimulate output therefore the equilibrium message space becomes finer a more competent cb is also less likely to erroneously observe extreme realizations of the shocks so she is more able tofine tune expectations at times of business as usual

gambling reputation repeated bargaining with outside options we study the role of incomplete information and outside options in determining bargaining postures and surplus division in repeated bargaining between a long run player and a sequence of short run players the outside option is not only a disagreement point but reveals information privately held by the long run player in equilibrium the uninformed short run players offers do not always respond to changes in reputation and the informed long run player s payoffs are discontinuous the long run player invokes inefficient random outside options repeatedly to build reputation to a level where the subsequent short run players succumb to his extraction of a larger payoff but he also runs the risk of losing reputation and relinquishing bargaining power we investigate equilibrium properties when the discount factor goes to 1 and when the informativeness of outside options diffuses in both cases bargaining outcomes become more inefficient and the limit reputation building probabilities are interior publication abstract

internal control system earnings quality and the dynamics of financial reporting using an earnings management model in which managers manipulate information when the firm s control system fails i introduce a measure of earnings quality based on the notion of integral precision that has solid theoretical foundations a trade off between the frequency and the magnitude of overstatements is shown overstatements are larger when misreporting is less likely overall the model generates a distribution of earnings announcements similar to its empirical analogue and provides a structural method to identify the likelihood and magnitude of misreporting by exploiting information from the moments of the distribution of reported earnings

industrial metabolism and the linkages between economics ethics and the environment abstract with industrialization the material flows in the world have grown enormously expanded geographically and become more open and complex traditionally the emissions have been strongly connected to earlier steps in the material flows extraction and raw materials intensive industry but during the last few decades the emissions from industrial pointsources have decreased radically in the western industrialized world the result of the industrial cleanup is a shift towards the latter steps of the societal material flows the relative importance of consumption emissions has increased as indicated in studies of the rhine basin important prerequisites for this development have been increasing environmental awareness and public opinion putting pressure on legislators authorities and companies and a dynamic industrial development with structural changes that have permitted investments in modern technology and emissions control despite the often radical emission reductions problems with acidification eutrophication diffusion of persistent organic chemicals and climate change still persist on a regional and global level during the last decade there has been an increasing emphasis on the international and global environmental problems the materials flow perspective has experienced a major breakthrough waste minimization recycling life cycle analysis and environmental auditing have become major themes in most european countries and have also started to influence industry the importance of the consumer and his attitudes and actions as well as the relationship between trade and environment are often emphasized in this context the industrial metabolism approach needs further development to be able to assist in meeting the modern challenges of environmental management to sum up flows of a few elements or products in a limited region is not sufficient it is necessary to develop the analysis of the context of the flows include industrial economic and geographical change in the analysis and more actively seek connection to political and industrial decision making and human behavior and attitudes the time geographical process landscape launched by torsten hagerstrand could be an important source of inspiration in this context

the federal reserve and panic prevention the roles of financial regulation and lender of last resort this paper surveys the role of the federal reserve within the financial regulatory system with particular attention to the interaction of the fed s role as both a supervisor and a lender of last resort the institutional design of the federal reserve system was aimed at preventing banking panics primarily due to the permanent presence of the discount window this new system was successful at preventing a panic in the early 1920s after which the fed began to discourage the use of the discount window and intentionally create stigma for window borrowing policies that contributed to the panics of the great depression the legislation of the new deal era centralized fed power in the board of governors and over the next 75 years the fed expanded its role as a supervisor of the largest banks nevertheless prior to the recent crisis the fed had large gaps in its authority as a supervisor and as lender of last resort with the latter role weakened further by stigma the fed was unable to prevent the recent crisis during which its lender of last resort function expanded significantly as the fed begins its second century there are still great challenges to fulfilling its original intention of panic prevention

