a direct mechanism characterization of sequential bargaining with one sided incomplete information we characterize the sequential equilibria of a class of infinite horizon bargaining games with one sided incomplete information when the seller the uninformed party makes all the offers we prove a folk theorem every incentive compatible individually rational direct bargaining mechanism is implementable by sequential equilibria introducing buyer counteroffers eliminates outcomes which are unfavorable to that party as the proportion of buyer offers increases the set of implementable mechanisms shrinks continuously when the proportion reaches one only the single outcome most favorable to the buyer remains thus depending on the offer structure sequentiality may or may not impose restrictions beyond static incentive compatibility

decentralized trading strategic behaviour and the walrasian outcome for a market with a finite number of agents pairwise matching and bargaining it is shown that even when the market is frictionless the equilibrium is not necessarily competitive it depends on the amount of information agents use if their behaviour is conditioned only on the sets of agents present and the time the competitive solution is the unique subgame perfect equilibrium if agents have full information and condition their behaviour on some of it there are also noncompetitive equilibria in which behaviour depends on specific information such as the identity of the trading partner and past events

more labour market flexibility for more innovation evidence from employer employee linked micro data this paper examines labour market flexibility in various definitions and its impact on innovation the results demonstrate that the relationship strongly depends on the type of innovation as well as the predominant innovation regime in which a company operates thereby labour market flexibility does not influence innovation in an entrepreneurial innovation regime characterised by high competition low market entry barriers and generally available knowledge that might explain why the silicon valley has been successful despite of having a labour market with a strong strong hire and fire mentality in contrast labour market flexibility significantly reduces the likelihood of innovation in a routinised innovation regime with leading innovators and high entry barriers similar to the us automobile industry and steel districts that did not succeed these findings emphasise that the currently discussed structural labour market reforms might hamper innovation as technological change still requires a level of security and stability

agent based computational transaction cost economics this article explores the use of agent based computational economics ace for modelling the development of transactions between firms transaction cost economics neglects learning and the development of trust ignores the complexity of multiple agents and assumes rather than investigates the efficiency of outcomes efficiency here refers to minimum cost or maximum profit we model how co operation and trust emerge and shift adaptively as relations evolve in a context of multiple interacting agents this may open up a new area of application for the ace methodology a simulation model is developed in which agents make and break transaction relations on the basis of preferences based on trust and potential profit profit is a function of product differentiation specificity of assets economy of scale and learning by doing in ongoing relations agents adapt their trust in a partner as a function of his loyalty exhibited by his continuation of a relation they also adapt the weight they attach to trust on the basis of realized profit the model enables an assessment of the efficiency of outcomes relative to the optimum as a function of trust and market conditions we conduct a few experiments to illustrate this application of ace

law finance and innovation the dark side of shareholder protection proponents of minority shareholder protection state that national legal institutions protecting small investors boost stock markets and in turn the long term performance of countries in this paper we empirically challenge this argument we perform three stage least squares estimation on a sample of 48 countries during 1993 2006 and find that countries with stronger shareholder protection tend to have larger market capitalisation but also lower innovative activity we cope with stock market endogeneity and industry heterogeneity and circumvent omitted variables bias so that this finding is unlikely to be driven by misspecification problems the estimation results are interpreted arguing that stronger shareholder protection may depress rather than encourage the most valuable corporate productions because it enables small and diversified shareholders to play opportunistic actions against undiversified stockholders after specific investments are undertaken by the company innovative activity largely based on specific investing is particularly exposed to this problem copyright oxford university press

bargaining with two sided incomplete information an infinite horizon model with alternating offers this paper examines an infinite horizon bargaining model incorporating five features two sided incomplete information with potentially information revealing strategies an infinite horizon uncertainty concerning the potential gains from trade an illumination of interesting qualitative bargaining issues and plausible free from arbitrarily specified out of equilibrium conjectures equilibria these features motivated in the paper have powerful implications a nash equilibrium exists and is generically both unique and sequential comparative static implications of variations in the game s specifications are developed we find that natural indications of bargaining strength emerge from the model and establish the intuitive result that an increase in a player s relative bargaining strength makes that player more likely to capture the gains from bargaining

labor market policy evaluation with ace abstract i develop an agent based computational economics ace model with which i evaluate the aggregate impact of labor market policies the findings are that government financed training measures increase the outflow rate from unemployment to employment although the overall effect is positive this effect is achieved by reducing the outflow rate for those who do not receive subsidies furthermore the outflow rate would have been downward biased had one supposed a matching function that is exogenous to policies

