equilibrium behavior in crisis bargaining games this paper analyzes a general model of two player bargaining in the shadow of war where one player possesses private information concerning the expected benefits of war i derive conclusions about equilibrium behavior by examining incentive compatibility constraints where these constraints hold regardless of the game form hence the qualitative results are game free i show that the higher the informed player s payoff from war the higher is his or her equilibrium payoff from settling the dispute short of war and the higher is the equilibrium probability of war the latter result rationalizes the monotonicity assumption prevalent in numerous expected utility models of war i then provide a general result concerning the equilibrium relationship between settlement payoffs and the probability of war

growth miracles and failures in a markov switching classification model of growth abstract in this paper economic growth is interpreted as a sequence of transitions between distinct growth regimes that countries visit with different frequencies countries featuring similar growth dynamics are endogenously grouped into three different clusters the first cluster comprises successful countries that are characterized by lengthy periods of high or very high growth moderately successful countries in the second cluster experience both periods of reasonable growth and periods of stagnation whereas failing countries in the third cluster suffer from highly volatile growth rates with frequent episodes of crisis successful countries are characterized by better initial conditions policies and institutions compared to the other countries neither initial conditions nor institutions distinguish moderately successful from failing countries what makes them different is policy in the form of investments into infrastructure and human capital trade liberalization and limited policy volatility

rationality and deterrence this essay explores the relationship between deterrence theory and two distinct notions of rationality associated with it the author argues that the concept of procedural irrationality which is the basis of many critiques of contemporary deterrence theory is not necessarily inconsistent with the instrumental definition of rationality implicit in many models of deterrence he also argues that some recent rational choice models of deterrence are nonetheless deficient in their application of the rationality postulate finally he provides an outline of a possible resolution of the paradox of deterrence

multilateral negotiations a spatial analysis of the arab israeli dispute a model for forecasting political choices and for explaining the perceptual conditions that lead to those choices is delineated the model based on the median voter theorem and on the axioms of expected utility maximization is applied to the prospects for a multilateral peace conference in the middle east the analysis helps provide insights into the motivations behind recent actions by leaders in the soviet union the united states jordan the palestine liberation organization and israel

nuclear brinkmanship with two sided incomplete information a brinkmanship crisis with two sided incomplete information is modeled as a game of sequential bargaining in which each state is uncertain of its adversary s resolve the sequential crisis equilibria are characterized explicitly and used to analyze the influences of resolve misperception and the status quo on escalation and crisis stability the description of brinkmanship as a contest of resolve is found to be misleading the state with the greatest resolve may not prevail in the crisis a state may be less not more likely to prevail the greater its resolve and a states expected payoff may be less not more the greater its resolve moreover reducing misperception may destabilize a crisis surprisingly increasing the stake a potential challenger has in the status quo may not make a challenge less likely finally crises involving severe conflicts of interest are shown to be less likely than crises not entailing a severe conflict of interest

trade policy in a growth model with technology gap dynamics and simulations for south africa we extend an open economy ramsey model to include the technology gap to the world technology frontier the setting is a middle income country with productivity growth driven by technology adoption and foreign capital goods stimulating spillover and catching up the interaction of technology adoption and capital accumulation generates prolonged transition growth and strengthens the growth effect of increased openness model simulations reproduce the changing openness in south africa 1960 2005 international sanctions and protectionism are represented by a calibrated tariff equivalent and the counterfactual elimination of the tariff equivalent shows large potential for gdp growth according to our preferred parameterization increased trade share by 10 points raises gdp level over time by about 12 separating the effects of openness between investment and productivity we find that almost 60 of the increase in gdp is due to increased productivity partly because of interaction with higher investment

feed in tariff and tradable green certificate in oligopoly abstract feed in tariff fit and tradable green certificate tgc schemes are studied in a formal model and numerical example using the uk data we find that if the markets were perfectly competitive then feed in tariff and the certificate price would be the same however when the markets are imperfect they are generally different while both the tariff and certificate price fluctuate around the difference between the costs of green and black energy the tariff deviates more from the cost difference than the certificate price the supplies of both black and green energy under fit are higher than tgc obviously as a result of subsidies a troubling outcome is that the total energy supply increases under fit as the renewables quota increases which can negate other measures to mitigate climate changes such as demand management finally using the data from the uk market we find that social welfare under tgc is consistently higher than fit for a wide range of values of the parameters

