sluggish consumers an evolutionary solution to the bertrand paradox we consider an evolutionary model where sellers charge prices for a homogeneous commodity and where consumers while incompletely informed about prices decide from which seller they buy the commodity sellers revise their decisions by way of imitation and experimentation and consumers engage in search consumers are sluggish if they do not learn sellers prices with some positive probability only if consumers are not sluggish at all does economic evolution unambiguously support bertrand equilibrium if consumers are sluggish firms charge other prices as well and the evolutionary process displays a property similar to parallel pricing if consumers are extremely sluggish evolution picks up monopoly pricing journal of economic literature classification numbers c7 d43 d83 l13

evaluating interval forecasts a complete theory for evaluating interval forecasts has not been worked out to date most of the literature implicitly assumes homoskedastic errors even when this is clearly violated and proceed by merely testing for correct unconditional coverage consequently i set out to build a consistent framework for conditional interval forecast evaluation which is crucial when higher order moment dynamics are present the new methodology is demonstrated in an application to the exchange rate forecasting procedures advocated in risk management

an evolutionary model of bertrand oligopoly we analyze the long run outcome of markets in which boundedly rational firms with a decreasing returns to scale technology compete in prices the behavior of these firms is based on limitation of success and experimentation in this framework we introduce a new approach to model boundedly rational behavior based on the idea of behavioral principles i e formal descriptions even with the simplest ones the result is that the prices announced are a strict refinement of the set of nash equilibria with more sophisticated behavioral principles the long run outcome corresponds to the concept of central prices wich are also nash equilibria introduced here this is a robust and clear cut prediction wich under quadratic costs and arbitrary demand essentially coincides with the walrasian equilibrium

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

imitation by price and quantity setting firms in a differentiated market abstract we study the evolution of imitation behaviour in a differentiated market where firms are located equidistantly on a salop circle firms choose price and quantity simultaneously leaving open the possibility for non market clearing outcomes the strategy of the most successful firm is imitated behaviour in the stochastically stable outcome depends on the level of market differentiation and corresponds exactly with the nash equilibrium outcome of the underlying stage game for high level of differentiation firms end up at the monopoly outcome for intermediate level of differentiation they gravitate to a mutually non aggressive outcome where price is higher than the monopoly price for low level of differentiation firms price at a mark up above the marginal cost market clearing always results endogenously

competitive behavior in market games evidence and theory we explore whether competitive outcomes arise in an experimental implementation of a market game introduced by shubik 1972 market games obtain pareto inferior strict nash equilibria in which some markets are closed we find that subjects do not coordinate on autarkic nash equilibria but favor more efficient nash equilibria in which all markets are open as the number of subjects participating in the market game increases the nash equilibrium they achieve approximates the associated walrasian equilibrium of the underlying economy motivated by these findings we investigate theoretically whether evolutionary forces lead to walrasian outcomes in market games we introduce a strong version of evolutionary stable strategies sess f orfinite populations our concept requires stability against deviations by coalitions of agents a small coalition of trading agents is sufficient for pareto improving trade to be generated in addition provided that agents lack market power nash equilibria corresponding to approximate competitive outcomes constitute the only approximate sess

a new pearson type qmle for conditionally heteroscedastic models this article proposes a novel pearson type quasi maximum likelihood estimator qmle of garch p q models unlike the existing gaussian qmle laplacian qmle generalized non gaussian qmle or lad estimator our pearsonian qmle pqmle captures not just the heavy tailed but also the skewed innovations under strict stationarity and some weak moment conditions the strong consistency and asymptotic normality of the pqmle are obtained with no further efforts the pqmle can be applied to other conditionally heteroscedastic models a simulation study is carried out to assess the performance of the pqmle two applications to four major stock indexes and two exchange rates further highlight the importance of our new method heavy tailed and skewed innovations are often observed together in practice and the pqmle now gives us a systematic way to capture these two coexisting features