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

an introduction to applicable game theory this paper offers an introduction to game theory for applied economists i try to give simple definitions and intuitive examples of the basic kinds of games and their solution concepts there are four kinds of games static or dynamic and complete or incomplete information complete information means there is no private information the corresponding solution concepts are nash equilibrium in static games of complete information backwards induction or subgame perfect nash equilibrium in dynamic games of complete information bayesian nash equilibrium in static games with incomplete information and perfect bayesian or sequential equilibrium in dynamic games with incomplete information the main theme of the paper is that these solution concepts are closely linked as we consider progressively richer games we progressively strengthen the solution concept to rule out implausible equilibria in the richer games that would survive if we applied solution concepts available for simpler games in each case the stronger solution concept differs from the weaker concept only for the richer games not for the simpler games

bundled payments for healthcare services proposer selection and information sharing the centers for medicare and medicaid services cms has introduced a bundled payments for care improvement bpci initiative each bundle pertains to a specific medical condition a set of linked services and a length of time referred to as an episode of care proposers choose bundles design service chains and propose target values of quality metrics and payments per episode expert panels evaluate proposals based on cms announced relative weights but there is no limit on the number of proposers that may be selected moreover there is no minimum score that will guarantee selection which makes selection uncertain for proposers we develop normative models for the parameter selection problems faced by potential proposers within the cms proposal selection process proposers have private information about their costs of achieving different quality targets which determine their equilibrium responses we show that an optimal strategy for cms under its current approach may be to either announce a fi

eco industrial park initiatives in the usa and the netherlands first lessons abstract since the introduction of the industrial ecology concept by frosch and gallopoulos in 1989 and the apparent success of the kalundborg industrial symbiosis project attention to planned eco industrial park eip development projects has grown all over the world this article includes data from six of these eip development projects three of the projects discussed are located in the netherlands and three in the us this article compares the differences in project approach and results on a national level the approach suggested is derived from the available eip development literature initial research indicates that the dutch eip projects are more successful than their us counterparts this difference in success can be mostly attributed to the fact that the us projects are initiated by local and regional governments that see the project as a way to improve the local regional economy with access to substantial government funds because of this heavy government involvement us companies are in general not interested in the project the more successful dutch projects on the other hand are mostly initiated by the companies themselves with financial and advisory support from the local and regional government

quality disclosure and certification theory and practice this essay reviews the theoretical and empirical literature on quality disclosure and certification after comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure we address two sets of theoretical issues first why don t sellers voluntarily disclose through a process of unraveling and given the lack of unraveling is it desirable to mandate seller disclosure second when we rely on certifiers to act as the intermediary of quality disclosure do certifiers necessarily report unbiased and accurate information we further review empirical evidence on these issues with a particular focus on healthcare education and finance the empirical review covers quality measurement the effect of third party disclosure on consumer choice and seller behavior as well as the economics of certifiers jel d18 k32 l15 m31

traders vs relationship managers reputational conflicts in full service investment banks we present a model that explains why investment bankers struggle to manage conflicts of interest banks can build a type reputation for technical competence by performing complex deals that may not serve their clients interest on the other hand banks can sustain a behavioral reputation by refraining from doing so a behavioral reputation is a luxury reserved for banks that have proven their abilities the model sheds light on conflicts between the trading and advisory divisions of investment banks as well as the consequences of technological change for time variation in the relative strength of behavioral and type reputation concerns

stock price manipulation it is generally agreed that speculators can make profits from insider trading or from the release of false information both forms of stock price manipulation have now been made illegal in this article the authors ask whether it is possible to make profits from a different kind of manipulation in which an uninformed speculator simply buys and sells shares they show that in a rational expectations framework where all agents maximize expected utility it is possible for an uninformed manipulator to make a profit provided investors attach a positive probability to the manipulator being an informed trader article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