capabilities perception and escalation the evolution of crises depends upon interpreting intentions under uncertainty we model crises as a game of two sided incomplete information players are uncertain about their own payoffs from war because of differences between observable and actual capabilities we derive four hypotheses testing them against crises in europe between 1815 and 1970 we show a nonmonotonic relationship between ex ante observable capabilities and the likelihood of violence in a crisis as well as the ex ante likelihood of a negotiated settlement we answer five questions 1 how do differences in observable capabilities between rivals influence the likelihood of a crisis and the escalation to violence 2 how do intangible capabilities alter the effects of observable capabilities on the likelihood of conflict and violence 3 what do national leaders learn from the responses of their adversaries in crises 4 under what conditions can deterrence succeed 5 under what conditions are the strong likely to give in to the weak or vice versa in a crisis

uncertainty shifting power and appeasement great britain faced an immensely complicated strategic problem in the 1930s and important aspects of it can be stylized as a situation in which a state that is declining in power is unsure of the aims of a rising state if those aims are limited then the declining state prefers to appease the rising state s demands rather than go to war to oppose them if however the rising state s demands are unlimited then the declining state prefers fighting and given that the declining state is becoming weaker over time it prefers fighting sooner rather than later if there is to be a war this situation creates a trade off the earlier a state stands firm the stronger it will be if war ensues but the higher the chance of fighting an unnecessary war in equilibrium the declining state generally tries to appease the rising state by making a series of concessions

a quasi feed in tariff policy formulation in micro grids a bi level multi period approach abstract a quasi feed in tariff qfit policy formulation is presented for micro grids that integrates renewable energy generation considering policy makers and generation companies gencos objectives assuming a bi level multi period formulation that integrates physical characteristics of the power grid the upper level problem corresponds to the pm whereas the lower level decisions are made by gencos we consider that some gencos are green energy producers while others are black energy producers policy makers incentivize green energy producers to generate energy through the payment of optimal time varying subsidy price the policy maker s main objective is to maximize an overall social welfare that includes factors such as demand surplus energy cost renewable energy subsidy price and environmental standards the lower level problem corresponding to the gencos is based on maximizing the players profits the proposed qfit policy differs from the fit policy in the sense that the subsidy price based contracts offered to green energy producers dynamically change over time depending on the physical properties of the grid demand and energy price fluctuations the integrated problem solves for time varying subsidy price and equilibrium energy quantities that optimize the system welfare under different grid and system conditions

the incidence and persistence of corruption in economic development abstract economic development and bureaucratic corruption are determined jointly in a dynamic general equilibrium model of growth bribery and tax evasion corruption arises from the incentives of public and private agents to conspire in the concealment of information from the government these incentives depend on aggregate economic activity which in turn depends on the incidence of corruption the model produces multiple development regimes transition between which may or may not occur in accordance with recent empirical evidence the relationship between corruption and development is predicted to be negative

import substitution and economic growth abstract despite latin america s dismal performance between the 1950s and 1980s the region experienced strong capital deepening we suggest that these facts can be explained as a consequence of the restrictive trade regime adopted at that time our framework is based on a dynamic heckscher ohlin model with scale economies in the capital intensive sector initially the economy is open and produces only the labor intensive good the trade regime is modeled as a move to a closed economy the model produces results consistent with the latin american experience specifically a sufficiently small country experiences no long run income growth but an increase in capital

electric power system planning with renewable energy accommodation for supporting the sustainable development of tangshan city china abstract in this study considering break the original energy structure dominated by coal and make the most use of renewable energy in the future an inexact stochastic robust mixed integer programming itsrmp method was developed for supporting regional electric power system management in tangshan city china the developed method incorporated interval parameter programming ipp stochastic robust optimization sro two stage stochastic programming tsp and mixed integer programming mip within a general optimization framework to reflect uncertainties expressed as interval values and probability distributions in the regional electric power system three scenarios corresponding to different subsidy price levels and three cases associated with different pollutants emission reduction levels were designed the electricity generation schemes facility expansion pollutant emission and system cost considering the subsidy policy and air pollution mitigation control had been obtained the results indicated that subsidy policy would exert an important influence on the development of tangshan s electric power system which can reduce the cost advantage of conventional power generation and enhance the development enthusiasm of renewable power generation to power enterprises in detail the electricity generation amount of renewable energy would increase with the improvement of subsidy price level moreover decision makers could identify the possible policy implementations and enforcements under considering the trade off among system economy security and environmental objectives the modeling results were valuable for promoting new energy accommodation and supporting the sustainable development of social economy

trade as a threshold variable for multiple regimes abstract this paper employs the data sorting method developed by hansen econometrica 68 2000 575 which allows the data to endogenously select regimes using different variables it is shown that openness as measured by the trade share to gdp is a threshold variable that can cluster middle income countries into two distinct regimes that obey different statistical models our result suggests that openness may not be as crucial in the growth process of low and high income countries but it is instrumental in identifying middle income countries into high and low growth groups