an evolutionary analysis of insurance markets with adverse selection abstract the equilibrium nonexistence problem in rothschild and stiglitz s insurance market is reexamined in a dynamic setting insurance firms are boundedly rational and offer menus of insurance contracts which are periodically revised profitable competitors contracts are imitated and loss making contracts are withdrawn occasionally a firm experiments by withdrawing or innovating a random set of contracts we show that rothschild and stiglitz s candidate competitive equilibrium contracts constitute the unique long run market outcome if innovation experiments are restricted to contracts which are sufficiently similar to those currently on the market

aggregate comparative statics abstract in aggregative games each player s payoff depends on her own actions and an aggregate of the actions of all the players many common games in industrial organization political economy public economics and macroeconomics can be cast as aggregative games this paper provides a general and tractable framework for comparative static results in aggregative games we focus on two classes of games 1 aggregative games with strategic substitutes and 2 nice aggregative games where payoff functions are continuous and concave in own strategies we provide simple sufficient conditions under which positive shocks to individual players increase their own actions and have monotone effects on the aggregate the results are illustrated with applications to public good provision contests cournot competition and technology choices in oligopoly

survival at the center the stability of minimum differentiation abstract we model a hotelling market with multidimensional product differentiation in an evolutionary framework both evolutionary stability in the sense of schaffer 1989 and stochastic stability following kandori et al 1993 young 1993 are analyzed it is shown that firms move towards the center in product space i e a principle of minimum differentiation on all dimensions of the product space applies

conditional var estimation using pearson s type iv distribution abstract this paper presents a new value at risk var estimation model for equity returns time series and tests it extensively on stock indices of 14 countries two most important stylized facts of such series are volatility clustering and non normality as a result of fat tails of the return distribution while volatility clustering has been extensively studied using the garch model and its various extensions the phenomenon of non normality has not been comprehensively explored at least in the context of var estimation a combination of extreme value theory evt and garch has been explored to analyze financial data showing non normal behavior this paper proposes a combination of the pearson s type iv distribution and the garch 1 1 approach to furnish a new method with superior predictive abilities the approach is back tested for the entire sample as well as for a holdout sample using rolling windows

entrepreneurship social mobility and income redistribution in south india development economists have been preoccupied with the problem of increasing the size of the gnp pie to the relative neglect of its distribution despite the recent disenchantment with the viewpoint that all classes share in the benefits of industrial growth empirical data on the distribution of income business opportunity and economic power are in short supply many of the studies on entrepreneurship and economic development when they are not apologetics for ruthless capitalist exploitation as paul baran suggests extol the achievements of the capitalist entrepreneur without examining class origins and monopoly advantage joseph schumpeter sees entrepreneurs irrespective of class origin as heroic figures with the dream and will to found a private kingdom to conquer adversity to achieve success for its own sake and to experience the joy of creation for gustav papanek 1967 the private entrepreneur who is frugal diligent far sighted remarkably able and willing to take political risks is in large part responsible for the success of pakistan in achieving rapid industrialization

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

an illustration of the essential difference between individual and social learning and its consequences for computational analyses abstract drawing a conclusion from recent insights in evolutionary game theory we show that a so called spite effect implies that there is an essential difference between individual and social learning we illustrate its consequences for the choice of computational tools in economics and social settings in general by analyzing two variants of a genetic algorithm

imitation and price competition in a differentiated market abstract we study the stable market outcome that evolves in a spatially differentiated market when price competing firms choose actions by imitation of the most profitable firm we compare and contrast the stable outcomes under two imitation procedures one where each firm immediately imitates the most profitable firm and the other when a firm imitates another firm only if it is more profitable while being sufficiently similar in context of the market segment it operates in or sufficiently close in either case the symmetric pure strategy nash equilibrium is always a stable outcome however when imitation of the most profitable firm is immediate and market differentiation is moderate states with prices lower than the nash equilibrium are also stable in contrast when imitation of the most profitable firm is more gradual and market differentiation is below a threshold states with prices above the nash equilibrium are also stable thus while competitive evolutionary pressure in this imitation based model does result in the nash equilibrium always being stable other outcomes may be stable as well interestingly the states that are stable under gradual imitation give the firms a higher profit than the stable states under immediate imitation