insider trading in a rational expectations economy it is often argued that efficiency considerations require society to freely permit insider trading in this article an opposing efficiency argument is formalized the model incorporates an investment stage followed by a trading stage if outsiders expect insiders to take advantage of them in trading outsiders will reduce their investment the insiders loss from this diminished investor confidence may more than offset their trading gains consequently a prohibition on insider trading may effect a pareto improvement insiders are made better off if they can precommit not to trade on their privileged information govemment regulation accomplishes exactly this jel 022 026 313 the traditional rationale articulated for insider trading regulation and other securities law is that such rules promote confidence in markets indeed president franklin d roosevelt justified the first major u s securities legislation by saying it should give impetus to honest dealing in securities and thereby bring back public confidence similar language is still invoked half a century later in connection with enforcement efforts against insider trading and in proposals for tightened stock

bubbles and persuasion with uncertainty over market sentiment abstract recent empirical studies suggest that during times of unexpected innovation agents heterogeneously update their beliefs about an asset fundamental value and are uncertain of other agents beliefs about it in this paper i show that when there is uncertainty over the market sentiment defined as other investors beliefs about an asset fundamental value market manipulation can act through a previously unconsidered channel by misleading agents learning on the market sentiment this novel type of market manipulation could strengthen existing financial bubbles or even give rise to new ones

media capture in a democracy the role of wealth concentration abstract since objective news coverage is vital to democracy captured media can seriously distort collective decisions the current paper develops a voting model where citizens are uncertain about the welfare effects induced by alternative policy options and derive information about those effects from the mass media the media might however secretly collude with interest groups in order to influence the public opinion in the case of voting over the level of a productivity enhancing public bad it is shown that an increase in the concentration of firm ownership makes the occurrence of media bias more likely although media bias is not always welfare worsening conditions for it to raise welfare are restrictive

the reconstruction finance corporation the gold standard and the banking panic of 1933 the banking crisis of 1933 which forced a national holiday closing the entire u s financial system is often blamed on either publication of the names of banks borrowing from the reconstruction finance corporation a speculative run on the gold backed dollar due to fears that president elect roosevelt would devalue the currency or both evidence presented here indicates that neither factor started the final banking crisis of the depression the michigan bank holiday ignited the panic resulting in a series of bank holidays and a run on the dollar this chain of events toppled the united states financial system

regulation competition and liberalization in many countries throughout the world regulators are struggling to determine whether and how to introduce competition into regulated industries this essay examines the complexities involved in the liberalization process while stressing the importance of case specific analyses this essay distinguishes liberalization policies that generally are procompetitive from corresponding anticompetitive liberalization policies

ratings shopping and asset complexity a theory of ratings inflation abstract many identify inflated credit ratings as one contributor to the recent financial market turmoil we develop an equilibrium model of the market for ratings and use it to examine possible origins of and cures for ratings inflation in the model asset issuers can shop for ratings observe multiple ratings and disclose only the most favorable before auctioning their assets when assets are simple agencies ratings are similar and the incentive to ratings shop is low when assets are sufficiently complex ratings differ enough that an incentive to shop emerges thus an increase in the complexity of recently issued securities could create a systematic bias in disclosed ratings despite the fact that each ratings agency produces an unbiased estimate of the asset s true quality increasing competition among agencies would only worsen this problem switching to an investor initiated ratings system alleviates the bias but could collapse the market for information

incentives through consumer learning about tastes we consider a long lived firm that faces an infinite sequence of finitely lived consumers in each period the firm can exert either high or low effort which is the firm s private information when consumers learn about the firm s talent from the outcomes of previous transactions there exists no equilibrium in which the firm always exerts high effort however when consumers learn about their own tastes such an equilibrium can exist consumer learning about tastes therefore is an alternative to reputational concerns that produces stable incentives we discuss the implications of this mechanism for advertising advertising content and consumer education