guns butter and anarchy a state in the international system implicit in realism must allocate its limited resources between satisfying its intrinsically valued ends and the means of military power i formalize this guns versus butter problem in a simple infinite horizon model in which two states must continually decide how to allocate their resources and whether to attack the other state the analysis establishes sufficient conditions to ensure the existence of an equilibrium in which neither state attacks shows that there is a strictly pareto dominant pair of peaceful equilibrium payoffs characterizes the unique peaceful markov perfect equilibrium that yields them and describes the comparative statics of the equilibrium allocations more broadly the analysis also suggests that the notion of anarchy has little if any substantive significance distinctively related to international politics and that the problem of absolute and relative gains is superfluous

crisis learning games endings from a data based study of bargaining in recurrent crises between evenly matched states provide the foundation for the construction of four crisis learning games symmetrical and asymmetrical nuclear and nonnuclear sequential three by three games assuming complete information and nonmyopic play are presented and analyzed the empirical study indicated that states that were unsuccessful in one crisis were likely to move to more coercive bargaining strategies in the next crisis the four sequential games offer insights as to why this is likely to produce unwanted consequences while demonstrating the importance of the participants initial strategy choices with the realpolitik lessons suggested by the earlier study removed the dynamics of the games present a case for beginning with a cooperative strategy and moving to reciprocating or tit for tat bargaining

nuclear deterrence counterforce strategies and the incentive to strike first i use the theory of games to investigate issues about how to understand the use of nuclear counterforce strategies by the united states and the soviet union during the cold war the function of the counterforce strategies i model is not to enable a state confidently to launch a nuclear attack but to convince its adversary that the probability that it might do so as a last resort is greater than zero the models allow one to investigate rational behavior when information is incomplete and there is an incentive to strike first and therefore provide a way to explore controversies about the effect of counterforce strategies on both the credibility of extended deterrence and the possibility of inadvertent nuclear war the models suggest contrary to the claims of a number of writers that the use of nuclear counterforce strategies is not necessarily inconsistent with rational behavior and provide some insight into the relation between counterforce strategies and brinkmanship models of deterrence

stability and centrality of legislative choice in the spatial context majority rule spatial voting games lacking a core still always present a near core outcome more commonly known as the copeland winner this is the alternative that defeats or ties the greatest number of alternatives in the space previous research has not tested the copeland winner as a solution concept for spatial voting games without a core lacking a way to calculate where the copeland winner was with an infinite number of alternatives we provide a straightforward algorithm to find the copeland winner and show that it corresponds well to experimental outcomes in an important set of experimental legislative voting games we also provide an intuitive motivation for why legislative outcomes in the spatial context may be expected to lie close to the copeland winner finally we show a connection between the copeland winner and the shapley value and provide a simple but powerful algorithm to calculate the copeland scores of all points in the space in terms of the modified power values of each of the voters and their locations in the space

what do we know about the study of distributed generation policies and regulations in the americas a systematic review of literature abstract policy makers are increasingly in search for evidence based solutions for meeting contemporary challenges of energy services that are both low carbon and sustainable one of the emerging trends are policies and regulations that incent distributed electricity generation dg the question that this article addresses is what is the current state of the study of these policies or regulations in the americas the focus on the americas was chosen because the article is part of a larger research project that explores regulations for dg in brazil and canada this article uses a non traditional means for synthesizing academic work systematic literature review to explore the current state of peer reviewed publications on the subject it is a means of transparently locating evaluating and synthesizing information to avoid bias in data collection in total 87 articles were included in the review climate change is the main driving force for dg as identified in the articles job creation or the green economy was cited as a motivating factor more strongly in north america while in the southern countries the issue of diversifying the energy mix and avoiding infrastructure costs was more pronounced many articles dealt with the issue of mechanisms for incenting dg and over half of these focused on aspects of feed in tariffs incentive mechanisms vary depending on policy goals of the jurisdictions with renewable portfolio standards being more popular in the u s the review showed that there is little emphasis on the social impacts and benefits of the regulations or policies and that specific urban challenges and local governance is not widely investigated pointing to a need for future study in these areas