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

co evolution of firms and consumers and the implications for market dominance consider a setting in which rms randomly discover new ideas that a ect their products or services and implement favorable ones at the same time that rms are adapting their o erings consumers are searching among rms for the best match it is shown that implicit in these dual dynamics is an increasing returns mechanism which can result in one rm dominating the market in the long run the conditions under which there is sustained market dominance are characterized

evolutionary stability and nash equilibrium in finite populations with an application to price competition abstract schaffer schaffer m e 1988 evolutionarily stable strategies for a finite population and a variable contest size journal of theoretical biololgy 132 469 478 proposed a concept of evolutionary stability for finite population models that has interesting implications in economic models of evolutionary learning since it is related to perfectly competitive equilibrium the present paper explores the relation of this concept to nash equilibrium in particular classes of games including constant sum games games with weak payoff externalities and games where imitative decision rules are individually improving an illustration of the latter is provided in the context of bertrand oligopoly with homogeneous product which allows for a characterization of the set of evolutionarily stable prices

technological diffusion and preference learning in the world of homo sustinens the challenges for politics abstract this article relates agents learning of a preference for a technology competition of technologies and their relative diffusion among potential adopters competitive interactions between two technologies are captured by an extended lotka volterra model to also incorporate preference learning on the part of potential adopters of these technologies we combine it with a model of cultural learning based on role model conformist and hedonistic learning our theoretical analysis is illustrated by a concrete example the competition between electric mobility and conventional forms of individual mobility the model enables an evaluation of specific policy instruments as to the promotion of sustainable technology

the evolution of walrasian behavior consider an evolutionary context where a given number of quantity setting oligopolists tend to mimic successful behavior occasionally experimenting with some small probability in this context it is shown that the unique long run outcome of the process has all firms playing walrasian i e choosing an output that maximizes profits when taking the market clearing price as given

cournot competition imitation and information networks abstract we develop a stochastic learning model of cournot competition on arbitrary networks where firms can only observe local information and imitate the locally best the walrasian equilibrium is uniquely selected for any connected information network

tax competition relative performance and policy imitation rather than about their absolute payoffs governments in fiscal competition often seem to care about their performance relative to other governments moreover they often appear to mimic policies observed elsewhere i study such behavior in a standard tax competition game both with relative payoff concerns and for imitative policies evolutionary stability for games with finitely many players is the appropriate solution concept independently of the number of jurisdictions involved an evolutionarily stable tax policy coincides with the competitive outcome of a tax competition game with infinitely many players it thus involves drastic efficiency losses

political consumerism and public policy good complements against market failures political consumerism has become over the past years an ever growing phenomenon by which citizens express through their consumption their political environmental and ethical opinions this paper discusses political consumerism from an economic science perspective focusing on the link between political consumerism and public policies it wonders to what extent political consumerism may represent an effective and fair instrument against market failures overall it seems that it would be better to consider it as a complement to conventional public policies

positive externalities of domestic biogas initiatives implications for financing domestic biogas programs are often justified on the basis of the private benefits and costs accruing to the individual households in terms of providing a superior cooking fuel improved indoor air quality and saving of time spent on collecting firewood this paper contends however that the economic surpluses from domestic biogas programs are realized beyond such narrowly defined project boundaries the paper maintains that economic value addition from the consumptive use of the biogas for cooking and the non consumptive and indirect value derived from the biogas plant providing feedstock for other processes and other such benefits as greenhouse gas mitigation positive externalities need to be accounted for the process approach adopted by this paper would enable an integrated view of the value chain and consequently a mechanism to reallocate costs and to distribute such surpluses

an experimental investigation of the impact of information on competitive decision making managers often employ market response models as decision aids and historical information of competitors market outcomes to aid their competitive decisions in oligopolistic settings however little is known about how access to a decision aid or the availability of competitors market outcomes impact a firm s competitive decisions e g prices or market outcomes resulting from those decisions e g profits or how managers make these decisions across such informational conditions hence the objective of this paper is twofold first we investigate whether access to a decision aid and historical information of competitors outcomes yields more or less competitive decisions and outcomes second we determine which learning constructs such as choice reinforcement and beliefs about projected profits best explain competitive actions across various information conditions we find that relative to the availability of competitive information access to a decision aid has a larger effect on lowering prices and profits we also find that in two firm markets price competition is even more intense than in five firm markets similarly the availability of market share information leads to more aggressive pricing even when profits are held constant finally we outline the implications of our findings in making managerial resource allocations to market research endeavors