friends acquaintances or strangers partner selection in r d alliances like governance structure and alliance scope partner selection may serve to safeguard firms intellectual assets in r d alliances we categorize potential alliance partners into friends acquainta

evaluating innovation and labour market relationships the case of italy in this paper the link between labour market flexibility and innovation is analysed paying particular attention to the different technological regimes of economic activities and the different geographical areas of the italian economy a dynamic panel data specification is used to assess the endogenous relationship between patents included as a proxy of the innovation and job turnover and wages which represent labour market indicators the results show that higher job turnover only has a significant and negative impact on patent activities in regional sectors of northern italy while a positive and significant impact of blue and white collar wages has been generally found

trust and efficiency abstract agency problems within the firm are a significant hindrance to efficiency we propose trust between coworkers as a superior alternative to the standard tools used to mitigate agency problems increased monitoring and incentive based pay we model trust as mutual reciprocal altruism between pairs of coworkers and show how it induces employees to work harder relative to those at firms that use the standard tools in addition we show that employees at trusting firms have higher job satisfaction and that these firms enjoy lower labor cost and higher profits we conclude by discussing how trust may also be easier to use within the firm than the standard agency mitigation tools

strategic urban projects in amsterdam and new york incomplete contracts and good faith in different legal systems contracts between local government and private investment agencies play an important role in strategic urban projects real estate cycles provide only a narrow window of opportunity within which to draft such contracts a legal system should therefore not impede the possibility of reaching an agreement quickly instead it should facilitate efficient ways of reaching an agreement lengthy contracting may contribute to the persistence of real estate market cycles this paper explores the question of whether the civil law principle of good faith facilitates the drafting of incomplete contracts which may be efficient in situations of high uncertainty and complexity as was the case with two strategic inner city projects the south axis in amsterdam and battery park city in new york city the paper further establishes that good faith does play a considerable role in the differences in contracting practice

trust contract and economic cooperation after providing a brief overview of the standard economic analysis of incomplete contracts in terms of property rights transaction costs and self enforcing implicit contracts the author shows why in the orthodox view trust is not a pertinent category to their negotiation or effectiveness drawing on various empirical studies which he has undertaken in the area of industrial relations the author develops an alternative approach to the study of incomplete contracts in which the concept of trust is central in this alternative vision boundedly rational agents with limited foresight form provisional judgements about the trustworthiness of their trading partners based on the success of their past encounters a consequence of this alterna tive understanding of incomplete contracts is that there is no guarantee that coopera tion will succeed even when the circumstances appear to promise mutual gain the author argues however that by establishing an appropriate set of procedural rules to guide their response to the unanticipated agents can promote the kinds of mutual learning that contribute to the build up of trust and that increase the likelihood of successful cooperation

structure behavior and market power in an evolutionary labor market with adaptive search abstract this study uses an agent based computational labor market framework to experimentally study the relationship between job capacity job concentration and market power job capacity is measured by the ratio of potential job openings to potential work offers and job concentration is measured by the ratio of work suppliers to employers for each experimental treatment work suppliers and employers repeatedly seek preferred worksite partners based on continually updated expected utility engage in efficiency wage worksite interactions modelled as prisoner s dilemma games and evolve their worksite behaviors over time the main finding is that job capacity consistently trumps job concentration when it comes to predicting the relative ability of work suppliers and employers to exercise market power

little innovation many jobs an econometric analysis of the italian labour productivity crisis during the past twenty years italy has realized changes in labour legislation leading to a decentralization of wage bargaining and increased flexibility in labour relations both these factors have helped to curb wage growth and to enhance employment growth but have also led to a crisis in italian labour productivity growth our estimates among 3 000 firms show that firms with high shares of flexible workers a high labour turnover and lower costs of labour relative to capital experienced significantly lower rates of labour productivity growth our findings raise doubts about the mainstream call for flexibilisation of european labour markets we argue hat the italian shift towards a low productive and labour intensive growth path is problematic gainst the background of an ageing population

a note on the theory and measurement of trust in explaining differences in economic growth this paper takes issue with the trend to attribute differences in economic growth rates to differences in interpersonal trust i discuss the world values survey wvs measure that is used to operationalise trust at the macro level i hypothesise that there is a mismatch between the theoretical argument and the empirical operationalisation of trust instead of measuring trust the wvs measure may instead proxy the well functioning of institutions i provide circumstantial evidence for this thesis by a principal components analysis of trust and institutions and a robustness test of zak and knack s 2001 trust and growth economic journal vol 111 295 321 seminal study on trust and economic growth