nuclear superiority and the balance of resolve explaining nuclear crisis outcomes scholars have long debated whether nuclear superiority or the balance of resolve shapes the probability of victory in nuclear crises but they have not clearly articulated a mechanism linking superiority to victory nor have they systematically analyzed the entire universe of empirical cases beginning from a nuclear brinkmanship theory framework i develop a new theory of nuclear crisis outcomes which links nuclear superiority to victory in nuclear crises precisely through its effect on the balance of resolve using a new data set on fifty two nuclear crisis dyads i show that states that enjoy nuclear superiority over their opponents are more likely to win nuclear crises i also find some support for the idea that political stakes shape crisis outcomes these findings hold even after controlling for conventional military capabilities and for selection into nuclear crises this article presents a new theoretical explanation and the first comprehensive empirical examination of nuclear crisis outcomes

nuclear deterrence and the strategy of limited retaliation recent formal work in nuclear deterrence theory has focused on brinkmanship crises in which states exert coercive pressure by manipulating the risk of an unlimited nuclear exchange this essay extends the formal analysis of deterrence theory to the strategy of limited retaliation in which states exert coercive pressure by inflicting limited amounts of damage in order to make the threat of future punishment more credible this strategy is modeled as a game of sequential bargaining with incomplete information the equilibria suggest that states prefer relatively smaller less destructive limited options that counterforce options are desirable even if they cannot limit the total amount of damage an adversary can inflict that smaller less destructive limited nuclear options may make a nuclear exchange more likely and that uncertainty and incomplete information may significantly enhance deterrence

endogenous aggregate elasticity of substitution abstract in the literature studying aggregate economies the aggregate elasticity of substitution aes between capital and labor is often treated as a constant or deep parameter this view contrasts with the conjecture put forward by arrow et al 1961 capital labor substitution and economic efficiency review of economics and statistics 43 225 250 that aes evolves over time and changes with the process of economic development this paper evaluates this conjecture in a simple dynamic multi sector growth model in which aes is endogenously determined our findings support the conjecture and in particular demonstrate that aes tends to be positively related to the state of economic development a result consistent with recent empirical findings

capabilities uncertainty and resolve a limited information model of crisis bargaining this paper presents and solves a crisis bargaining game under limited information the sides alternate offers from three possible offers with war and its costs starting if the target s counteroffer is rejected the equilibrium of the model falls into four different cases these four cases are analyzed to determine how the sides communicate through their offers and how the costs of war initial beliefs misperceptions and distribution of capabilities drive the probabilities of a crisis and war the model demonstrates a joint selection bias misspecification problem in empirical studies of crises arising from the unobservable nature of beliefs several empirical studies of crisis bargaining are discussed in the light of this methodological problem new patterns of evidence are found that support the presence of the selection problem and their conclusions are reexamined

on the output effects of barriers to trade we study the macroeconomic effects of international trade policy by integrating a hecksher ohlin trade model into an optimal growth framework the model predicts that a more open economy will have higher factor productivity furthermore there is a selective development trap to which countries may or may not converge depending on policy income at the development trap falls as trade barriers increase hence cross country differences in barriers to trade may help explain the dispersion of per capita income observed across countries the effects are quantified and we show that protectionism can explain a relevant fraction of tfp and long run income differentials across countries we study the effects of international trade policy on output to do so we analyze a standard neoclassical growth model where countries can trade intermediate goods the markets of these goods are structured as in the also standard hecksher ohlin trade model thus trade happens owing to comparative advantage which emerges from differences in factor endowments across countries 2 we focus on the case of a small price taking economy one can solve for equilibrium sequentially first each period s output and trade can be treated as a static problem and its solution can be summarized by a mapping from capital and labor to the output of the final good then using that endogenous mapping as if it were an exogenous production function one can solve the intertemporal decisions of agents in the economy in that way a potentially complex dynamic trade problem is avoided it turns out that the equilibrium mapping linking inputs and final output is affected by tariffs as the gains from trade impact not only welfare but also the availability and price of intermediate inputs and hence productivity

crisis bargaining escalation and mad although incomplete information is recognized to be an essential feature of crises game theoretic formulations have not generally modeled this explicitly this paper models a mutually assured destruction mad crisis as a game of sequential bargaining with incomplete information sufficiently simple that its equibria may be found these provide better game theoretic foundations for the notions of resolve and critical risk and their role in crises and also make it possible to compare the bargaining dynamics of this model with those of descriptively richer but incompletely specified models revealing several inconsistencies several analyses of mad conclude that the state with the greatest resolve in this contest of resolve will prevail many models based on critical risks suggest that a state is less likely to escalate the greater its adversary s resolve in our model however the state with the weakest resolve sometimes prevails and some states prove more likely to escalate if their adversaries resolve is greater