a case study of industrial symbiosis development using a middle out approach abstract industrial symbiosis is emerged as a collective multi industrial approach to improve economic and environmental performance through the use of wastes by products as substitutes for raw materials the development of is initiatives depends on the context in which they occur characterised in terms of social economic political spatial and temporal embeddedness as a consequence the context can be influenced to become more supportive of is through a continuous interactive process combining top down governmental directives and bottom up spontaneous business initiatives a strategy to develop and enhance this process is explored in this paper and described by the authors as a middle out approach policies and policy instruments introduced by governmental agencies provide objectives and incentives to businesses the middle out approach induces the development of a strategy to create positive feedback loops among agents e g government industries that may guide their actions into setting the conditions to support is emergence this paper provides a case study that discusses a regional development of is in portugal that highlights critical factors for success in implementing is and shows that the middle out approach can also be understood as an extension and combination of previous research on context factors and planned spontaneous approaches to is development

information acquisition and reputation dynamics we study dynamic incentives and behaviour in markets with costly discovery of past transactions in our model a sequence of short lived customers interact over time with a single long lived firm that privately knows its type good or opportunistic customers must pay to observe the firm s past behaviour we characterize the equilibrium structure that features accumulation consumption and restoration of reputation the opportunistic firm deliberately builds its reputation up to a point where the maximum periods of information acquired by customers do not reveal past opportunistic behaviour and exploits the customers who most trust the firm copyright 2011 oxford university press

when second opinions hurt a model of expert advice under career concerns we augment the standard career concerns model by introducing i an action that blocks the information about the true state of the world and ii a second opinion interim news after the initial consultation with the expert in this model the principal s action as well as the expert s message endogenously determine the observability of the states and consequently the assessment of the expert s ability by the principal we show that having access to better interim news could reduce the welfare of the principal due to its strategic effect on the expert s recommendation we also discuss the implication of the results for possible delegation of decision making to another person with different decision parameters

games with incomplete information a simplified exposition with inventory management applications abstract in most existing literature in supply chain management it is assumed that the players possess complete information about the game i e the players payoff objective functions are assumed to be common knowledge for static and dynamic games with complete information the nash equilibrium and subgame perfect equilibrium are the standard solution concepts respectively for static and dynamic games with incomplete information the bayesian nash equilibrium and perfect bayesian equilibrium respectively are used as solution concepts after presenting a brief review of the static and dynamic games under complete information the application of these two games in inventory management is illustrated by using a single period stochastic inventory problem with two competing newsvendors next we illustrate the bayesian nash and perfect bayesian equilibrium solution concepts for the static and dynamic games under incomplete information with two competing newsvendors the expository nature of our paper may help researchers in inventory supply chain management gain easy access to the complicated notions related to the games played under incomplete information

product services as a research field past present and future reflections from a decade of research in the last decade many researchers institutes and programs in the eu paid attention to product service systems pss given this massive effort it is time to take stock is pss research a theoretical field in its own right is the pss concept indeed the road to the factor 10 world is it the road to enhanced competitiveness what is needed to really use the potential of the concept this paper discusses these questions summarizing the analysis done in the pss review book new business for old europe various eu sponsored projects and the conceptual approach chosen in a new research network on sustainable consumption and production called score 2006 elsevier ltd all rights reserved

inter firm trade finance in times of crisis the paper discusses the main features that distinguish inter firm international trade finance from alternative sources of financing on the one hand inter firm trade finance could help overcome informational problems associated with other lending relationships on the other it may contribute to propagate shocks due to the interconnection among firms along credit chains the paper evaluates the potential effects of a financial crisis on the use of trade credit for firms operating in developing countries it argues that while the advantages of trade credit might remain largely unexploited due to poor legal institutions the disadvantages might be exacerbated because of these firms greater exposure to a default chain based on these arguments a menu of choices is identified for what policymakers can do to boost firms access to inter firm trade finance in times of crisis

credit rating industry a helicopter tour of stylized facts and recent theories the recent subprime crisis and the ongoing euro zone crisis have generated an enormous interest in the credit rating industry not only among economists but also among average citizens as a consequence we have seen an explosion of the economic literature on the industry the objective of this survey is to introduce readers to the key stylized facts of the credit rating industry and to the recent theoretical economic literature on this industry