arch models properties estimation and testing abstract the aim of this survey paper is to provide an account of some of the important developments in the autoregressive conditional heteroskedasticity arch model since its inception in a seminal paper by engle 1982 this model takes account of many observed properties of asset prices and therefore various interpretations can be attributed to it we start with the basic arch models and discuss their different interpretations arch models have been generalized in different directions to accommodate more and more features of the real world we provide a comprehensive treatment of many of the extensions of the original arch model next we discuss estimation and testing for arch models and note that these models lead to some interesting and unique problems there have been numerous applications and we mention some of these as we present different models the paper includes a glossary of the acronyms for the models we describe

evolution to equilibrium in an asymmetric oligopoly with differentiated goods abstract we present results on finite population evolutionarily stable strategies esss and stochastically stable states for a model of evolution with an imitative rule of strategy choice in an asymmetric oligopoly with differentiated goods and two groups of firms one group of low cost firms and one of high cost firms the firms play price setting and quantity setting oligopoly games under linear demand functions we will show that the stochastically stable state in a price setting oligopoly and that in a quantity setting oligopoly coincide

green preferences as regulatory policy instrument abstract we examine here the suggestion that if consumers in sufficient numbers are willing to pay the premium to have power generated using low emission technologies tax or permit policies become less necessary or stringent while there are implementation difficulties with this proposal our purpose is more fundamental can economics make sense of using preferences as a regulatory instrument if green preferences are exogenously given to what extent can or should they be regarded as a substitute for other policies even with green preferences production and consumption of polluting goods continue to impose social costs not borne in the market moreover if green preferences are regarded as a policy instrument the no policy baseline would require a problematic specification of counterfactual non green preferences viewing green preferences as a regulatory policy instrument is conceptually sensible if the benchmark for optimal emissions is based on value judgments apart from the preferences consumers happen to have if so optimal environmental protection would be defined by reference to ethical theory or even less favorably by prescriptions from policy advocates who give their own preferences great weight while giving those of the public at large and the costs they bear very little consideration

on the existence of positive equilibrium profits in competitive screening markets abstract frictionless consumer choices and price competition are often associated with competitive markets and vanishing equilibrium profits we discuss vanishing profits in competitive screening markets like insurance we assume symmetric firms which exhibit constant returns to scale consumer heterogeneity creates the possibility of adverse selection firms can offer multiple contracts in equilibrium and importantly in any deviation nash equilibrium profits vanish if each consumer has a unique optimizing bundle at equilibrium prices or more generally if there exists a linear ordering of contracts that dictates the preferences of firms whenever consumers are indifferent between multiple optimal contracts of particular interest equilibrium profits vanish if for each agent indifference curves are steeper than iso profit curves the results extend to miyazaki wilson spence equilibria we provide examples of economies where there exists an equilibrium with strictly positive profit and show that these examples are robust hold for an open set of economies

comparing cournot and bertrand in a homogeneous product market abstract this paper examines some general notions relating to the comparison of cournot and bertrand equilibrium outcomes results obtained by vives in this connection are reconsidered in a homogeneous product market and it is shown that these results are sensitive to the market sharing rules it is found that the results are always true under those market sharing rules which have the property of including the competitive equilibrium in the set of bertrand equilibria for example the capacity sharing rule if however the sharing rule does not have this property for example the equal sharing rule then the results referred to above may not hold when costs are asymmetric journal of economic literatureclassification numbers l13

cournot versus walras in dynamic oligopolies with memory abstract this paper explores the impact of memory in cournot oligopolies where firms learn through imitation of success as suggested in alchian j polit econ 57 1950 211 and modeled in vega redondo econometrica 65 1997 375 as long as memory includes at least one period the long run outcome corresponds to any quantity between the cournot one and the walras one the evolutionary stability of the walrasian outcome relies on interfirm comparisons of simultaneously observed profits i e whether a firm earns more than others in a given period whereas the stability of the cournot nash equilibrium is derived from intertemporal comparisons of profits for each given firm i e whether a deviation pays off for that firm