crisis stability in the nuclear age in the logic of crisis stability first strike advantages may still be destabilizing although even a successful first strike cannot protect a state from a terribly costly retaliatory second strike if there is an advantage to striking first and if war seems sufficiently likely launching a preemptive first strike may seem to be the least of evils i reconsider the logic of crisis stability by studying games that are completely stable although there are first strike advantages four general conditions ensure stability identifying these conditions refines our understanding of crisis stability by also identifying the potential sources of instability and this more refined understanding shows that the logic of crisis stability focuses attention too narrowly on first strike advantages stability results from a more subtle interaction of several factors of which a first strike advantage is only one

linear complementarity models of nash cournot competition in bilateral and poolco power markets two cournot models of imperfect competition among electricity producers are formulated as mixed linear complementarity problems lcps and a simple example is presented to illustrate their application the two models simulate bilateral markets the models include a congestion pricing scheme for transmission but other transmission pricing approaches can also be represented in this framework the two models differ from each other in that one has no arbitrage between nodes of the network while in the other model arbitragers erase any noncost based differences in price the latter bilateral model turns out to be equivalent to a cournot model of a poolco the models differ from other cournot market models in that they include both of kirchhoff s laws via a dc approximation can include arbitragers possess unique solutions and are readily solved by efficient lcp algorithms the key assumption that permits their formulation as lcps is that each producer naively assumes that its output will not affect transmission prices

rational deterrence and crisis stability this paper presents a new game theoretic model of nuclear crises that maintains consistency with the usual chicken and prisoner s dilemma metaphors within a repeated continuous game framework it establishes the existence of totally credible because always optimal deterrence strategies that are the expression of threats of graduated retaliations in response to an encroachment of status quo drawing a careful distinction between the three fundamental kinds of nuclear threats the risk of losing control the graduated response and the massive retaliation the theory predicts that a hawkish stand in response to aggression by an approximately equal nuclear opponent leads to an almost certain nuclear disaster a completely dovish approach invites exploitation by a hawkish opponent who can maneuver a partial victory a successful policy involves retaliations that are restrained at first but that become increasingly firm if the opponent refuses to compromise a firm and restrained strategy forces a rational opponent into a similar behavior the result is a safe return to the status quo ante i e crisis stability the theory is illustrated by a numerical simulation of the cuban missile crisis showing the outcomes of various strategies available to the united states and the soviet union the simulation and the theory suggest a reformulation of nuclear strategies the key to credibility and crisis stability lies in the threat to exact costs that cancel any prior benefit from aggression not in the promise to impose equal or greater punishments

rational deterrence theory i think therefore i deter deterrence theories purport to supply the auxiliary assumptions rational choice theories need to predict rational strategic behavior they generally assume that would be initiators are i instrumentally rational 2 risk prone gain maximizers 3 free of domestic constraints and 4 able to identify themselves correctly as defenders or challengers these assumptions are contradicted by empirical studies that indicate that risk prone gain maximizing initiators are relatively uncommon that leaders at times calculate as deterrence theories expect but behave contrary to their predictions and that the calculus of initiators generally depends on factors other than those identified by deterrence theories deductive theories of deterrence are also inadequate because they do not define their scope conditions nor can they accommodate deviation by initiators from processes of rational calculation rational deterrence theories are poorly specified theories about nonexistent decision makers operating in nonexistent environments

returns to investment in education a global update the author updates compilations of rate of return estimates to investment in education published since 1985 and discusses methodological issues surrounding those estimates some key patterns among the three main levels of education primary education continues to exhibit the highest social profitability in all world regions private returns are considerably higher than social returns because of the public subsidization of education the degree of public subsidy increases with the level of education which is regressive social and private returns at all levels generally decline by the level of a country s per capita income overall the returns to female education are higher than those to male education but at individual levels of education the pattern is more mixed the returns to the academic secondary school track are higher than the vocational track since unit cost of vocational education is much higher and the returns for those who work in the private competitive sector of the economy are higher than in the public noncompetitive sector and the returns in the self employment unregulated sector of the economy are higher than in the dependent employment sector controversies in the literature are discussed in the light of the new evidence the undisputable and universal positive correlation between education and earnings can be interpreted in many ways the causation issue on whether education really affects earnings can be answered only with experimental data generated by randomly exposing different people to various amounts of education given the fact that moral and pragmatic considerations prevent the generation of such pure data researchers have to make do with indirect inferences or natural experiments some have been attempted the author looks at the research on overeducation or surplus schooling the conclusions reinforce earlier patterns they confirm that primary education continues to be the number one investment priority in developing countries they also show that educating females is marginally more profitable than educating males that the academic secondary school curriculum is a better investment than the technical vocational tract and that the returns to education obey the same rules as investment in conventional capital that is they decline as investment is expanded