conflicts of interest information provision and competition in the financial services industry abstract in some markets sellers have better information than buyers over which products best serve a buyer s needs depending on the market structure this may lead to conflicts of interest in the provision of information by sellers this paper studies this issue in the market for financial services the analysis presents a new model of competition between banks where price competition influences the ensuing incentives for truthful information revelation we also compare conflicts of interest in two different firm structures specialized banking and one stop banking

competitive bluffing an examination of a common practice and its relationship with performance bluffing a common and consequential form of competitive behavior has been comparably ignored in the management literature even though misleading one s rivals is suggested to be an advantageous skill in a multifaceted and highly competitive environment to address this deficiency and advance scholarship on competitive dynamics our study investigates the moral reasoning behind competitive bluffing and using a simulated market entry game examines the performance effects of bluffing findings suggest that decision makers views on the ethicality of bluffing competitors differ from their beliefs on the ethicality of misleading other organizational stakeholders analysis also indicates that decision makers who view competitor bluffing as more ethical less unethical are more willing to engage in competitive bluffing finally while bluffing is often thought to be an effective business practice results show that in the context of repeated interaction bluffing is not conducive to high levels of performance and in fact can have undesirable consequences

public trust and government betrayal abstract this study presents a simple model of government reputation in which government type cannot be directly observed by households with the variation that government type rather than being permanent follows an exogenous markov process this formulation captures three characteristics of bad policy outcomes governments which betray public trust do so erratically public trust is regained only gradually after a betrayal and governments with recent betrayals betray with higher probability than other governments

information percolation momentum and reversal abstract we propose a joint theory of time series momentum and reversal based on a rational expectations model we show that a necessary condition for momentum to arise in this framework is that information flows at an increasing rate we focus on word of mouth communication as a mechanism that enforces this condition and generates short term momentum and long term reversal investors with heterogeneous trading strategies contrarian and momentum traders coexist in the marketplace although a significant proportion of investors are momentum traders momentum is not completely eliminated word of mouth communication spreads rumors and generates price run ups and reversals our theoretical predictions are in line with empirical findings

the economics of convention c onventions regulate much of economic and social life yet they have received surprisingly little attention from economists by a convention we mean a pattern of behavior that is customary expected and self enforcing everyone conforms everyone expects others to conform and everyone has good reason to conform because conforming is in each person s best interest when everyone else plans to conform lewis 1969 familiar examples include following rules of the road adhering to conventional codes of dress and using words with their conventional meanings conventions with direct economic implications include species of money and credit industrial and technological standards accounting rules and forms of economic contracts indeed it would scarcely be an exaggeration to say that almost all economic and social institutions are governed to some extent by convention the main feature of a convention is that out of a host of conceivable choices only one is actually used this fact also explains why conventions are needed they resolve problems of indeterminacy in interactions that have multiple equilibria indeed from a formal point of view we may define a convention as an equilibrium that everyone expects in interactions that have more than one equilibrium the economic significance of conventions is that they reduce transaction costs imagine the inconvenience if whenever two vehicles approached one another the important exceptions are sugden 1986 and ullman margalit 1977 the interested reader might also refer to the symposium on social norms that appeared in the fall 1989 issue of this journal with articles by sugden 1989 and elster 1989

cheap talk in the classroom how biased grading at school explains gender differences in achievements career choices and wages in this paper i provide a theoretical explanation for the gender differences in education and on the labour market that are observed empirically in most oecd organisation for economic cooperation and development countries including the us within a cheap talk model of grading i show that biased grading in schools results in 1 boys outperforming girls in maths and sciences 2 boys having more top and more bottom achievers in maths and sciences than girls 3 girls outperforming boys in reading literacy 4 female graduates enrolling in university studies more often than male graduates 5 the predominance of female students in arts and humanities at the university 6 the predominance of male students in maths and sciences at the university and 7 the gender wage gap on the labour market for the highly educated copyright 2009 wiley blackwell