learning to contract evidence from the personal computer industry organizational forms involving more detailed contracts than are found in traditional spot market exchanges appear to be increasingly prevalent there has been relatively little analysis however of the extent to which firms learn how to use contracts to manage their interfirm relationships over time in this paper we conduct a detailed case study of a time series of 11 contracts concluded during 1989 1997 between the same two partners both of whom participate in the personal computer industry to explore whether and how firms learn to contract we find many changes to the structure of the contracts that cannot be fully explained by changes in the assets at risk in the relationship and evidence that these changes are largely the result of processes in which the firms were learning how to work together including learning how to contract with each other the nature of this learning appears to have been quite incremental and local that is not very far sighted we suggest how and when contracts might serve as repositories for knowledge about how to govern collaborations and suggest some boundary conditions for this phenomenon our findings also provide implications for the debate about whether contracts have a positive or negative effect on interorganizational trust we conclude with suggestions for future research

stratification and growth in agent based matching markets abstract this paper examines the dynamic impact of matching on economic mobility and growth to account for complex interactions over time experimental economies of heterogeneous agents are simulated with the match process acting as a fitness selection mechanism even with perfect information and substantial variety in both offspring and entrants two sided matching inevitably causes the population to evolve into stratified groups corrective measures are possible to improve mobility but by altering the path of market evolution a policy may have unintended impacts on growth and inequality

interpreting the beveridge curve an agent based approach abstract we construct an agent based computational model of the labour market with heterogeneous workers and firms to study the behaviour of the beveridge curve along the business cycle in this framework search frictions arise because filling a vacancy is a costly activity that takes time whereas productivity mismatch comes from firms imperfect information about the value of the workers before the job interview takes place the model offers an interpretation for the outward movement exhibited by the u s beveridge curve since the last months of 2009 sectoral misallocation plays a role moreover when the speed of recovery from a recession is not uniform across sectors unemployed workers are less selective in their application strategy and firms must spend more time in choosing the best match unemployment remains high in spite of an increase in the number of vacancies

is flexible labour good for innovation evidence from firm level data whether the use of flexible workers is damaging to innovation or not depends on the dominant innovation regime in a sector in sectors with a routinised innovation regime high shares of low paid temporary workers have a negative impact on the probability that firms invest in r d in sectors that tend towards a garage business regime however flexibility has no impact the two innovation regimes differ in the nature of their knowledge base reliance on generally available knowledge or dependence on a firm s historically accumulated knowledge base innovation in the latter regime benefits from longer job durations our results are consistent with findings in macro level studies that coordinated market economies with rigid labour markets have higher labour productivity gains than liberalised market economies

schumpeter meeting keynes a policy friendly model of endogenous growth and business cycles this paper studies an agent based model that bridges keynesian theories of demandgeneration and schumpeterian theories of technology fueled economic growth we employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply demand and the fundamentals of the economy we find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both short run fluctuations and longterm growth patterns from a normative point of view simulations show a corresponding complementarity between keynesian and schumpeterian policies in sustaining long run growth paths characterized by milder fluctuations and relatively lower unemployment levels the matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct regimes of growth or absence thereof characterized by different short run fluctuations and unemployment levels

a multistage model of bargaining this paper presents a simple multistage model of bargaining wherein a seller makes an offer that can be either accepted or refused if rejected the process continues how the seller s ability to make commitments affects bargaining outcomes is analysed by comparing the commitment equilibria to those arising when commitment is impossible the effects of increasing uncertainty about preferences and varying the length of the bargaining horizon are analysed the ways in which the bargaining environment can be changed to improve outcomes are discussed

when labour market rigidities are useful for innovation evidence from german iab firm level data abstract supply side economists made numerous pleas for removing labour market rigidities through structural reforms from a schumpeterian viewpoint however one can argue that labour market rigidities create useful incentives for innovation our estimates on german panel data 2007 2015 support the schumpeterian view using the taxonomy of industries by peneder 2010 we find that evidence of the schumpeterian view is particularly strong in r d intensive manufacturing industries as well as in service industries with high degrees of cumulativeness of knowledge evidence of the schumpeterian view is weaker in low technology industries and in start ups when firms rely more on generally available knowledge rather than on firm specific and tacit knowledge accumulated in the past

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small