theoretical contribution of industrial ecology to circular economy abstract circular economy ce currently represents a viable option for countries governments academia and society to transform the linear and semi circular materials and energy flows into circular flows and obtain better sustainable benefits in this sense industrial ecology ie with its tools can assist in the transition to ce therefore the main goal of this paper is to present the theoretical contribution of ie to ce the methodology used was based on bibliometric analysis in the international context with regard to the bibliometric analyses we have identified that the evolution of ce would not be possible without the existence of ie concepts and tools especially with tools such as industrial symbiosis is and eco industrial parks eips furthermore three levels of ie contribution to ce were identified such as conceptual technical and policy aspects finally new ce based researches from an ie perspective with bibliometric analysis and with co citation networks are possible including solid waste management and policies

private equity returns and disclosure around the world to obtain more funds from the institutional investors private equity pe fund managers may report inflated valuations of private investee companies that are not yet sold however such overvaluations may result in a reputational cost when those investments are realized using evidence from 39 countries we show that there are significant systematic biases in managers reporting of fund performance we find that these biases depend on the accounting and legal environment in a country and on proxies for the degree of information asymmetry between institutional investors and pe fund managers

new like new or very good reputation and credibility we show that sellers may earn reputation for their ability to deliver high quality goods on average by honestly announcing the realised quality of items for sale every period as the expected revenue stream from continuing with honest communication increases with their ability high ability sellers remain honest while low ability sellers find it too costly and sometimes lie about quality for short term gain thus cheap talk communication facilitates the market s learning of a seller s ability and strengthens reputation effects we study this new reputation mechanism and the induced market dynamics first when sellers cannot restart with a new identity and then when they can we extend the analysis to various other situations such as voluntary refund and moral hazard

large shocks in the volatility of the dow jones industrial average index 1928 2013 we determine the events that cause large shocks in volatility of the djia index over the period 1928 2013 using a new semi parametric test based on conditional heteroscedasticity models we find that these large shocks can be associated with particular events financial crashes elections wars monetary policies etc we show that some shocks are not identified as extraordinary movements by the investors due to their occurring during high volatility episodes especially the 1929 1934 1937 1938 and 2007 2011 periods

using privileged information to manipulate markets insiders gurus and credibility access to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted announcements the fact that privileged information is noisy interferes with the public s attempts to learn whether such announcements are honest it allows opportunistic individuals to manipulate prices repeatedly without ever being fully found out this leads us to extend sobel s 1985 model of strategic communication to the case of noisy private signals our results show that when truthfulness is not easily verifiable restrictions on trading by insiders may be needed to preserve the integrity of information embodied in prices

information reliability and welfare a theory of coarse credit ratings abstract an enduring puzzle is why credit rating agencies cras use a few categories to describe credit qualities lying in a continuum even when ratings coarseness reduces welfare we model a cheap talk game in which a cra assigns positive weights to the divergent goals of issuing firms and investors the cra wishes to inflate ratings but prefers an unbiased rating to one whose inflation exceeds a threshold ratings coarseness arises in equilibrium to preclude excessive rating inflation we show that competition among cras can increase ratings coarseness we also examine the welfare implications of regulatory initiatives

lying for strategic advantage rational and boundedly rational misrepresentation of intentions starting from hendricks and mcafee s 2000 example of the allies decision to feint at calais and attack at normandy on d day this paper models misrepresentation of intentions to competitors or enemies allowing for the possibility of bounded strategic rationality and rational players responses to it yields a sensible account of lying via costless noiseless messages in many cases the model has generically unique pure strategy sequential equilibria in which rational players exploit boundedly rational players but are not themselves fooled in others the model has generically essentially unique mixed strategy sequential equilibria in which rational players strategies protect all players from exploitation